Supply chain issues, labor shortages, and higher material costs have made New York City buyers even more reluctant to take a chance on places that need a major renovation. But for those in search of a deal, a fixer upper still presents an opportunity. It all depends on whether you are up to the task of a renovation and whether the price reflects what it will cost you in time and money to fix it up.
So when you're considering buying a fixer-upper, how do you weigh all the headaches against the pleasure you'll take in living in a place you've made all your own—and the potential gains you'll make when you sell? Ask yourself the following questions:
1. Does the Discount Makes Sense?
If you're open to the work, you need to make sure there's enough of a discount built into the cost of the apartment to make the project worthwhile. There needs to be enough of a reward for the time, money, and stress that the process entails. Ask yourself: When the work's done will your equity have increased? Right now, there is huge premium for renovated properties, so if you're willing to undertake a major project you'll get properties that are less competitive and enjoy huge rewards if you're properly advised on where the price should be. This will also make for a good future investment if you intend to sell in a short amount of time, bringing your property value up.
2. Have You Calculated the Real Budget and Timeline?
You may have the appetite for a fixer upper, but do you have the budget? It’s always more work than you expect, and costs are usually higher too.
New York City’s condos and co-ops make you jump through hoops in order to renovate, making the process longer and more complicated than nearly anywhere else in the country. Even if you have renovated elsewhere, make sure you fully understand how the process is different in New York.
If the apartment is a co-op, the board will no doubt be aware of the condition and have an idea of the work that needs to be done. The board will often need you, the buyer of this type of apartment, to have extra liquidity available to satisfy board requirements.
If your NYC renovation involves any plumbing, refinishing brick work, electrical work, or home extensions, you'll need a permit, which also takes a long while to get in NYC. If you live in an apartment building, the condo or co-op board will be watching closely. Permits are not required for cosmetic work such as painting, plastering, flooring, or replacing fixtures, for example.
3. Have You Taken Current Supply Chain Issues and Rising Prices of Goods and Labor Into Account?
. It can take months to receive even the basics like appliances, countertops, and tile. Make sure you have the resources, both emotionally and financially, to take on such a project. When you're budgeting for the renovation, it's more important than ever to do your homework. All renovation timelines are at minimum doubling—and I mean in addition to the normal doubling of time we do with contractors to manage expectations. According to the National Association of Home Builders, residential construction costs are up 21 percent year over year, and remember: renovation costs can't be rolled into a mortgage and you will need to pay them out of pocket. A bank will not finance the construction costs.
You can, however, find supply chain workarounds, if you are willing to consider that. Shopping local, browsing pre-used furniture, or simply being prepared to compromise are good strategies to get the renovation done with fewer delays.
4. Do You Have Somewhere Else to Live?
If you are undertaking a renovation, add two months to whatever the contractor tells you will be the timeline or double the timeline altogether. With that in mind, ask yourself: are you prepared to live in the apartment under some sort of renovation for several months or do you have the funds and the ability to live elsewhere while the work takes place? That cost should be factored into renovation costs too.
5. Do You Have the Patience for It?
If you understand the process, and have the perseverance and vision needed to transform a disaster into a diamond, now is a good time to get a deal on a fixer upper. Consider every scenario, prepare for it, and don’t let the job become a source of resentment rather than excitement.
So are you ready to renovate?
Talk to your broker and ask for contractor referrals. Talk to several contractors to make sure they understand the scope of the work that is needed and are giving you an accurate quote. I also suggest bringing a contractor to the apartment before you buy—so they can advise on what can be done and estimate the cost and timeline for the renovation. Make sure they are taking into consideration factors like appliance delivery dates, Department of Building permits, installation costs, and building requirements.
Most importantly, I you’ve decided to undertake a full renovation, focus on the end result, the home you will get, and remember to have fun along the way!
Source: Brick Underground