The Pros and Cons of Buying a Fixer Upper
Some houses need a little TLC to become beautiful homes. These old or damaged homes often have layers of charm underneath the wear-and-tear, and many prospective homeowners have trouble deciding between a newer, more expensive, move-in ready home and buying a fixer upper. When approaching the lovable —but potentially problematic —fixer upper, it’s important to weigh the pros and cons carefully.
Here are the Pros and Cons of Buying a Fixer Upper
Pro: The Price is Right
The primary appeal of buying a fixer upper is its low price. Whether the house displays cosmetic defects, interior damage, a rough exterior, or something else, these noticeable issues inevitably drive down the price. Evaluate the home’s listing price, its condition and how much repairs could cost carefully to be sure you’re getting a good deal.
Con: Fixer Upper Financing Trouble
Though the price might be lower, getting financing when buying a fixer upper can be tough. Most lenders don’t offer favorable financing options for a home that needs a lot of work. It may be a struggle to find a suitable lender and the rates or mortgage structure is likely to be less-than-ideal.
Pro: Fast Track to a Great Neighborhood
Buying a fixer upper is an easy way to get into a great neighborhood that you otherwise might not be able to afford. A fixer upper can bring you closer to top performing schools, your workplace, parks, or other amenities.
Con: The Uncertain Future of Buying a Fixer Upper
Unless you’re a seasoned house-flipper, it can be difficult to know how much work the house really needs. Damages that look like cosmetic defects may actually be symptoms of structural damage, mold, rot, termites, or other costly problems. When buying a fixer upper it’s important to get a detailed home inspection to ensure you’re prepared.
Pro: Building Equity
If a move-in-ready home already has the most modern amenities and the best features in the neighborhood, it’s difficult to make any improvements and increase the home’s equity. However buying a fixer upper gives you room to grow and every improvement will translate into value you earn through sweat equity. Even a few simple DIY projects that build equity can make a big difference.
Con: Get Ready for Stress
A fixer upper is likely to bring unexpected problems at inconvenient times, such as leaky pipes, a leaky roof, broken water heaters, flooding basements. Going home won’t mean relaxing, but the start of a second job. When buying a fixer upper, make sure your life and schedule allows for flexibility.
Pro: No Bidding Wars
In a seller’s market, it can be tough to close the deal and and it’s not uncommon to see bidding wars on popular, move-in ready homes. However fewer buyers are ready for a fixer upper and many aren’t in a position to take on the job, which will thin your competition. Buying a fixer upper gives you more room for negotiations with the seller, without other buyers getting in the way.
Con: Not The Right Time or Place
Depending on the house you are looking at, you may need to be in the right situation to take on a fixer upper. If the house needs so much work that it isn’t livable, you’ll need to have another residence in the interim. If you have a family, the house might not be safe for children. You’ll also need either home improvement skills or connections with experts who can help. These two factors could make buying a fixer upper outside of reach.
Pro: Lower Property Taxes
Property taxes are levied based on the sale price of the house, meaning you might be paying taxes on a older $100,000 house with the square footage, property, and neighborhood of a $150,000 house. This will lower your monthly costs of owning a fixer upper, making it a more manageable expense.
Con: A Long, Expensive Road
A fixer upper is likely to require a steady stream of money and hard work, which adds up quickly. While budgeting for a move-in ready home concludes with the sale, budgeting for a fixer upper only begins with the sale. It takes caution and discipline to keep from going over budget. When buying a fixer upper, you’ll need to ensure that you create a realistic monthly home budget and stick to it.
Pro: It’s All Yours
Anything that needs work on a fixer upper is an opportunity for complete customization. You get to make all the decisions in your home, from new flooring to paint to new roofing and siding. When buying a fixer upper, you can put your signature on each part of the home and truly make it your own.
Con: Old Age
Most fixer uppers need extra work because they are old. This means you’re likely to get outdated appliances, dated interior design, and low-efficiency insulation at best. At worst, you’ll get lead paint or lead pipes, problems with asbestos, faulty electrical wiring, or other hazards. It’s important to consult with an expert to locate and mediate these hazards, as they could be detrimental to your health.
Pro: Tax Credits
When buying a fixer upper that’s particularly old, a percentage of qualified renovations to historic homes can be written off on your taxes. This meansyou acquire the full value of the equity without the full cost. A range of other tax incentives also exist for making energy-efficient improvements on everything from windows to boilers, which you may need to replace anyway.
Before buying a fixer upper, make sure you’ve considered all the angles, and whether you are ready for the money and time investment that a fixer upper needs. When comparing a fixer upper with other properties, try to get an accurate picture of what the damage is and what work the house needs to make it an appealing option to future home buyers. If you’re ready for it, you could turn your fixer upper into a real gem. Have you restored a fixer upper? Would you do it again? Tell us in the comments!