Is Buying a Fixer-Upper Worth It?
Is Buying a Fixer-Upper Worth It?
Are you considering buying a fixer-upper house? Here is what you should know about buying one and whether it is worth it.
Buying a house is a substantial financial decision and a real estate investment. However, if you are willing to put extra work into a home that is known as a "fixer-upper" at a below-market price, then this is for you.
Buying a fixer-upper house is a serious investment because you have to be fully committed before you start. Every day, more consumers are considering buying a home that is not move-in-ready to save more money.
With home prices still rising and low inventory options, many home buyers are starting to accept that they may not find the perfect move-in-ready home. More than half of buyers say they would consider purchasing a fixer-upper. About 73% in a survey said they are willing to purchase a fixer-upper due to the low listing price.
A fixer-upper home is a lot more expensive than a move-in-ready home, but you also have to consider the cost of renovations and repairs. There are professionals out there who can help you find the value in choosing the right projects.
Here is what you should know about buying a fixer-upper.
Chapters
1. What Is A Fixer-Upper
A fixer-upper home is available at a lower purchase price because it requires major maintenance work once you buy it, similar to a foreclosed home. Sometimes, you can live in a fixer-upper, but you may need to spend a lot of time and money on structural and cosmetic improvements for the home.
Some people benefit more from a fixer-upper, as many individuals use it as a business opportunity to renovate and sell the house for profit. Fixer-uppers can also be considered starter homes, especially in today's expensive and competitive real estate market, where it's challenging for some buyers to purchase a property.
If you choose the right one, a fixer-upper can make a great first house. This type of property needs improvements, which can range from minor changes like a painting to significant fixes like structural repairs. Therefore, you need time, energy, and money for this type of investment.
2. Tips For Buying A Fixer-Upper
When you are looking to buy a fixer-upper, it is important to understand what property you want to buy. Some properties need significant work and could cost you more than expected if you are not prepared, even though you may not need to make a large offer in the beginning.
There are many things that go into looking for the best fixer-upper house. You need to consider everything, from the economy to your finances to the location. This is a huge time investment that you need to consider carefully. Below are some tips for buying a fixer-upper home.
Buying a fixer-upper can be thrilling but also daunting. But with the right perspective, this journey can give you every opportunity and creativity you want in a house. Navigating the purchase can be scary; contact a real estate professional for help finding the right property for you.
Look at Location
You can always fix up a home but you can not change the location of that home. An ideal fixer-upper home would be located in a desirable neighborhood that you would like. If you do not like the area or the property values, you may be left with buyer's remorse.
One of the best ways to find a fixer-upper is to drive around neighborhoods easily and target ones that may need some help. You may also look at online listings that have been on the market for a while and look for descriptions that explain the home's need for work.
Budget Accordingly
Planning ahead and knowing how much you can afford is crucial when you buy a fixer-upper. Renovating a home takes a lot of time and money, so budgeting and creating a plan help expand the project. They tend to recommend adding an extra 20% to your general home-buying budget.
Also, you need to prepare for all the repairs and renovations you will do yourself, as well as any professional help you may need, such as plumbing or electricians. Keep in mind that contractors may be backed up and can delay your work, so planning ahead and having your work in advance will help.
To set a price for a fixer-upper, you need to start by figuring out the value of the home if it does not require work, compare it to other homes in the area, and then subtract the cost of work to get the best estimate of how much a fixer-upper home can cost.
However, keep in mind that the number will vary depending on whether you need a professional and whether any unexpected circumstances arise that require more work on the house.
Expect the Unknown
With the economy, weather, money, and many other things, obstacles are bound to happen and will make the project take longer, so make sure you plan ahead for any disruptions. Think carefully about where you want to focus and what simple ways to fix any disruptions that can come your way.
Get Home Inspection
For any home buying, you should always get a home inspection done so a licensed inspector can point out any flaws or critical issues that could be a serious problem. It is important not to let cosmetic flaws deter you from a home you want, though. Simple things like broken doors or peeling paint can be easily fixed, so make sure you look at bigger components such as:
- Electrical
- Plumbing
- Sewer System
- Roofing
- Foundation
- HVAC and Air Conditioning
- Environmental Issues
Finance Right
Remodeling a fixer-upper can get very expensive, so it is important to first budget and plan and then have the right kind of financing lined up. Some home renovation mortgages even allow you to roll the remodeling cost into your loan amount with a single mortgage. Still, they may have limitations on your spending amount and timeline.
Considering all of your financing options is essential. Here are some options you may consider:
- Fannie Mae HomeStyle Renovation Loan
- Freddie Mac CHOICERenovation Loan
- FHA 203(k) Loans
- VA Renovation Loan
3. How To Buy A Fixer-Upper
If you are considering buying a fixer-upper, there are things you should know before and things to consider during the process.
Finding a fixer-upper can be as simple as driving around a place and spotting homes that look in need. You can also look online with a real estate agent since they have access to the multiple listing services that the public doesn't.
Before buying a fixer-upper home, ensure you get the home inspection done. It may cost a couple of hundred, but it is essential if you want to buy a fixer-upper. Without this home inspection, you may have no idea that the home needs new things done that can be important.
After you understand what you want, you also need to determine if you can comfortably afford to fix it up. Creating a list of every project you need to complete and pricing out all the materials and labor costs is a simple and easy way to estimate renovation costs.
When you are doing a fixer-upper, you should see what you can DIY renovate yourself and what you will need a professional to help with. Certain things, like structural work, will require a permit as well, so you need to plan ahead to see what you will need to do.
4. Pros and Cons Of Buying A Fixer-Upper
Fixer-upper homes require a huge time commitment but can also save you money. Buying a regular move-in house has many pros and cons, but there are also some you should consider with fixer-uppers.
Pros:
- You can make it your own
- Less buyer competition
- Lower purchase price
- Build equity fast
- Quality control
- Make profit
Cons:
- Need a lot of cash after the sale for renovations
- Construction takes time
- Extra work that doesn't add value
- Difficult budgeting and planning
- Unexpected issues can occur
After weighing all the pros and cons, hopefully, you can have a better idea if buying a fixer-upper house is for you. The right decision depends on your unique situation. Considering everything, budget, needs, and preferences, is essential in this process.
Depending on personal life, preferences, and finances, buying a fixer-upper can be a great investment, but it can also be a huge disaster. Every case is different, and it all depends on the individual.
5. Should You Buy A Fixer-Upper?
Buying a fixer-upper has become very popular in recent years. These types of properties make great investments and also allow you to have the freedom to create your own dream house. However, you need to remember that these projects cost money and time, so make sure you understand you can handle them before making the purchase.
One of the biggest selling points of buying a fixer-upper house is that it can help you afford a bigger home in a better location. Generally priced below market value, a fixer-upper house can save you a lot of money.
Another reason to buy a fixer-upper is that your repairs and renovations will increase the value of your home, so if you plan on selling it after you make those improvements, you will make a profit.
There are so many reasons why buying a fixer-upper house is worth it. From the personal freedom of renovations to saving money and increasing the value of the home, it is an excellent investment if you want a good deal.
Methodology
We used information from different sources and our data to create this guide about fixer-uppers and whether they are worth buying. There were various data to use, so we put them together to help you understand buying fixer-uppers.
Above are a few sources we used to gather most of our information about fixer-uppers and whether they are worth buying.
FAQS
How to tell if a fixer-upper is worth it?
To make sure the fixer-upper house is worth the money, you need to look at comparable homes in the neighborhood. Then, you will add your estimated cost of renovations to that purchasing price. If you are making a profit on the house, then it is a good investment.
Is a fixer-upper a good investment?
Buying a fixer-upper is cheaper than buying a move-in-ready home. Since every house is unique and everyone wants or needs something different, it can be hard to say if a fixer-upper is a good investment for you specifically. If you are curious, you need to see if you have the time, money, and plan to take on this huge investment.
What should you avoid in a fixer-upper?
When you buy a fixer-upper, you should avoid not getting the full inspection done, falling in love with the house without considering all possibilities, assuming the best case when calculating costs and value, and taking on projects that require you to hire all professionals since it will cost more, especially in the long run.
Is Buying a Fixer-Upper Worth It? - The Bottom Line
A fixer-upper can be a great investment, but it can also be a huge money pit if you do not estimate correctly and plan ahead of time. There is no such thing as a perfect fixer-upper because each property is different, so it is all up to you.
Buying a fixer-upper can help you afford a larger house in a great area where you can customize yourself and increase its value all in one. Fixing up a home takes a lot of time and money and you need to be flexible with any unforeseen circumstances to come ahead.
If buying a fixer-upper house still sounds like an investment you want to continue, start searching for the best option for you. Before you jump right in, be realistic about your skills, finances, and time.
If you are considering moving or selling, contact us or visit our website. Our team at Raleigh Realty is here to help you with any home buying or selling needs.
Ryan Fitzgerald
Hi there! Nice to 'meet' you and thanks for visiting our Raleigh Real Estate Blog! My name is Ryan Fitzgerald, and I'm a REALTOR® in Raleigh-Durham, NC, the owner of Raleigh Realty. I work alongside some of the best Realtors in Raleigh. You can find more of my real estate content on Forbes, Wall Street Journal, U.S. News and more. Realtor Magazine named me a top 30 under 30 Realtor in the country (it was a long time ago haha). Any way, that's enough about me. I'd love to learn more about you if you'd like to connect with me on Facebook and Instagram or connect with our team at Raleigh Realty. Looking forward to connecting!
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