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Are fixers a good idea in bad areas?
ANSWER: It depends. Distressed properties or
fixer-uppers can be found anywhere, even in wealthier
neighborhoods. Such properties are poorly maintained and
have a lower market value than other houses in the
neighborhood. Many experts recommend that before you
make such an investment, first find the least desirable
house in the best neighborhood. Then do the math to see
if what it would cost to bring up the value of that
property to its full potential market value is within
your budget. If you are a novice buyer, it may be wiser
to look for properties that only need cosmetic fixes
rather than run-down houses that need major structural
repairs.
Are there any special tax breaks for historic rehab?
ANSWER: Qualified rehabilitated buildings and
certified historic structures currently enjoy a 20
percent investment tax credit for qualified
rehabilitation expenses. A historic structure is one
listed in the National Register of Historic Places or so
designated by an appropriate state or local historic
district also certified by the government. The tax code
does not allow deductions for the demolition or
significant alternation of a historic structure.
Resources: * National Trust for Historic Preservation,
1785 Massachusetts Ave, NW, Washington, DC 20036-2117;
(202) 588-6000, nationaltrust.org.
Are there gov't programs for rehab?
ANSWER: The U.S. Department of Housing and
Urban Development's Section 203 (K) rehabilitation loan
program is designed to facilitate major structural
rehabilitation of houses with one to four units that are
more than one year old. Condominiums are not eligible.
The 203(K) loan is usually done as a combination loan to
purchase a fixer-upper property "as is" and rehabilitate
it, or to refinance a temporary loan to buy the property
and do the rehabilitation. It can also be done as a
rehabilitation-only loan. Plans and specifications for
the proposed work must be submitted for architectural
review and cost estimation. Mortgage proceeds are
advanced periodically during the rehabilitation period
to finance the construction costs.
For a list of participating lenders, call HUD at (202)
708-1112. If you are a veteran, loans from the U.S.
Department of Veterans Affairs also can be used to buy a
home, build a home, improve a home or to refinance an
existing loan. VA loans frequently offer lower interest
rates than ordinarily available with other kinds of
loans. To qualify for a loan, the first step is to apply
for a Certificate of Eligibility. Another program is the
Fedeal Housing Administration's Title 1 FHA loan
program. Resources: * "Rehab a Home With HUD's 203(K)"
brochure, U.S. Department of Housing and Urban
Development, Washington, D.C.; brochure online.
Are there programs for fixer-uppers?
ANSWER: If you need home loan to buy a
"fixer-upper" and remodel it, look at the U.S.
Department of Housing and Urban Development's Section
203(K) loan program. The program is designed to
facilitate major structural rehabilitation of houses
with one to four units that are more than one year old.
Condominiums are not eligible. A 203(K) loan is usually
done as a combination loan to purchase a "fixer-upper"
property "as is" and rehabilitate it, or to refinance a
temporary loan to buy the property and do the
rehabilitation. It can also be done as a
rehabilitation-only loan. Investors no longer may
participate - only owner-occupants. Owner-occupants are
required to come up with only 3 to 5 percent. HUD
requires that a minimum of $5,000 be spent on
improvements. Two appraisals are required. Plans and
specifications for the proposed work must be submitted
for architectural review and cost estimation. Mortgage
proceeds are advanced periodically during the
rehabilitation period to finance the construction costs.
What are some guidelines to follow when trying to
find a contractor? ANSWER:
While hiring contractors recommended by friends is
usually a safe route, never hire a construction
professional without first checking him or her out. If
your state has a licensing board for contractors, call
to find out if there are any outstanding complaints
against that license holder. Also, call your local
Better Business Bureau to see if there are any
complaints on file. If you are satisfied with the
answers you find there, interview the contractor
candidates. Ask what kind of worker's compensation
insurance they carry and get policy and insurance
company phone numbers so you can verify the information.
If they are not covered, you could be liable for any
work-related injury incurred during the project. Also be
sure that the contractor has an umbrella general
liability policy. If they pass the insurance hurdle,
next check some of their references. A good contractor
will be happy to provide as many as you want.
Finally, don't let yourself be rushed into making a
decision no matter how competitive the market may seem.
Also, never pay a deposit to a contractor at the first
meeting. You may end up losing your money.
What are some resources for info on home
improvements?
ANSWER: If you're getting ready to embark on
a home improvement project involving contracting help,
"Ready, Set, Build: A Consumer's Guide to Home
Improvement Planning Contracts" lays out a road map for
selecting the right contractor, obtaining competitive
bids up to what to include in a contract. There also is
information on consumer rights, liens and financing. The
book is available for $9.95 through Consumer Press and
Women's Publications, Inc., 13326 Southwest 28th St.,
Fort Lauderdale, FL 33330-1102; (954) 370-9153,
bookguest@aol.com. * Remodeling magazine's annual "Cost
vs. Value Report", available for a nominal fee from the
magazine; call (717) 399-1900, ext. 146 or visit Online
Store to order.
What kind of return is there on remodeling jobs?
ANSWER: Remodeling magazine produces an
annual "Cost vs. Value Report'' that answers just that
question. The most important point to remember is that
remodeling a home not only improves its livability for
you but its curb appeal with a potential buyer down the
road.
Most recently, the highest remodeling paybacks have come
from updating kitchens and baths, home-office additions
and extra amenities in older homes. While home offices
are a relatively new remodeling trend, for example, you
could expect to recoup 58 percent of the cost of adding
a home office, according to the survey.
Where are fixer-uppers found?
ANSWER: You can find distressed properties or
fixer-uppers in most communities, even wealthier
neighborhoods. A distressed property is one that has
been poorly maintained and has a lower market value than
other houses in the immediate area. Ascertaining whether
the property you're interested in is a wise investment
takes some work. You need to figure what the average
house in a given area sells for, as well as what the
most desirable houses in that area are like and what
they cost. Some experts suggest that buyers who take
this route try to find a "cosmetic fixer" that can be
completely refurbished with paint, wallpaper, new floor
and window coverings, landscaping and new appliances.
You should avoid run-down houses that need major
structural repairs. A house price that looks too good to
be true probably is. A smart buyer will find out why
before buying it. The basic strategy for a fixer is to
find the least desirable house in the most desirable
neighborhood, and then decide if the expenses needed to
bring the value of that property up to its full
potential market value are within one's rehab budget.
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