Buying a home is a monumental decision and one you’ve surely made with care. But today’s housing market can make it tricky to get exactly what you want right out of the gate.
According to Reuters , the shortage of affordable homes across the country will continue well into 2019 and possibly beyond.
Supply hasn’t been able to keep up with demand, the article says, and the average house price is far outpacing inflation. So, instead of going for a move-in ready home you may be tempted to buy a fixer-upper and save a little cash.
However, though the home’s initial price may seem enticing, the cost to renovate a house could deter you from remodeling your dream home.
Just how much does it cost to fix up a house? Let’s break down the most common costs associated with gutting a house and remodeling so you can make an informed buying decision.
Decide If This Is Your Home or a Flip
Many times, people looking to purchase a fixer-upper are in it for the short game of a flip. This means they are hoping to purchase a home well under market value, make a few renovations, and then quickly sell the home for a profit. And that’s all good—you just need to decide which camp you’re in.
This Old House explains that fixer-uppers that just need a little paint and cosmetic work are excellent for flippers as they are a relatively low-cost investment that could provide bigger returns. But, if you’re looking to build your dream home and just require good bones, then go ahead and look at properties that may need structural changes or something more than just a facelift.
This type of home is typically less expensive but could take years and lots of money to renovate. However, if you’re planning to make it your forever home, then it might be worth it to you.
Do Your Homework Before You Buy
It’s crucial to add up all the costs of potential renovations before you put a down payment on a home. And don’t let the dreamy idea of just wanting your own home get in the way. This isn’t the time to go easy on your potential property investment. Instead, it’s all about being brutal before you buy. And doing so may actually pay off in the long run. Otherwise, you may end up in your own version of “The Money Pit” movie.
“If people are unforgiving upfront about assessing the costs of renovation, the value of the property and the neighborhood, and how much money they have, they can come out ahead and buy more house than they otherwise could ever afford,” Bradley Inman, CEO of HomeGain.com, told This Old House .
Like Inman says, assess the upfront cost and add up all potential material and labor needs—think both big and small, like plumbers, electricians, carpenters, all the way down to any new doorknobs you’ll buy along the way. Then, subtract that from the home’s renovated market value. Inman suggests subtracting a further 5% to 10% for unforeseen costs, and that number is what you should consider offering.
For example, if you’ve done the math and found that fully renovating a two-bedroom home in Denver, Colorado, will cost $50,000 for labor and materials, you might add in an extra $5,000 for extras. Then, subtract that from $424,200, which is the current median home value (as of January 2019) for a two-bedroom property in the city. That equates to $369,200, which would then be your maximum offer. Of course, you could always mitigate the renovation costs by doing some of the work yourself.
Preparing to Invest in Home Renovations
Though each home is unique and each renovation will be different, Realtor.com provides a general cost breakdown for different remodel hypotheticals.
Than Merrill, founder of FortuneBuilders.com, told Realtor.com that a person can expect to pay about $25,000 to $45,000 for smaller remodels that include painting both the inside and outside of a home, light refinishing of cabinets, and updating landscaping.
For a heavier lift, which includes all of the above plus a complete kitchen renovation and a small bathroom fixup, the cost could be between $46,000 and $75,000.
And a major upgrade (the cost of gutting a house and remodeling), which includes everything listed above plus fixing structural issues, like the foundation and roof, will likely cost $76,000 or more.
Here’s what the cost breakdown looks like for a few of the most common fixer-upper areas. (Note: These are national averages and may vary depending on where you are.)
Common Fixer Upper Project Costs
According to HomeAdvisor’s 2018 remodel estimates, the average cost of kitchen remodels currently sits at $20,474. And, as HomeAdvisor points out, the National Kitchen and Bath Association estimates the top expenses for an average kitchen remodel include cabinetry/hardware (29%), installation (17%), appliances (14%), countertops (10%), and flooring (7%).
You could always save by purchasing stock cabinets from a place like Ikea, which only run a few hundred dollars per cabinet, or go big and get custom cabinets, which could set you back approximately $1,500 for just one.
The average bathroom renovation ranges from $6,000 to $14,000, according to HomeAdvisor. The biggest cost in the room is, once again, the cabinets. Next is the bath itself which HomeAdvisor said could cost between $400 and $1,500 for a basic tub. If you’re looking to go high end, that tub could set you back a cool $8,000.
A roof should typically last two to three decades on a home—or longer if you choose the right material. The average cost for replacing a roof, according to HomeAdvisor, is $6,838.
But, again, that cost can vary greatly depending on if you want to go low or high quality. For example, asphalt shingles, which are the most common roofing type, could cost as little as $1,700, but slate, which could last even longer without needing repair, may run up to $120,000.
How to Handle the Cost of a Fixer Upper
These numbers can seem overwhelming, but remember, you’re bringing out your home’s maximum potential for both you and any potential future sale. To help pay for these improvements, you could look into applying for a home improvement loan to finance your home addition project.
SoFi applicants have an average online approval-to-funding in just seven days. Furthermore, they are unsecured loans, meaning you’re not required to put up collateral against the loan. And with fixed monthly payments, you can better plan for the road ahead. Now, all you need is a hammer and you’re ready to go.
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