I'm Thinking of Buying a House That Needs Remodeling. Here's What I'm Doing First

I've been hoping to buy a house for several months, but I am having a difficult time finding a property that works for me. I want to live in a specific neighborhood due to the location and amenities the area offers. But, there have not been any houses coming up for sale in that neighborhood that I like and that are within my budget, based on how much I'm willing to spend on my mortgage payment.

Because of these challenges, I am considering buying a fixer-upper in the neighborhood. But, to make sure I'm making a smart financial choice, I'm doing one important thing first.

I'm getting a quote from a contractor to estimate the remodeling costs

Before I jump into buying a house that needs to be remodeled, I want to get a clear idea of how much the fixes and upgrades are going to cost me.

The house in question has been pretty neglected because of a bad divorce situation, so there's a lot of problems that need to be addressed, including a new roof, some water damage, and a new kitchen due to some problems with the cabinets. The house is also pretty dated, so I'll need to take down wallpaper, repaint, and remodel the bathrooms.

All of this work is likely going to come at a big cost, and I want to know about how much that will be. To get a good idea, I've gotten quotes from several contractors after making a complete list of the work I want done. Since I expect there to be unforeseen issues, I'm also going to add about 5% to 10% to the estimate the contractor gives me so I don't go over budget.

This will help me to confirm I can afford to do the fixes that are necessary, without going over the total budget I set for the house.

I'm comparing the final cost of the home to nearby properties

I also want to make sure I won't end up overpaying for my house once I factor in both the price that I am paying to buy it and the remodeling costs. So, I've looked at what properties near my new house are selling for to get an idea of how a house in good condition in the neighborhood would be priced.

To confirm that the investment in the home is worth it, I'm comparing my total costs of the home purchase and the remodel with what a finished house could be purchased for. Since it seems like the total costs I'll incur are less than what a totally remodeled house could be purchased for, I've decided to move forward with the transaction.

If you are considering buying a fixer-upper, going through this process is important. A "good deal" on a house that needs fixing is only a good deal if you can do the necessary upgrades and still end up with a house that's priced comparably to those surrounding it.

Many contractors will be willing to give you a quote on the work -- sometimes for a small fee -- and it's well worth taking that step before deciding to buy. You definitely don't want to be unpleasantly surprised with how much your total housing expenses end up being once the remodel is factored in.