Fixer-upper houses come with their own pros and cons. Anyone who’s familiar has probably heard a horror story or two. I, myself, have a list of them, sorry! But there are some good experiences too. Fixer-upper houses can be a great choice for those looking for something more affordable and the opportunity to restore to its former glory. Here is our guide on the pros and cons of buying a fixer-upper house, especially if you’re on a budget!
What is a fixer-upper house?
Fixer-upper may sound a bit like a derogatory term, but in the real estate market, it just means that a property is priced lower because it needs repairs. Fixer-uppers are homes that need to be fixed up or renovated. The renovations typically involve work like repairs to the foundation, shoddy plumbing and electrical, or crumbling walls from water damage.
Whether you buy the fixer-upper as-is or spend money on renovations, these houses typically allow you to buy a larger home for the cost of smaller ones.
- Lower Purchase Price: A fixer-upper house comes at a cheaper purchase price which will allow you to get qualified for a home loan with a lower down payment. Although, you will be spending money on renovations and upgrades later on.
- Chance to customize your new home: The best part about buying a fixer-upper is the chance to invest money in the parts of the home that matter most to you. Want a contemporary kitchen? Or a fancy bathtub? Make that one of your top priorities when remodeling. If you are buying a house that is move-in ready, you might find yourself subject to the taste and interests of the prior owner.
- Less Competition: With a fixer-upper house, you are far less likely to end up in a bidding war. Generally speaking, there is a lot less competition and you will most likely end up getting the home you like at a reasonable price.
- Increase your home value greatly: There is a great chance that you will be able to greatly increase your initial investment with a fixer-upper house compared to a turnkey home. As with any major financial transaction, do some math in advance to find out how much your renovation plans will cost and whether you will be able to get that money back when you resell the home.
- You are in charge: Another great benefit of a fixer-upper home is that you are in charge of everything. You can choose the paint colors, floor materials, contractors, and everything else!
- A chance to move into a better neighborhood: If you’re looking to buy a fixer-upper, know that your location has an effect on the final price of the home. If there are no homes available for purchase in your desired neighborhood then it might be worth checking out properties with potential issues as they can often offer great deals.
- Unexpected issues: One of the most daunting aspects of buying a fixer-upper home is that you never really know what to expect. Even if your inspection goes smoothly, there are always potential issues with older homes- and sometimes things go wrong even when everything seems fine.
- Expensive Renovations: If you are looking for a fixer-upper, make sure to take into account the money that will be spent on renovations. Or you may end up spending more money on a fixer-upper.
- Budgeting is hard: Most homeowners have a budget in mind when they embark on a renovation, but it’s all too easy to fall victim to mounting costs and get taken over by the projects. You will always get a surprise cost popping up and adding onto the total price.
- Long-term project: If you are looking for a quick move-in, then getting involved with the renovation process of a fixer-upper house may not be your best option. You could be living in a construction zone for months or even years while your home is being renovated.
Is a fixer-upper house a good investment?
Fixer-uppers are a gamble, but it can be worth the risk if you avoid costly mistakes.
A fixer-upper house may seem like a good investment, but it can become an expensive money pit if you estimate renovations incorrectly.
To ensure your money isn’t wasted on an overpriced, run-down house with too many problems that will need more fixing than you bargained for, do some research and then think about how much adding these renovations would cost (or take away from potential profit).
Be sure to look at comparable homes in the neighborhood and add your estimated cost for home improvement projects before deciding on purchasing one of these houses.
For example: If you find that a four-bedroom, three-bathroom house in the neighborhood costs $500,000 on average, and the fixer-upper house you’re interested to buy needs $200,000 worth of renovations, you’ll want the purchase price to be around – ideally below – $300,000.
A fixer-upper home may seem like an amazing deal, but once you realize how much it will cost to repair and renovate the property, your opinion might change! Before making a purchase on this type of house make sure it is worth all that time and money.
Ready to invest in your new home? Reach out to one of our mortgage experts to get started with your loan application.
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