Aurel Garban's Blog
If you’re buying a fixer upper, whether you plan to live on the property or flip it, there are plenty of things that you’ll need to consider. So you can budget appropriately, below, many of the costs and fees are laid to so that you can see what you’ll need to budget for when rehabilitating a home.
The Overall Costs
The costs that you’ll incur in buying and finishing a home that needs to be rehabilitated are as follows:
- The team needed for rehabilitation
- The purchase price of the property
- The cost of owning the property
- The cost of selling the property (if you plan on flipping the home)
The people that you put together to rehab your home will be very important to the entire rehabilitation process. You should take the time to research each person that you’re hiring to be sure that they are a good fit for the job.
Professionals who will be involved in the process include:
- Insurance agent
- Home inspector
You can ask your realtor or other trusted contacts for recommendations. Putting a team in place helps to make the entire, sometimes cumbersome process of house rehabilitation a bit smoother.
Buying The Property
These costs are pretty standard as if you were buying any other home. You’ll need to pay closing costs, attorneys fees, realtor fees, and more. Costs typically included in a home purchase are:
- Purchase price
- Closing costs
You should budget for all of these typical home buying costs when buying a rehab home.
The Costs Of Home Rehabilitation
This is where things get expensive. You’ll need to first pay a contractor just to consult with them to see how they will create your vision for the property. You could also take another route an consult with a home inspector who has experience in construction. They can give you an idea of what the construction expense will be and what needs to be addressed.
When you do get to meet with contractors, you’ll want to understand their construction experience and feel comfortable that they can produce the work that you need at a high level of quality.
Owning A Home
Once you have the home in need of rehabilitation in your possession, you’ll need to pay the typical costs of any homeowner. These include:
- Mortgage payments
Even if you’re not currently occupying the home, once the property is purchased, all of these costs will need to be covered and considered.
If you decide to flip the property and sell it, you’ll need to consider additional costs including realtor’s fees and other closing costs.
466 Putnam Ave, Cambridge, MA 02139
So what will 2020 bring to the real estate market? While market trends can, and do, change on a whim, some activity seems to be easier to predict. If you’re entering the market this year as a buyer or seller, having a better understanding of these trends will help you make informed decisions, so here’s what you can expect.
1. Home Prices Rise, but Slower
Home prices have been on the rise in the past couple of years. This trend is expected to continue in 2020, but the rise will be a bit slower. Freddie Mac warns of an economic slowdown this year, and expects price growth to be around 2.8, compared to 3.3 in 2019 and 5.0 in 2018. This is good news for sellers, but it’s also good news for those who aren't considering selling this year. Rising home prices means your equity will increase or hold steady.
2. Drop in Mortgage Rates
Next, interest rates are expected to drop for most loan types. In 2020, expect to see averages below four percent for most types of loans. Of course, this particular trend can change suddenly, but if it remains on track it will mean more interested buyers in the market. This can help sellers.
3. Homebuilders Focusing on Starter Homes
Demand for starter homes is on the increase. There are two reasons for this. First, many people who would normally be listing their starter homes are choosing to stay put, because younger homeowners are valuing community more than owning a large home. Second, Baby Boomers are starting to look for smaller “starter” homes as their downsized homes. This creates an additional number of buyers competing for the type of home that appeals to first-time buyers. Because of this demand, many homebuilders are focusing on building in this demographic.
4. Millennials Dominating the Market
Millennials, those born between 1980 and 1998, are going to be the largest generational group in the home buying market. Many of these young adults waited to buy their first home until they were well established in their careers, and are now ready to make the purchase. Others are ready to move out of their starter home and into their forever home. These buyers use the Internet primarily to help them in their home search and are looking for the home’s location and features, rather than a huge home with lots of square footage.
Market trends are never set in stone. Economic factors can change and impact these trends, but based on current projections, these are a good indication of what the 2020 home market will bring.
4 Brattle, Cambridge, MA 02138