Is that Fixer-Upper Worth the Investment?
In 2013, the HGTV show, "Fixer-Upper" aired for the first time. The charming hosts, Chip and Joanna Gaines, inspired first-time home buyers to take on fixer-uppers of their own. If you watch a thirty-minute episode of "Fixer-Upper" you will see that in a mere six weeks with just $100,000 you can get the house of your HGTV dreams!
Is it really that easy?
The idea is that taking on a project rather than purchasing an expensive move-in-ready home will ultimately mean making a profit and getting exactly what you want. Renovating a home can be very rewarding, but it also comes with a price and an immense amount of hard work. So how can you determine if that fixer-upper is worth your investment?
Pros of purchasing a fixer-upper
Lower Purchase Price
Buying a fixer-upper is almost always cheaper than purchasing a turn-key home. But you must factor in renovation costs. Calculate how much you might be saving after additional costs. If you still come out better than what you would pay for the home in the perfect neighborhood with the white picket fence, then it’s worth considering.
You Decide where your Money goes
In a move-in-ready home, you are stuck with the design, interests, and investments of the previous owner. With a fixer-upper, you have every opportunity to invest in what matters to you. If you want a patio to please guests or a playroom that will wow the kids, then you have the freedom to make those custom additions.
Increase your Home's Value
You have the opportunity to make renovation choices that could greatly increase your home's value. Approach the project with resell value in mind. If you consider future buyers, you have a better chance of getting the best return on your investment.
Cons to consider before purchasing a fixer-upper
Where will the money come from?
Funding your fixer-upper project can be the most difficult part of the process. It is rarely a good idea to use credit on a huge purchase like a major renovation. You will want to talk to your bank to explore possible loan options.
Busting the Budget
Consider your all-in budget. When planning the remodel think about every possible cost that you could run into. Keep in mind that even after adequate planning, four out of every ten fixer-uppers bust their budget.
If you don’t have time to wait weeks or even months for your home to be ready to live in, then a fixer-upper is not for you. More often than not these projects end up taking longer than expected which can increase budget and stress.
Termite damage, anyone? If those little critters take up residence in your new fixer-upper, your floorboards (and any other wooden structures undergirding your home, for that matter) could be toast.
Setbacks like this happen, sometimes unexpectedly. You've got to be equipped with the money, the resources, and the initiative to soldier on in spite of them. Are you ready to confront these challenges head-on?
Takeaways for the first-time buyer
A fixer-upper can be a fun project for an experienced home buyer. First-time buyers, on the other hand, should know that buying a house can already be complicated. Worrying about a massive renovation can add stress to an already stressful process. So, unless you're positive that a fixer-upper is for you, consider making a move-in ready home your first house purchase.