Should you buy a fixer-upper home?
Content networks like HGTV and Magnolia Network are full of shows about people who fix up old, damaged houses for a living. After binge-watching a bunch of episodes and seeing house after house transformed from an old wreck to a beautiful home, you could easily find yourself thinking, “I bet I could do that!”
But before you grab a hammer, step back and take a reality check. Yes, buying a fixer-upper and putting some work into it can be a good way to get a great home on a budget – especially if you do the repairs yourself.
But it can also be a good way to fall into a money pit that swallows up your savings and free time — and remains hungry for more. It’s not a decision to make lightly.
Should You Buy a Fixer-Upper House?
When you buy a move-in ready home, you can do just that: move in and get settled. When you buy a fixer-upper, your work is just beginning.
It could take months or even years of work, plus many thousands of dollars, to turn your new house into your dream home. But for many people, all that effort is worth it for the sake of the finished result.
To figure out whether fixing up a fixer-upper is right for you, you need to start with a realistic idea of what you’re getting into. Understand both the benefits and the costs as measured in money, time, and hassle. Then figure out whether your skills, your schedule, your budget, and your relationships are up to the task.
Pros and Cons of Buying a Fixer-Upper
Buying a fixer-upper home is a tradeoff. You’re sacrificing time and effort to get the house you want on a budget you can afford. If you do it right, you’ll end up with a home that’s worth more than you put into it, but this isn’t guaranteed.
Buying a fixer-upper can be a way to get more bang for your home-buying buck. The perks include:
- Lower Purchase Price. Fixer-uppers cost less per square foot than move-in ready homes. That lower price tag means both your down payment and your monthly mortgage payment are lower. It makes it easier to afford a home, or to get a bigger house than your budget would allow otherwise.
- Lower Taxes. Your annual property tax bill is equal to your local property tax rate times the assessed value of your home. Since fixer-upper homes are worth less money, they tend to come with lower property taxes. Unfortunately, those lower taxes only last until after the renovations are done. Then the home value goes up, and so does the tax bill.
- Less Competition. In a hot real estate market, competition for move-in-ready homes is fierce. Because fewer homebuyers are interested in fixer-uppers, it’s easier to get your hands on one at an affordable price.
- Access to Better Neighborhoods. If most houses in your ideal neighborhood are out of your price range, a fixer-upper can be your way in. You can gain access to features like good public schools, mass transit, parks, and shopping on a budget you can afford.
- Ability to Customize. It’s often hard to find the exact features you want in a turnkey home. But when you redo a house from the ground up, you can make it just the way you want it. You can decide what upgrades to add and choose the exact materials, finishes, and colors you want in every room.
If fixer-uppers offer such great value, why aren’t more homebuyers interested in them? Simply put, because it takes a lot of work, time, and money to get them into shape. If you buy one, be prepared to deal with these problems:
- Repairs & Renovations Can Be Expensive. Typical prices for a whole-house remodel range from about $18,000 to about $77,000. Depending on how much work your fixer-upper needs, the purchase price plus the cost of renovations could add up to more than you’d have spent on a move-in-ready home.
- Surprise Issues Can Put You Over-Budget. You can — and should — try to avoid this problem by inspecting the house ahead of time and budgeting for repair costs. But older houses often have hidden problems a home inspection doesn’t reveal. That makes it hard to come up with an accurate renovation budget ahead of time.
- Financing Options Are Limited. Traditional mortgages don’t cover renovation costs. There are special renovation loans that do, like the FHA 203(k) and Fannie Mae HomeStyle Renovation Loan. But these loans generally come with limitations on what upgrades you can add and how you do the work.
- It Takes a Long Time. When you buy a new home, you can just move in and get settled. With a fixer-upper, the necessary home renovations can take months or even years. You have to either delay moving in or deal with living in a construction zone.
- It’s Stressful. Fixing up a house is a big job. If you’re DIYing the work, it can easily eat up all your free time. And even if you’re hiring it out, finding contractors and supervising their efforts eats into your spare time. You also have the stress of either living in a half-finished house or running back and forth between it and your current home.
Things to Consider When Buying a Fixer-Upper
Obviously, you don’t want to take on the job of fixing up a house unless you know you can afford the cost of renovations. If you blow your budget on the house itself and leave too little for renovation projects, you could be stuck living in a half-finished home for years.
But that isn’t the only thing you need to know. Fixing up a house is a major undertaking, and you need to be sure you’re up for the challenge. Before you make a bid, ask yourself these questions to figure out if a fixer-upper is the right house for you.
How Much Work Are You Able and Willing to Do?
One of the best ways to keep the cost of renovations down is to do the work yourself wherever possible. By tackling home improvement projects on your own, you can cut their cost by 15% to 50%, depending on the type of project.
But DIYing a whole house from top to bottom isn’t as easy as it looks on TV. You need to evaluate your skill level to figure out which jobs you can handle.
Some jobs, like painting or stripping wallpaper, are simple enough even for DIY beginners. Others, like roofing or major electrical work, are far too dangerous for any amateur. If a mistake could kill you or cause major damage to your house, it’s best to leave the job to the pros.
In between these two skill levels, there are lots of jobs that a skilled DIYer can do, such as:
- Hanging cabinets
- Repairing walls
- Building decks
- Replacing windows
- Refinishing floors
- Putting on vinyl siding
- Hanging drywall
However, even if you can handle a job on your own, that doesn’t necessarily mean you want to. Some homeowners love DIY and can’t think of a better way to spend time than hanging drywall. But for others, spending a weekend up to the elbows in joint compound sounds like a nightmare.
The more work you’re both able and willing to do yourself, the more likely you are to get good value from a fixer-upper. If you’re a skilled DIYer who really enjoys tackling home improvement jobs, buying a fixer-upper makes sense. You can quickly build up sweat equity, raising the market value of your new home through your labor rather than by spending cash.
But if you’re a novice or reluctant DIYer, you’ll have to spend a lot more money on contractors. That will make it harder to get your money’s worth out of a fixer-upper.
How Much Time Are You Willing to Spend?
Fixing up an older home is a time-consuming job. If you do the work yourself, it can easily eat up all the free time you have, and then some. You may have to choose between taking time off from work or devoting every weekend to home improvement for weeks on end.
Even if you’re not planning to do most of the work yourself, rehabbing a house still takes time. You need to:
- Learn What Each Job Involves. Before you even start hiring contractors, you need to have some idea of what you want them to do. That way, you can tell if their bids cover all the parts of the job.
- Get Multiple Bids. Next, you need to get bids from contractors. Ideally, you need at least three bids on every job. That lets you compare prices and see if they’re reasonable.
- Check References. You also want to make sure the contractor you hire is reliable. That means asking for and checking out references from other customers. If you can, go out and look at examples of the contractor’s work.
- Supervise the Work. Once you hire a contractor, your job isn’t done. You need to keep an eye on the work to make sure it’s being done the way you want. For a big remodel, you could spend months or even years checking up on one contractor after another.
The bottom line is, no matter who does the work, you’ll have to devote a lot of time to it. If you’re not willing to give up your daily trip to the gym or weekly date night, it’s probably not for you.
Can You Handle the Stress?
Buying a first house is always a stressful experience. Make that house a fixer-upper, and all that stress is doubled. You’re putting in hours of hard work, week after week. You’re also straining your budget to the max to pay for it all.
A rehab also means living with uncertainty. You never know just how long a job will take. New problems keep cropping up without warning, and you have to drop everything and deal with them.
Finally, if you’re living in the house during the overhaul, you add the stress of living in chaos for months on end. You could spend weeks living on takeout because you lack a finished kitchen or showering at friends’ houses because you don’t have a usable bathtub. Plus, you’ll be living with all the noise and dirt created in a construction zone.
How well you handle this challenge depends largely on your temperament. If you’re a creature of habit who doesn’t deal well with change and uncertainty, fixing up a house probably isn’t a job for you. But if you’re the kind of person who thrives on chaos, it could be just your cup of tea.
Moving into and fixing up a fixer-upper is also easier if you live with someone who can share the work. DIY jobs tend to go more smoothly with an extra pair of hands. Even hiring and supervising contractors is easier with another person to help.
But at the same time, living in a half-finished home puts a lot of stress on the other people who live in it. It can be hard on young children, who often don’t deal well with disruptions in their routine. It’s also tough on new relationships. You’re still learning how to live with each other, but the way you’ll likely be living is nowhere close to normal.
The best candidate for a fixer-upper is probably a person in a long-established relationship with no small kids. However, it’s also doable for a single person if you have plenty of friends and relatives who are willing to help you out.
Where Will You Live During Renovations?
As noted above, living in a house during renovations is always stressful and inconvenient. But in some cases, it’s not even possible. A house with no working bathrooms or no heat in the wintertime isn’t just uncomfortable — it’s unlivable.
If you’re in this situation, you’ll need a separate place to stay during the renovations. There are several possible ways to handle this situation:
- Keep Your Old House. If you’re already a homeowner, you can wait to sell your old house until your new one is finished. However, this isn’t possible if you need to sell the old house to raise the down payment for the fixer-upper. And even if you can pull it off, it means carrying two mortgages at once.
- Rent. You can also rent a place to live in while you’re working on your new house. In some cases, you can even sell your old house, then rent it back from the new owners until you’re ready to move. But once again, this means you have a monthly rent payment on top of your new mortgage.
- Stay With Family. In some cases, family members or friends can put you up until your fixer-upper is ready to move into. This is fine for a few weeks, but it can get stressful as the weeks run into months. For one thing, you’ll probably have to keep most of your belongings in storage. You’ll also be living under someone else’s roof, which means living by their rules. And making room in their home for you can be hard on them, too.
On the whole, it’s usually less costly to move into your new fixer-upper as soon as possible. But even this arrangement involves some extra expense if the house isn’t finished.
For instance, if there’s no working kitchen, you’ll have to pay extra for restaurant or takeout meals. If there isn’t a functioning laundry room, you’ll pay extra to take your clothes to the coin laundry. You need to make sure there’s room in your budget for these added costs.
Buying a fixer-upper is a major commitment. It will eat up a lot of your time and money. And once you close on the house, you can’t just back out if you decide it’s too much for you. You’re in it for the long haul, which could turn out to be months, or even years.
But if you’re willing to put in the effort, a fixer-upper gives you a chance to own a dream home you’d never afford otherwise. And in some ways, it’s even better than just buying a home that’s already perfect when you first walk in the door.
Putting in all those hours of work to fix up your fixer-upper makes it uniquely yours. When the work is finally done, you’ll have more than just a beautiful home. You’ll have something you put your heart and soul into.