Will a Home Be a Money Pit? What You Need to Know
Looking for a home can be a fun prospect, or a daunting one. You are looking for the perfect home, whether it is your first home, second, or beyond. Because houses cost a lot of money, you don’t want to overspend, or worse yet, get stuck in a house that’s a money pit. It will eat up all of your money, and you’ll have no chance of making any of your money back when you decide to move.
Even if the house looks like it’s the perfect one, with nothing wrong, it could still be a money pit. The house itself might not even be the problem. The best way to avoid a money pit house is to work with a trust and local real estate agent that knows the market. Otherwise, read on to discover some great tips to help you avoid that money pit and get the perfect house.
Tip #1- There Goes the Neighborhood
When you typically think of a money pit house, you probably think that it just means that you’ll be throwing money into the house to repair it and fix it up. That’s not always the case, however. Sometimes, you’ll find the perfect house that doesn’t need any work done, but it will still be a money pit. How can this happen?
It all comes down to the neighborhood. If it is a bad neighborhood, with high crime rates, low home values, or any other adverse issues, that will directly affect the value of your home. When you try to resell the house, the neighborhood itself will drag down the value of the home, meaning you will lose money when you try to sell. If you can resell the house at all. While you can always fix up a house, and repair any issues, you can’t fix the neighborhood.
The best way to avoid this kind of money pit, especially if you don’t plan to live in the area for a long time, is to thoroughly checkout the neighborhood first. Ask your real estate agent for advice and information. Do your research, and don’t move into a neighborhood that might be a problem.
Tip #2- Old and Expensive
One of the biggest money pits in a house can be old and outdated appliances. Replacing a large appliance, like a furnace, can be a large expense. Plus, if you aren’t expecting it, that will be a lot of money that you were not planning on spending. Even worse, if you have to replace too many large appliances, you might not get that money back if you sell the house in a few years.
Appliances aren’t the only big expense you might have if you buy an older home. You will want to find out how old the roof is, and if you are going to need to replace it. New roofs are a huge expense, and even repairing shingles can be costly. These are things you need to find out about before you buy the house. That way, if you still want the home, you can try to negotiate a better price in order to cut down on some of the costs and avoid a money pit.
Tip #3- Do You Really Want a Fixer-Upper?
You’ve thought about buying a fixer-upper so that you could turn a house into your perfect home. Buying a fixer-upper does provide you with a great opportunity to remodel and renovate your new home into exactly what you want. But, you will need to be careful, because buying a fixer-upper can be a big money pit, and not necessarily for the reasons you might be thinking.
Unless you are capable of handling the renovations yourself, or have some friends that know what they are doing, the cost of hiring a contractor or other help will likely end up being the biggest expense of the entire renovation. While the idea of buying a fixer-upper might seem like a great idea, you’ll need to consider if the benefits outweigh the costs. If you are going to be doing the work, can you take the time off of work to get your house done?
The biggest money pit of a fixer-upper can be the neighborhood, actually. If the house is already priced to other comparable homes, you can actually lose money when you renovate the home. It becomes more expensive, and nicer, than the other homes in the area, and you end up getting stuck with a home that is actually too nice for the area that it is in. If you want to do renovations, find a good home, for a good price, in the right neighborhood. Use your local real estate agent to find the fixer-upper that you want in order to avoid a costly money pit.