Pros and Cons of Buying a Fixer-Upper
Considering purchasing a fixer-upper? One common decision many first-time homebuyers face is whether to buy a fixer-upper instead of a move-in ready home. While purchasing a fixer-upper has its advantages there are downsides to think through too, as with most major decisions. If you're seriously considering buying a fixer-upper, below are several important pros and cons to consider.
Pro: A fixer-upper is typically less expensive than a move-in ready home.
In a perfect world, we'd all be able to afford our dream house fulfilling every item on our checklist. But too often, that ideal home is just out of our price range. That's why many people choose to buy a fixer-upper instead.
At a lower purchase price, a fixer-upper can be an affordable option giving you an opportunity to own the home you've always wanted. Keep in mind, the savings on a fixer-upper purchase may not be as high as you expect. Yet, even after renovation costs, a fixer-upper can be a great way to move into a desirable neighborhood for a fraction of the price of purchasing a move in ready home. You’ll simply need to prepare yourself for potentially costly renovations and with a little patience.
Con: You may go over your budget.
More often than not, first-time homebuyers underestimate how much it will cost to turn a fixer-upper into a move-in ready home. Even if you know exactly how much a renovation will cost, any unexpected problem could set you back thousands of dollars. To avoid going over budget, a good rule of thumb is to increase your initial remodel budget by 10–25% to cover unplanned expenses. Talk to your real estate professional about your budget and plans so they can assist you in staying within a price point you’re comfortable with.
Pro: You can create the home you want.
Many people choose to buy a fixer-upper because of the endless possibilities it comes with. Shopping for move-in ready homes usually means you'll have to sacrifice a few wants on your list. Buying a fixer-upper, on the other hand, can make it easier to check off every item on your list for the same amount of money it would have cost you to buy a move-in ready home without a walk-in closet or granite countertops. It's your house, after all, and putting your own touches on it will really make it feel like a home!
Con: It can cause more stress than you're ready to handle.
Nothing causes financial and emotional strain like a real estate project that turns out to be more than you bargained for. Not only can a fixer-upper cost a lot of money, but it can demand more of your time and effort than you expected to put into it. This can put a lot of stress on your mental wellbeing and even your relationships. If you don't want to risk that stress, a move-in ready home may be a better option for you.
Pro: If you flip it, you can make a good profit.
House flipping is the practice of renovating a fixer-upper to resell it for more money than you put into it (sell price plus remodeling costs). If you don't plan to move in yourself, investing in a fixer-upper can be a good way to make money, provided you do your research beforehand. As long as you know what your budget should be and how much you can resell the renovated house for, flipping a home can be a fun and lucrative project!
Con: If the market is down, you may end up stuck with it.
Even if you manage to stay within your budget and finish your project, one problem you could still face is the challenge of selling a home no one wants to buy. If the housing market is down, you can expect to be stuck with the home for a while, or even be forced to sell it at a loss if your financial situation changes. Before you flip, plan ahead and make sure you have an exit strategy in case of trouble down the road.
Should you buy a fixer-upper?
In the end, whether you should buy a fixer-upper or a move-in ready home depends on your needs, your financial situation and your life goals. If you're willing to put in the money, time and effort to turn a rundown house into a livable home, a fixer-upper may be the right choice for you!