First time home buyers and do-it-yourself enthusiasts often dream of buying a fixer-upper – a rundown house that is otherwise perfect. For example, a fixer-upper may be far cheaper than the move-in ready houses in the neighborhood. It is also something you can renovate to your heart’s content. However, our society has romanticized this concept, so many have unrealistic expectations. Here are the pros and cons of buying a fixer-upper.
The Pros of Buying a Fixer-Upper
A fixer-upper may be the only way you can afford to buy your dream home in an upscale neighborhood. You get it at a discount and can often move in to take advantage of proximity to good schools and amenities. You’ll have more negotiating power with sellers, too, because most people don’t want to buy something that needs repairs.
Fixer-uppers are incredibly customizable. You can choose which appliances, light fixtures, carpets and finishes go into place. This personal touch is so important to some people that they end up renovating any house they buy. With a fixer-upper, the work needs to be done anyway, and you’re probably improving the home’s value by putting in a better kitchen or bathroom.
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The Cons of Buying a Fixer-Upper
If you don’t know what you’re getting into, you’ll end up paying for your mistake in many different ways. You won’t want to discount the purchase price based on an expected list of repairs and then find out there is massive electrical work that needs to be done. This is why fixer-uppers often cost much more than people planned to make it livable. One solution is to bring in an inspector to list everything wrong with the property. Have them do a thorough inspection because you don’t want to plan on fixing the plumbing and find out the wood frame is rotting.
Another downside of buying a fixer-upper is that you may find yourself living in a construction project. You might have to pass in-progress work because you’re doing it yourself on weekends or have run out of money to pay the contractor. You’re also stuck with the house that’s almost unsellable if you lose your job and can’t pay for essential repairs.
How to Make Sure You Get a Good Return
Some people try to save money by attempting to do all the work themselves. While you might be able to paint the walls yourself, hire a professional for work you can’t afford to do wrong. Make sure that you hire a professional for insulation removal, plumbing and electrical work. In fact, you may not get the renovations approved by an inspector if you try to do projects like these yourself.
Another mistake people make is failing to consider the carrying costs. For example, they may avoid the hassle of living in the middle of a construction project by living in a rented unit while the house is being renovated. However, you still have to pay the mortgage and insurance on the fixer-upper while paying the rent. You might have to pay the construction loan payments in addition to the mortgage, too, if you took out this second loan to pay for renovations and repairs. Always factor in the carrying costs of the home when it is being renovated.
Fixer-uppers do present an excellent opportunity if you do things right, but they can turn into a nightmare if you make a mistake. Consider all the pros and cons before buying a fixer-upper, and plan so that you don’t end up in over your head.