Buying Mission Viejo Fixer Upper Homes

If done correctly, buying a fixer upper in Mission Viejo can be a rewarding experience. But buying a fixer upper is not for everyone. Fixer uppers are best bought by people who have an interest or skill in doing some of the renovation work themselves, for it is hard to find a cost effective contractor to handle all of the miscellaneous repair odds and ends that you will often find in a Fixer Upper home. Here is a step by step guide to buying a Fixer Upper in Mission Viejo or elsewhere in Orange County, CA..

1. Identifying a Fixer Upper home ? - A fixer upper is simply a neglected and/or poorly maintained home. The three main sources of Fixer Uppers in Mission Viejo are a.) rental homes where the tenant damaged the property and the landlord is not willing or able to make the needed repairs. b.) homes owned by an elderly person who has not made repairs to the home for many years. This property may also be in Probate. c.) a home where the owner has come upon hard financial times and has neglected the property. This type of property may also be in foreclosure.

2. Where to find fixer-uppers? - Although you can find a fixer upper in most any community, the odds are most of the Fixer Uppers you'll come across will be in older moderately priced neighborhoods in Mission Viejo. Fixer uppers can be found in the local newspapers such at the Orange County Register, and the Orange County Penny Saver. You can also find fixer uppers listed for sale by a Realtor and these can be found online in the Multiple Listing Service (MLS). Finally, you can drive by different residential streets on the way to work or shopping and keep an eye out for homes that have been terribly neglected and in bad condition, called the blemish on the block (B.O.B.) and write the owner a letter.

3. Are Fixer Uppers a good value ? - Sometimes... like any other investment you have to do your homework to calculate the potential net profit. To do this, you first need to analyze what the average house of that size in that neighborhood of Mission Viejo sells for in good condition. Then you need to estimate the cost of repairs. Be conservative, for many new fixer upper home buyers underestimate the cost of repairs. You also need to calculate the costs to purchase (ie: title insurance, escrow, loan costs etc), and if your are planning to sell immediately after repairs, you need to include the cost of sales and the costs of making the monthly payments. If your estimates yield a net profit of $20,000 or more, then you should give this property some serious consideration. If you are planning on living in the property, then you can be less demanding on the profit potential, if it is for pure investment, then shoot for a higher profit margin.

4. What type of home should I buy ? - A detached home is usually a little bit better option than a Condo. One, youll find better fixer potential since the Home Owners Association tends to eliminate the possibility of a home from getting to neglected, and Two, youll need the permission of the Association for major repairs. A 3 bedroom 2 bath is better than a 2 bedroom, 1bath. Also, if you are relatively new to this, a so called 'cosmetic' fixer is preferable. A cosmetic fixer is a home that may need new carpet, paint, misc light or plumbing fixtures, some broke windows or doors etc. Unless you're an experienced contractor it's a good idea to stay away from properties that have major mold issues, large cracks in the foundation, hillside or soils movement, etc. The general idea is to find the worst cosmetic fixer in an otherwise nice neighborhood.

5.) How do I finance the Purchase ? - Today, there are many options that did not exist 10 year ago. You'll need two sums of money. One sum of cash will be for the purchase costs which will be title, escrow and the down payment. This number can vary widely from $5,000 to $100,000 primarily dependent upon how much you want to put down. The second sum of cash needed will be for renovation costs, which can also vary widely from $5,000 to $50,000. Plus you'll most likely need a new loan as a first trust deed to purchase. Many lenders today will allow the purchase of a cosmetic fixer with low down payment, but not always. Sometimes, the appraiser will require that a particular item be repaired prior to funding which could kill the deal... So it's a good idea to interview several lenders and let them know what you are trying to accomplish before you purchase. There are also other sources of financing such as a low cost line of credit loan on your personal residence, the U.S. Department of Housing and Urban Development's Section 203 (K) rehabilitation loan program which can advance you money for repairs. Another program is the Federal Housing Administration's Title 1 FHA loan program where you can possibly borrow based upon future value.

6. What kind of return is there on remodeling jobs? Paint and carpet are usually offer the best return on remodeling dollars. Remodeling Magazine produces an annual "Cost vs. Value Report'' that can help to answer this question. 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. Bottom line, is if you buy in a middle income neighborhood of Mission Viejo, keep the repairs simple and don't over do it.

7. Do building codes come into play? It depends on upon who you are and the amount and type of work. If you are simply painting, installing new carpet, and fixing some broker doors, windows and faucets, you usually do not need a permit in Mission Viejo. If you are doing more extensive work such as a room addition, kitchen or bath remodel, etc. than you probably do need a permit from the city of Mission Viejo. Building codes are established by local authorities to set out minimum public-safety standards for building design, construction, quality, use and occupancy, location and maintenance. There are specialized codes for plumbing, electrical and fire, which usually involve separate inspections and inspectors. All buildings must be issued a building permit and a certificate of occupancy before it can be used. During construction, housing inspectors must make checks at key points. Codes are usually enforced by denying permits, occupancy certificates and by imposing fines. Building codes also cover most remodeling projects. If you are buying a house that has been previously significantly remodeled, ask for proof of the permits involved before you purchase to avoid future liability for fines.

8. Purchasing the Property: Once you have identified the fixer Upper, made your estimates and calculations of the market value after fix up, and cost of repairs, its time to acquire the property. Bottom line here is dont fall in love with any property. If you cant buy the property for the price you have calculated that is required to make your minimum target profit potential, then dont buy the property. Its often said, that 80% of the success of turning Fixer Upper properties, is the price you buy if for. Another rule of thumb, is if you want your low price, then be prepared to give the Seller there terms, such as: a quick escrow, As Is purchase, etc. During the escrow process, make sure you perform a very detailed inspection of the property, to make sure you have identified all of the repairs. Also, check with the City building department to make sure that the City has not cited the property for needed repairs that you may not be aware of.

Acquiring and renovated Fixer Upper properties can be a very enjoyable, rewarding and financially profitable endeavor if done correctly. Its best to start slowly and acquire lower priced properties to start of with. As you gain experience, you can tackle more expensive and difficult properties.