Buying a home that needs renovation can seem a little intimidating. Yet, it gives you a chance to create your ideal home. The budget is one of the main factors to consider. There are multiple items to take into account, such as material and labor expenses. Here are some tips for determining the cost of buying a fixer-upper.

1. Consider DIY Projects

Doing some projects yourself can reduce expenses. So, take time to figure out which parts of the renovation you can handle on your own. Things like removing wallpaper or painting are more straightforward. However, plumbing and electrical work should be left to the professionals.

When deciding which projects to tackle, consider your level of expertise. If you haven't done a home improvement project before, it may not be the best idea. Also, keep in mind your schedule. If you have a full-time job, you might become more stressed out than you want.

2. Do Your Research

Have your contractor walk through the house and give you a written cost estimate. Getting this information allows you to make smarter decisions about your budget. If you’re doing the renovation, get the supply prices first. Ensure you also tack on an extra 20-25% to handle surprise costs.

3. Look Up Permit Costs

Ask your contractor if the work requires any permits and what the cost would be. Failing to get one could complicate things when you go to sell your home. Plumbing and electrical work or additions often require permits.

Figure out whether you or your contractor will pick these up. You can obtain a certification through your local municipal office. Just remember it will take time to process the request.

4. Determine the Price for Structural Work

If your home needs lots of structural repairs, such as new walls, then hire a structural engineer. They can inspect your home and give you a cost estimate. Then you can add these expenses into your budget ahead of time. Also, before buying, ensure you fully understand the extent of the problem and how to fix it.

To find a professional, start with your network. Reach out to friends and family or your local home inspectors and designers. You can also use the HomeAdvisor directory of residential engineers.

5. Understand the Cost of Financing

Have enough money for the down payment, closing costs, and repairs. If you’re using a home equity loan, make sure you get pre-approval before making an offer. You can get these loans from your bank, credit union, or an online lender. First, ensure you have enough equity in your home and check your credit score.

Have the deal contingent on receiving the purchase and renovation loan, so you have money after the sale. Another option is the Federal Housing Administration's Section 203(k) program. It assists homeowners in buying or refinancing a home that needs renovation. It combines the purchase and rehabilitation costs into a single mortgage. To qualify, your property value must fall within the Federal Housing Administration limit.

6. Keep in Mind the Building Material Costs

Talk with your contractor to learn what material they already have and what they still need to buy. Purchasing raw supplies in bulk can help them cut costs. Along with building materials, construction leaves behind waste products, such as scraps. So, waste management fees should be included in the overall budget.

7. Know the Home’s Age

To determine your property's age, review your ownership documents or head to your county records office. If your home is older, you will more likely need to make substantial changes. This leads to bigger and more costly upgrades. For example, an older house often has outdated plumbing or electrical systems.

Knowing these expenses beforehand helps you create an accurate budget. To get a better idea of the projects that need to be done, get a home inspection. In addition, check for lead-based paint, radon, pests, and mold.

Calculating Costs Successfully

When buying a new home, there’s a lot to think about. Money is a top concern for many homeowners, especially when purchasing a fixer-upper. Yet, it can be less stressful if you account for all the factors. Review these tips to calculate the expenses and create your renovation budget.