How to Buy a Fixer-Upper: Tips for Military Buyers
by Becca Stewart - November 3rd, 2022
When PCS orders come in, there's a lot to think about. Chief among them is where you'll live next. Buying a home is a good investment, but interest rates are higher than they've been in decades, and home prices continue to rise. The cooling housing market means there are fewer multiple-offer scenarios and, therefore, less competition, but military families could still face frustration from rejected offers.
That’s why some military families are buying fixer-upper homes instead.
Fixer-uppers aren’t for everyone. But buying a home in need of some TLC often means a better price and less competition from other buyers. And with a little elbow grease, buying a fixer-upper could mean gaining equity more quickly, ensuring a more significant profit when it’s time to sell.
Here’s what real estate agents have to say about buying a fixer-upper and what military families should consider before making this purchase.
How to buy a fixer-upper: considerations for military buyers
We’ve all seen enough DIY shows on TV to make us feel like home improvement experts. But home renovations are much, much harder than HGTV would have you believe. They require time, expertise, and, yes, a fair amount of your hard-earned cash.
It’s not enough to merely consider how to buy a fixer-upper. You must also consider whether you legitimately have the time and financial resources to dedicate to a home overhaul. As military families, we all know that a surprise TDY or deployment can be hiding around the next corner. If the active duty member leaves, will the project continue as planned? Or will an absence throw the whole plan into disarray?
Fixer-upper homes can be an excellent investment for military families. Before you purchase a home in need of some TLC, do your homework. Below are a few considerations to take into account before making an offer.
Can you buy a fixer-upper with a VA loan?
This gets a little tricky, but yes, you can purchase a fixer-upper with a VA loan. The caveat is that you can only use a VA loan if you intend to use the home as your primary residence. So, if you’re buying a fixer-upper with the intent of flipping it (selling it for a profit as soon as it’s renovated) or renting it out, that goes against VA loan regulations.
However, if you’re buying a property with the sole intent of living in the home, you can absolutely use a VA loan on that purchase.
VA loans are a great option for military buyers, especially those buying homes that need some work. Not only will you get a better price on the home than you would with a newer house, but in many cases, you'll also get a lower interest rate with a VA loan. With the money you save, you can update your home and add some significant value.
- PCSgrades Real Estate Partner
When using a VA loan, one thing to keep in mind is that the inspection process is a little more in-depth than with a conventional loan. Sometimes, sellers and sellers' agents are hesitant to accept an offer with a VA loan because of these stricter inspection regulations. If you're competing against a buyer with a conventional loan, the seller just might choose the other offer.
However, fixer-uppers often receive fewer offers, meaning military families using a VA loan have a better chance of getting their offer accepted.
Side note: check out this incredible video from PCSgrades regarding home loans, including your VA loan entitlements.
What to look for when buying a fixer-upper home
When buying a fixer-upper, the two most important words are “home inspection.” Older and/or neglected homes can have a host of problems, from outdated electrical systems to compromised plumbing to structural issues. Then again, plenty of older homes need nothing more than a fresh coat of paint and some updated countertops.
The only way to know whether the home you’re considering is a lemon or a gem is to have a home inspection done. Typically, the home inspection occurs several days after the sellers accept your offer. Your real estate agent can recommend experienced home inspectors who can identify any potential issues with the home.
If possible, you should attend the inspection and ask about problems common in fixer-upper homes:
Age and functionality of electrical systems
HVAC system, particularly the furnace
Age and condition of the roof
Composition and integrity of plumbing system
Structural concerns, including cracks in walls or foundation
Age and functionality of major appliances
Signs of termites or other wood-destroying insects
Should the home inspection reveal issues of major concern, you have a few options. You can ask the seller to make the repairs, make accommodations for the repairs, or you can walk away from the deal.
If you choose to purchase the home despite the inspector’s findings, you will have a fuller picture of the necessary repairs and the cost associated with those repairs.
Factor in the additional costs
Each fixer-upper is different; some will need only minor repairs, while others require significant renovations. Consider the home’s inspection report carefully. You might contact some local contractors or price out supplies to get an estimate of the total renovation cost.
With the cost estimate in mind, decide how to pay for all necessary renovations and repairs. Do you have enough cash on hand? Will you make a profit from the sale of your current home? Or will you need to borrow money from a lender, credit union, or other financial institution? If you plan to take out a loan to cover renovations, consider the current interest rates. Borrowing money costs more now than it has in decades, so do the math and decide whether the renovations are cost-effective and necessary.
Knowing the upfront costs will help you create a financial plan to tackle this project. Talk with a qualified lender with in-depth knowledge of the VA loan program. You may be eligible for a renovation or rehab loan through the VA, a separate loan program designed for home improvement.
Who will do the work?
Military families are great at many things, but DIY renovations aren’t necessarily one of them. If you or your spouse are not particularly handy, you’ll need to hire someone to get the work done. Even if you are relatively handy around the house, some projects, like foundation work, electrical, or plumbing, should only be tackled by a professional. And all that skill comes with a hefty price tag.
Unfortunately, it's not uncommon for people to get in over their heads with fixer-uppers. They think they can do everything themselves, and that's often not the case. Then, they have to either hire someone to finish the job or the renovations aren't done correctly.
The last thing you want when you're trying to move is for an inspector to come back and say something isn't right. So, if you know what you're doing, a fixer-upper can be a great investment. But if you don't have a construction background or you don't have the means to pay someone else, you might want to reconsider.
- PCSgrades Real Estate Partner
If you can do any of the work yourself, it’s financially beneficial to do so. For instance, demolition, like tearing out cabinets, carpets, or floors, doesn’t take much skill. But doing this part of the project yourself can save you hundreds—if not thousands—in labor costs.
Where will you live during renovations?
Before purchasing the property, consider whether you can live in the home during renovations. If not, where will you live during construction? Can you afford additional time at an off-site location if the home renovations go longer than expected?
Consider resale value
Spoiler alert: if you are still active duty, you’re probably going to PCS again. Keep that fact in mind when purchasing and renovating a fixer-upper. You’ll want to buy a property with lots of resale potential.
The trick is to find a hidden gem that isn’t worth much now, but after some loving care, will be irresistible to future buyers. You can change the interior and exterior of the house, but you can’t change things like location, lot size, views, and the area’s housing market. Take all of these into account before purchasing a fixer-upper.
Becca Stewart is an Air Force Spouse, mother of two, freelance writer, and sufferer of Wanderlust. Originally from Colorado, she enjoys anything outdoors, especially if there’s snow involved. She is a travel fanatic, always looking for her next great adventure. As a full-time writer, Becca works closely with several nonprofit organizations and is a passionate advocate for human rights and military families. Learn more at writebecca.com.
