In the course of your hunt, it’s likely you’ll come across a place that has a lot of potential. It might not be exactly what you want, but with a redone kitchen, new lighting, a second bathroom and freshly stained floors, it would be fabulous!
In other words, you’ve stumbled upon the classic fixer-upper. It’s not so dilapidated that you’ll need to do a complete overhaul, but there are enough problems that significant work will need to be done – and a lower price reflects that. Should you consider it? Here are some thoughts.
If you find Condo-Hunting stressful and difficult, realize that fixing up a place is equally so. Not only will you need to work with and oversee contractors, but if you don’t have experience in home construction, you’ll need to do a lot of research to understand what needs to be done, how much it should cost and what a quality job looks like. This is not to say you can’t do it, but if searching for a home makes you a nervous wreck, buying a fixer-upper may not be the best idea.
Before you think of buying, read the Covenants, Conditions and Restrictions (CC&R) written by the building’s Association. This will give you a better idea of what you can and can’t do. Most cosmetic changes, such as new kitchen appliances, new tiling in the bathroom and installing wall-to-wall carpeting won’t require approval from your Association Board. However, larger changes may require approval, or may be banned. They may also need a building permit from your local authorities. Things like moving an interior wall, re-routing plumbing (think second bathroom), or significantly changing the appearance of your exterior deck – there’s no guarantee that you’ll be able to do them at all.
Fixing up a place takes time and totally disrupts your life. So if you need to move by a certain deadline, be wary. Depending on the work being done, you may be able to live in your condo while workers work – or you may not. If possible, plan on having another place to live until the majority of the work is done. Otherwise, figure out how you can live in your own “construction zone” until your transformation is complete. For example, you may need to take your showers at a friend’s or the gym for a while or eat take-out for weeks while the kitchen is being redone. Also beware: major remodeling almost always takes longer and costs more than estimated.
There’s no guarantee that you’ll come out ahead financially. In the romanticized version, you’ll buy a fixer-upper, make several gorgeous updates, live in a state-of-the-art unit for five years and then sell to a grateful buyer at a substantial profit. While this is certainly possible, it’s by no means guaranteed. Re-doing aspects of a condo can be expensive (that’s why the unit is discounted in the first place) – and many updates won’t permanently raise your unit’s resale value. More likely, you’ll roughly cover your expenses when you sell – whether or not you make a profit on your unit is far more influenced by the prevailing real estate market.
Unless you flip the place immediately, most updates won’t give the unit a sparkling million-dollar feel when you sell. For example, if you change out the 15-year-old appliances, yes, you’ll have sparkling new appliances. But when you go to sell five years later, they’ll just be nice medium-aged appliances – certainly an improvement from when you bought, but not something that’s going to raise the resale value by tens of thousands of dollars all by themselves. The same goes for new carpets, re-done floors, freshly tiled bathrooms and new bathroom fixtures. You’ll get a bump from having good-quality materials and fixtures, but it’s unlikely to be an incredible financial windfall.
Nevertheless, choose good-quality durable materials. When you go condo hunting, you can tell when the updates look shoddy and the materials look cheap. It’s a turn-off and something that makes you wonder about the overall quality of the unit. If you’re going to fix up a place, don’t do a patch-work, half-way job. Fix it up and make it nice – you’re going to live there for a while. When you do sell, having a unit in good shape will be an asset and a selling point – even if it doesn’t guarantee you a windfall.
Make sure you like the updates you make. Remember that you’re the person who will be living at your new place. So your first priority when considering updates and changes should be you – what you want and need. Within reason, you should assume that updates and styles you like will appeal to potential buyers down the line – surely someone will be interested in the castle you’ve created.
That said, think long and hard before going too unorthodox. If it’s been a dream of yours to do a full “Elvis at Graceland” and have shag carpet on the walls, or a vibrant fuchsia for all the fixtures, these are unusual enough choices that the next buyer will also have to fix up the place in order to undo your idea of a fix-up – meaning you’ll almost certainly not recoup your expenses.
Don’t install something just because it’s expensive. You may think that the next buyer will appreciate and pay top dollar for premium marble countertops or ornate real-wood wainscoting. But that’s not necessarily the case. Would you pay a premium for these things in your next condo, especially if someone else chose the style? Probably not. So don’t out-and-out splurge on luxury improvements unless you want the expensive update. The basic rule is: never upgrade above your location and your building.
Ultimately, think of a fixer-upper as an opportunity. If you put in the effort and research, you can customize a place to your specifications and recoup the cost of the projects when you sell. While there’s more work involved than buying an already-updated unit, the rewards are potentially greater – you’ll be able to live in a place that you’ve updated yourself. And that can be very satisfying.
The restriction on renovating a co-op can be even more severe and the co-op board will have the final say on your plans. Some buildings even limit all major construction to certain months of the year. Remember, even though you have a proprietary lease to your own unit, you are, in fact, a shareholder of the entire building, so it is to everyone’s benefit that standards are kept uniform.