Is the fixer-upper right for you? Consider the options
The Denver Post: March 7, 2007By Elana Ashanti Jefferson
Denver Post Staff Writer
Like people, pets and gardens, old houses need love.
An old house might seem ideal for cash- strapped buyers or anyone hoping to turn a financial nugget into a gem. Pair that with the many home-improvement shows and magazines spotlighting what seem to be overnight construction miracles, and buyers who once cringed at the challenge are now bulking up toolboxes and tackling their own projects.
But is a fixer-upper for everyone?
That question is key given this ebbing real estate market. Buyers of fixer-uppers wonder whether they will see a return on their remodeling investment. And with an abundance of newly built home properties available that require zero fixing and boast mortgage and financing specials, fixer-uppers may seem less attractive than ever.
Bill Mitchell can relate. After six years of caring for a coveted historic home on the Sixth Avenue Parkway, this AT&T retiree is weary of heeding the calls of his house.
"We did a huge remodel," says Mitchell, who enlisted the help of Scott Parker at Nest Architecture. "The kitchen needed to be opened up, and we gutted the basement."
More than $200,000 later, Mitchell's house, though beautiful, still needs work. But he and his partner no longer want a two-story property. So next year, they will relocate to a new penthouse condominium at The Pinnacle at City Park.
"It was a hard decision because we do love this house," the homeowner says. "But the thought of (renovating) all over again? We did not want to deal with it."
Experts say the biggest mistakes owners of fixer-uppers make are failing to consider unplanned costs and failing to be honest with themselves about how much elbow grease they are willing to expend.
"The first thing you have to ask yourself is, what are you qualified to do," says Tom Silva, longtime general contractor for the PBS home improvement staple "This Old House."
"If it's just painting and papering, that's fine," Silva says. "But you have to know how handy you are, and how much you're willing to learn."
Then get ready for the laundry list of issues that generally arise with an old house. Silva says the first and most daunting consideration is the foundation.
"A door may not close correctly, a wall may be bowed, a row of windows may not line up, a roof may sag," he says. "These are the kinds of (structural) issues that in most cases you're going to have to hire a professional for."
Next up when surveying whether or not to tackle a fixer-upper: plumbing and wiring.
"You have to figure out whether you have to re- plumb or rewire the house," Silva says. And like foundational problems, these tasks are better left to professionals than weekend remodeling warriors.
But even houses with good bones may need plaster work before any of the fun with upholstery and paint samples begins. And whenever walls are opened up, the opportunity presents itself to improve energy efficiency with more or better insulation.
In short, Silva says of old homes: "You better remember one thing - it's a tremendous amount of work."
So why do it?
"The rewards are great," he adds. "You can bring a lot of these old places back to life."
Plus, new homes rarely feature the same attention to detail and craftsmanship as old homes, says ServiceMagic home improvement expert David Lupberger.
"The word character comes mind," this residential builder and remodeler says. "The woodwork (and) the workmanship can't be duplicated. And if it is, it's very expensive."
But not everyone who starts with an old house can see it through. For instance, one of Lupberger's acquaintances planned a custom remodel around huge, salvaged antique wood beams. Two years into the job, after almost everything had to be redrawn and re-planned to accommodate the size of the beams, and a dwindling budget meant the homeowners were doing most of the construction themselves, they simply wanted out.
"It's always going to cost more than you think," Lupberger says. And there are always unforeseen chores.
Lupberger summarizes his fixer-upper cautions like this: "Give a person a 40- or 50-hour a week job, then tell them for the next two years they're going to work three or four nights a week on this (house) project."
That alone may stop some ambitious DIYers in their tracks. But those who do see a fixer-upper from start to finish can customize it more than what's offered in Colorado's current glut of new homes, says housing industry analyst Mike Rinner with the Genesis Group. Right now, only those homes located near high-density employment centers - downtown Denver, downtown Boulder, and the I-25 corridor - are selling briskly. So sitting on a fixer-upper for a few years is sure to result in a profit.
"It's all about your personal goals," Rinner says.
Other real estate experts are even more optimistic about the financial gains behind fixer-uppers. A 2003 study conducted by the National Association of Realtors indicated that houses marketed as "fixer-uppers" sell for 24 percent less than other properties, meaning "this is certainly an opportunity for people looking for bargains," says NAR spokeswoman Stephanie Singer.
And because demographic housing trends indicate more buyers are leaving the suburbs for urban and ex-urban communities, fixer-uppers may be the only option for people hoping to live in desirable neighborhoods at an affordable price.
"You can either get something new in an old neighborhood or something old in a new neighborhood," says Byron Koste, executive director of the Real Estate Center at the University of Colorado's Leeds School of Business. He bottom-lines the financial benefit of a fixer-upper this way: "When you buy a house that hasn't been redone, you get a tremendous discount."
Still, Koste confirms that there are real reasons today's buyers may deem a fixer-upper as a dubious investment:
"Interest rates are going up, so it is more expensive than it was before to own the same piece of land," he says. "It's harder to finance now than it was before. And, we overbuilt."
So what's the biggest financial caveat to fixer-uppers - besides renovation costs? In this market, fix-and-flip properties are not as likely to turn a profit, says Colorado Association of Realtors president Kit Cowperthwaite. Those hoping to make money off their fixer-upper need to wait before selling.
That should sit fine with folks who simply want affordable homes in prime locations.
"People who traditionally sink money into fixer-uppers want a better home," Cowperthwaite says. "They relish fixer-uppers because they don't mind tailoring the property for their own taste."