Pros and Cons to Buying a Fixer-Upper: Is it Worth the Investment?

There are many different property types to consider when buying a home. Most prefer move-in ready, but some may want to save a little bit of money on the purchase price and buy a fixer-upper, a home that requires repairs or renovations. Fixer-uppers can range from a home that is out-dated, to a home that needs major maintenance work.

Buying a fixer-upper is one that requires a certain type of homebuyer, if you aren’t handy or enjoy doing do-it-yourself projects, you might regret buying a fixer-upper. 

In order to ensure you're ready to take on the challenge of taking on a home in need of renovations, check out the list of pros and cons, so you can determine if this is the right investment option for you.

THE POSTITIVES

LOWER PURCHASE PRICE

It is no surprise that buying a fixer-upper home is cheaper than buying a move-in ready home. Whether the home is out of date, or needs light to extreme maintenance work, the price point is typically lower for these types of homes, depending on the condition of it. Buyers are more likely to make lower offers, as they keep in mind the repairs needing to be done. As the costs for real estate in London continue to rise, it’s becoming a more popular option. Buying a fixer-upper can allow for homebuyers to secure a home sooner than later.

Brand new and personalized

Some people have great taste, and want to personalize their home to their specifications. With a fixer-upper, you not only get to decorate and accessorize the home to your liking as you would with any home, but you get to customize almost every element in the home. From countertops, flooring, and paint, you can add your personal touches to reflect your style and personality. If you are someone that wants to create your own space from scratch, what better way than to start with a fixer-upper?

Less Competition

Fixer-uppers are less expensive because demand is low for this type of property. Ever since the real estate market has surged, we’ve seen an increase in the number of offers on one home. When homes go multiples, they sell for higher than the asking price. Depending on the amount of work the house needs, the chances of multiple buyers being interested in one fixer-upper home is rare.

Do-it-yourself

Fixer-uppers are a great idea If you’re someone who is skilled with tools or just loves taking on home improvement projects. Not only can you save tons of money by completing the renovations yourself, but you can ensure the quality of work is being done to the highest standards. With the inflation of most goods and services, it can be extremely costly to hire a professional to complete the work for you and would almost diminish your chances of financial gain.

The negatives

Securing financing

Some traditional lenders are hesitant to finance fixer-uppers since the appraisal value is lower than the comparative homes in the area would be worth.  Keep yourself prepared for having to shop around for financing before you secure a mortgage to purchase the fixer-upper. Another thing to consider when it comes to financing is how will you fund the renovations? Most people are limited in funds after putting down the down payment on the home and covering all the closing costs. Credit cards should only be used for small purchases that can be paid back quickly, as they have high interest rates and the interest rate is not deductible. 

The most commonly used type of funding for financing fixer-uppers would be a renovation loan, a personal loan, home equity line of credit, or refinancing your mortgage

Time and Effort

Undertaking a fixer-upper project is one that takes a large amount of time and effort. Depending on the condition of the home, there could be a considerable amount of work to be done before the home is liveable. You also could be living in a construction zone for some time. The time frame for the renovations varies depending on the repairs needed, your renovation skills, and the amount of time you can spend on the project. This can cause some people to feel overwhelmed, stressed, and frustrated.

Unexpected Costs

When buying a fixer-upper, you should always get a home inspection done first so you can uncover any potential problems and have a clear understanding of what needs to be done. Consider making a plan and budget and stick to it as best as you can. If you decide not to get a home inspection done, you could be in for a world of trouble if there are structural problems, or other hidden issues. It’s almost guaranteed that you will end up spending more money than you thought during the renovation process. Choose wisely where your money goes. Invest the most in the areas that matter most to you. Like to cook? Spend more time and money in the kitchen versus a room in the home you don’t use as often.

Limited resale value

Even after investing significant time and money on improving your home and completing the renovations, there are no guarantees that the investment will pay off in a favorable return. The outcome depends on the market conditions and the appreciation value of the neighbourhood. When considering a fixer-upper, it’s important to conduct thorough research on the neighbourhood before making a decision. 

Summary

Overall, buying a fixer-upper can be a unique opportunity for those that possess the skills, passion, determination, and resources needed to succeed. It allows individuals to transform a property into their own, embracing their style and personality. However, it’s important to acknowledge that the process may turn out to be more inexpensive and require more work than initially planned. Carefully weigh out the pros and cons before committing to ensure your decision is thought out thoroughly.

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