When you’re shopping for a home, there are basically two types you’ll find: Those that are in move-in condition, and those that will need some work.
Those that need work are sometimes known as “fixer-uppers.” There are pros and cons regarding the decision to buy a fixer-upper vs. a home that’s “move-in ready,” and the decision is a personal one.
Here are the three main reasons to consider that fixer-upper if you’re faced with that decision.
When you buy a home that’s already been refurbished, renovated or even just spruced up, you will be paying a premium for work that someone else has done. Think about it this way: If a rehabber bought a property on the cheap and put work into it in order to sell it for top dollar, you’re the one paying that top dollar.
A kitchen renovation that costs $50,000 but adds $60,000 to a home’s market value is a solid example. Guess who’s paying for that $10,000 spread. The new buyer. You’re making the payoff on someone else’s investment into the home.
It’s especially painful to consider if you’re handy. If you can paint, lay flooring, hang cabinetry or install new toilets, you can save a ton on labor costs. If those things are already done when you purchase a home, you will have paid someone else to do work you could do yourself. The handier you are, the more sense it makes to buy a fixer-upper.
If a home’s condition is appropriately reflected in the listing price, it’s hard to go wrong - especially if you can do some of the fixing up on your own.
The age-old mantra is that real estate is about three things: location, location, and location. It matters a great deal when you’re considering a fixer-upper.
If you REALLY want to live in a particular neighborhood, and there are no homes for sale in move-in condition, a fixer-upper might be your only avenue for living in that neighborhood. You can change just about anything in a home - wall colors, flooring, cabinets, etc. - but the one big thing you can’t change is its location.
If you’re committed to a certain neighborhood or school district, sometimes a home that needs work is all that’s available. The question becomes: Are you willing to sacrifice location or willing to put some work into a home that’s in the location you want?
When you buy a home that’s move-in ready, it’s great that you don’t have to paint walls, change floor coverings or window treatments, or, say, put in any landscaping. Just move your stuff in, and you’re good to go.
But that means you will be living with someone else’s preferences for wall colors, floors, curtains, and even all the plants outside your home. If you’d like to match those things to your own tastes, a fixer-upper could be for you.
A home that needs work is basically a blank canvas. If you buy a fixer-upper and want granite countertops or hardwood floors, YOU get to pick what your countertops and floors will look like. YOU get to select wall colors when a home needs to be painted. YOU get to pick what gets planted around the perimeter of your new home.
Theoretically, this is the case with any home you buy. But if you’ve paid a premium for a move-in ready home, how much financial sense does it make to go in and change a bunch of stuff to your liking?
A fixer-upper is a blank canvas when it comes to customizing a home.
Those really are the three main things to consider when you have the option to purchase a fixer-upper. As a first time home buyer you can get great value, the location you want, and customize a home to your tastes if you’re willing to go the fixer-upper route. In addition, utilize proper piti planning to make sure your finances are solid on the home loan front.