Renovating an old home is a great way to add value to your portfolio and improve your financial security as you enter later life. Even costly renovations, like replacing garage doors and windows, recoup 75% of the costs associated with remodeling.
Buying an old fixer-upper can be deeply rewarding, too. There’s something special about restoring old houses that have fallen on hard times. Seeing them brought back to their former glory will give you a sense of connection with the home and make your lot the talk of the town.
However, remodeling a house is a serious financial commitment. So, here are a few tips to consider before you spend all your savings on a historic bungalow or a Victorian mansion.
Financing Your Investment
Dilapidated duplexes and cheap colonial-style homes always look like a steal from the sidewalk. However, before you invest hundreds of thousands of dollars into an old home, you need to know what you’re working with and set a budget based on the renovations needed. Consulting professionals and having an upper limit on what you are willing to spend on renovations can go a long way to keeping you on track. This is especially important if you are investing in a fixer-upper.
You can calculate the amount to pay for a fixer-upper by subtracting the amount you’ll spend on renovations from the amount you estimate the home should be worth after it’s been restored.
For example, let’s say you’re looking at an old cottage in the woods that should be worth $400,000. However, it needs $200,000 of renovations to bring it up to par. Clearly, you should not offer any more than $200,000 lest you want to lose money when re-selling.
A renovation property is a big investment that will likely dominate your portfolio. However, real estate investment can be a great way to protect your retirement finances. Investing in property to supplement your retirement funds is a wise strategy as homes are protected against inflation and may be eligible for tax deductions. You can consider renting your retirement property, too, which will generate some extra income in your later years.
Just be sure to bring in an expert home inspector before you put your money into any property. A home inspector will be able to assess the house for signs of structural damage and may save you from headaches and heartache in the years to come.
Protecting the Property
Renovation projects are usually long-term investments of money and effort. During the restoration process, you need to make sure the home is protected from a range of threats.
Start by bringing in pest control — particularly if you have pets. Some pests are threats to pets and mice, rats, cockroaches, and raccoons can damage your property if left unchecked. You want to spend your time focusing on upgrades, not clearing your pet of fleas and dealing with skin irritation, anemia, or tapeworms.
You’ll need to protect your vacant property from other people, too. There were 2.8 million accounts of trespassing or burglary in 2019 alone meaning you can’t afford to leave your fixer-upper exposed to the public.
Keep your home secure during a remodel by securing the site with temporary fencing and security systems. Wire fencing may look unsightly for a while but a simple deterrent can make a world of difference during a remodel. If you’re removing doors and windows, board them up overnight and never leave the property unlocked while you are away.
Renovations that Add Value
Most of the renovations that you’ll complete will be necessary upgrades to kitchens, plumbing, bathrooms, and bedrooms. However, you’ll have a chance to add real value to the home by making some external features to boost your curb appeal.
Add value to your home by choosing renovations that boost your curb appeal, such as installing storage options like sheds and garages and purchasing some outdoor furniture. Follow up with outdoor lighting and use native flowers to bring a pop of color to your property. This immediately boosts the visual appeal of the home and can add serious resale value if you’re looking to flip the property quickly.
Consider making renovations to improve your home’s accessibility if you plan on retiring at the property. Start simple, with renovations like:
- Switch to lever-style door handles that are easier to open and close.
- Consider an open floor plan concept to improve your mobility within the property.
- Invest in grip bars and safety mats before you need them — strategic non-slip mats can save you from costly falls later in life.
- Lower the cabinets and appliances so all prospective buyers can access the property — even if they have a mobility disability.
These renovations will ensure that your home can support you as you age and lose some of your physical abilities. It can make your house a “stand out” item on the property market, too, as few homes are built with accessibility in mind.
Restoration projects are great for your financial portfolio and can be extremely rewarding. However, before you put down any offers, you need to get the home inspected and assess the state of the property. If you do decide to follow through on the offer, consider starting with cheaper value-boosting upgrades like renovating the garage or installing new windows.