You Bought an Abandoned New Jersey Home: Now What?

If you’ve recently purchased a fixer-upper, you may be wondering: what’s next?

Where others saw a money pit, you saw potential. But achieving that potential can be a long road. Purchasing an old or abandoned home can be an excellent way to minimize the cost of becoming a homeowner. Many folks who have been priced out of new builds are turning to fixer-uppers as an entry into homeownership. But once you sign on the dotted line and get the keys, you may find yourself second-guessing your purchase. Restoring an abandoned home is a massive undertaking physically, financially, and mentally.

If you are a recent homeowner of an abandoned property, here are some next steps to set you on a path for success.

1. Prioritization

When it comes to turning an abandoned house into a beautiful home, the path to success lies in planning. You need to determine which fixes are critical and which can wait. You also need to determine which projects you can do yourself and which projects will need to be done by professionals. Sweat equity is a great way to reduce your overhead after purchasing an abandoned home, but knowing your limits can also prevent costly mistakes.

Keep your expectations realistic. You probably won’t get all your renovations done within the first, second, or even third year of homeownership. Be patient with the process. Focus on the things you absolutely cannot live without.

2. Funding

You bought the house, but that is just the first financial hurdle. Now you need to find a way to fund all the repairs and renovations needed to make your dream come to life. Depending on how much work is needed for your specific property, you may have secured the funding up front with your mortgage. Or you may be funding your renovations as you go. If the latter, you need to determine where these funds will come from. Here are some ideas:

• Personal Savings: If you have been planning this purchase and project for some time, you likely already have some solid savings to fund your home repairs. If you haven't already, move any savings you have into a high-yield savings account to help your money work for you.
• 401(k) loan: Borrowing from your 401(k) can be a great way to utilize a resource you have built up for years. When you borrow from your 401(k) through a loan, you pay it back and avoid the tax consequences of taking money out of your 401(k) before the minimum age.
• Personal Loans: A personal loan can also be an option to fund your repairs and renovations; just be sure not to take on more debt than you can handle. You need to factor in your mortgage and other home costs before you commit to a personal loan.

3. Budget

If you are funding the project as you go, it is crucial to develop a solid budget. How much money can you put aside for home repairs every paycheck? You will need to determine whether you can afford to rent while you repair the home or whether you will need to live in the home while renovations are underway. This may also shift your priorities for which repairs need to be done first and which can wait.

Determine which big-dollar items need to be addressed and consider working on them first, while you are still likely to have savings and financing money for the home purchase. If the home needs a new roof to prevent further water damage, that should be the first thing you budget for.

If you need more wiggle room in your budget, look to other areas of your life where you can cut back. Downgrade your vehicle, spend less money on going out or entertainment, or find new income streams to help boost your funds. Even if these changes are temporary, they can offer some financial relief as you take on this major project.

When you need an experienced real estate attorney in New Jersey, Veitengruber Law can help.