Is a Fixer-Upper the Right Choice for You?

Many buyers have been on the sidelines over the past few years when competitively priced homes were selling with multiple offers. The spring market may bring more opportunity, and if you are ready to begin your search again but are still feeling the pain of losing out on properties in the past, you might consider a property that requires some work.

Our area experienced major development 50 or more years ago, making it easy to find properties that may be dated or in need of renovation. These homes are often overlooked by buyers who cannot see beyond the surface. Because of this, you can benefit in several ways:

• Less Competition & Negotiation Power – Fewer buyers pursuing fixer-uppers means more room for negotiation and a lower initial purchase price. According to Fast Expert, the extent of repairs will determine how discounted the property is. A house with good structure but cosmetic issues (such as outdated decor or old carpets) will cost less to fix than one needing foundational or electrical work. The key to finding a good fixer-upper is to fully understand the extent of the necessary repairs and their costs—be sure to get a comprehensive home inspection.

• Increase Property Value & Build Equity – By making strategic improvements, you can increase the property’s value and grow your home equity. Purchasing a home below market value and upgrading it to local standards may result in substantial financial gains when selling. This is particularly useful if you ever need a home equity loan or line of credit (HELOC), as the value of your renovated home can help secure a loan.

• Customization to Suit Your Needs – A fixer-upper gives you the ability to fully customize your home. You can take an existing structure in a desirable location and remodel it into your dream home, making personalized design choices along the way.

Things to Consider Before Buying a Fixer-Upper

A fixer-upper might need only cosmetic improvements or require significant structural repairs. While these homes can be more affordable initially, renovation costs can add up. Here are some key considerations:

1. Are You Ready for a Work-in-Progress?

   • Living in a home under renovation can be challenging. Depending on your budget, you may need to complete work gradually, room by room. Consider whether you have the time, patience, and willingness to live through ongoing improvements.

2. Most Homes Require Some Remodeling

   • Unless you’re purchasing a brand-new home, you’ll likely make some upgrades over time. Raf Howery, founder and CEO of home data company Kukun, estimates that 60% of all purchased homes undergo remodeling. Before making an offer, evaluate how much customization is needed and whether it fits your budget. Compare the final cost of a fixer-upper with that of a move-in-ready home to ensure the savings justify the effort.

3. How Will You Fund the Renovations?

   • Financing renovations can be tricky. While some companies provide renovation loans, these often come with restrictions. Many banks that offer conventional mortgages will not approve a loan exceeding the current property value. If you can afford renovations without financing, you may be better off securing a mortgage separately from the renovation costs. Alternatively, you could take out a personal loan or wait to build enough equity for a home equity loan.

4. Plan Your Renovation in Advance

   • Effective planning is crucial when purchasing a fixer-upper. Set a realistic budget, determine the necessary repairs, and create a timeline for completion. Hiring reliable professionals is key to achieving your desired outcome. For extensive renovations, consider obtaining construction insurance to protect against unexpected costs or delays.

Final Thoughts

Purchasing a property that requires work isn’t for everyone, but if the idea excites you, it may be an excellent opportunity. With the right approach, you can transform a home with great bones in a prime location into your ideal living space—all while building equity. If you’re considering a fixer-upper, careful planning and financial strategy will help ensure a successful and rewarding investment.