Do The Numbers Pencil For Denver Fixer-Uppers?
Let’s be honest - if you can buy a house that is in disarray at $2.2M, spend $1M making it perfect and, upon completion, have a resale value of $4.9 million, why wouldn’t you do that? At the end of the process, you get the exact home that you want at or under budget with instant equity. Sounds like a dream, right? Here is the rough calculation to consider: finished home value – cost of purchase – cost of complete renovation = “does this make sense?" If you are considering a fixer-upper in Denver, you should dig deeper before making your final choice.
Denver and Arapahoe County History and Affordable Homes
Let’s be clear, you make a profit when you buy a property, not when you sell it. This is the least understood principle in real estate. On the upside, Denver and Arapahoe County, Colorado are two of the most desirable places on the planet to live in today’s market. They feature some of the best dining, shopping, and schools not just in Colorado but on planet earth. People will always be drawn to live in this area. From a valuation standpoint, this area will always appreciate on balance long-term. No doubt, short-term valuations will fluctuate in cycles - typically, 7 year cycles. For homes in the Denver area, this cycle can change, however - sometimes longer, sometimes shorter.
Pitfalls of Fixer-Uppers In Denver
Let’s break down some of the disadvantages that can arise when you take on a fixer-upper in Denver, or anywhere for that matter:
- Gremlins - Any large construction project has gremlins - yes, like the 1984 timeless movie. Once you start opening up walls and changing the floor plan, you are bound to run into unknown issues that will need to be corrected in order to complete the job. Often, with fixer-uppers in Denver, these unforeseen complications are not the contractor’s fault - they don’t have x-ray vision. Once a problem is uncovered, it’s best to just fix it while it’s right in front of you. Unfortunately, every “gremlin” costs money - often above what you’ve initially budgeted for your construction project. One potential downside to tackling a fixer upper in Denver is the chance that the finished product could come in at a much higher price point than you anticipated.
- Loan Concerns - Another potential pitfall of a fixer-upper is the chance that the property is ineligible for financing. The state of the property you are considering can have a major impact on the amount of purchasing power you truly have - regardless of the value of end result.
- Contractor Issues - The personable, experienced, and industry-leading contractors are few and far between. The Chris Davis team can help connect you with local experts to give you a leg-up on your project, but often times there will be a wait for those professionals and their team to become available for your project. Even after you’ve found a contractor you like and trust to transform your fixer-upper in Denver, you may run into other delays due to weather, illness, or even other projects. Your contractor is not something you want to settle on, though. Wait for the most revered in the industry or you’ll certainly regret working with a contractor who can’t get the job done.
- Timetable & Carrying Costs - Unless you’re paying cash, there will be carrying costs during the renovation of your Denver fixer-upper. Things like mortgage, taxes, insurance, HOA fees, special assessments, heat, electric, natural gas, and solar panel leases should all be factored into your total budget as a recurring monthly expense. Keep in mind that there is a lot we don’t see in the 60-minute HGTV episodes and renovations can be a lengthy process, so you’ll want to calculate these additional expenses carefully and plan for additional costs if you run into delays.
The Potential Upside of a Fixer-Upper
Don't let the potential disadvantages of a fixer-upper get you down on the idea, though. A fixer-upper in Denver can be the perfect solution for those in the market to buy a home. Let’s talk about some of the advantages of taking on a renovation project to create your dream home.
- Instant Equity - If you buy a home right (which you can do with the help of an experienced broker), control your renovation budget, and find no “gremlins,” you have the opportunity to gain strong equity on your Denver fixer-upper on the day you move in.
- Customization - The flexibility a fixer upper offers to potential home owners versus what you’re willing to sacrifice for a turnkey home that’s within budget can make a fixer-upper in Denver the ideal solution for your family. Your money and your design could make your dream home a reality.
How To Mitigate Risk For A Fixer-Upper In Denver
There are few key things you’ll want to do to mitigate risk if you are considering purchasing a fixer-upper in Denver. First and foremost, you want to get an overqualified inspector to come look at the property. An experienced broker, like Chris Davis, will be able to connect you with an inspector who fits the bill to ensure you get all the information you need about the property before it’s too late.
Due diligence is another important factor in your decision to buy a fixer-upper in Denver. Due diligence is a broad category in the Colorado State Contract To Buy and Sell, so you’ll want a seasoned real estate agent to help you spell out the critical documents that you should see, in order to help you make the best decision possible regarding your purchase, whether you opt for a turnkey home or a fixer-upper in Denver.
Create The Home Of Your Dreams With Chris Davis On Your Side
An informed decision mitigates risk at the margins but does not eliminate risk, entirely. The right real estate agent on your team can help you have a positive home buying experience for a turnkey home, a fixer-upper, and everything in between. Chris Davis is an experienced real estate agent helping clients find the perfect fixer-upper’s to transform into their dream homes. Contact Chris today if you’re interested in creating the home of your dreams with a fixer-upper in Denver.