When young adults are considering their first home, a fixer-upper is a very tempting choice. With a fixer-upper, there is the opportunity to create value through making upgrades and renovations. There is also the fact that when a fixer-upper is on the market, the buyer has the leverage when it comes to negotiations. Finally, these homes are usually less expensive than a comparable home that is fully upgraded and move-in ready.
When my wife and I bought a home we didn’t necessarily look for a fixer-upper. What we were looking for, though, is a home where we could potentially put some work into and therefore “make it our own.” We also liked the idea of buying a home and putting in upgrades that would make it “show” better in the future when we try to sell it. We actually ended up narrowing our search down to a few homes, one of which would need more work and another that was pretty much fully upgraded (it even had a heated driveway!). We ended up going with the home that needed a little TLC, mainly because of the location of the home as well as some of the features (three bedrooms on one level, good “bones”, etc.).
If you are considering looking for a home that is a fixer-upper, or that is outdated, I have a few things that I would recommend you consider before making an offer and signing the closing documents:
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Potential Major Expenses
Always check things like the furnace, air conditioner, roof, etc. before buying a fixer-upper. This is true with any home, but particularly important if you are getting a fixer-upper where you will want to spend money on things like doorknobs, lighting, paint, etc. The last thing you want is to have to spend $5k (or more) on a roof when you really wanted to spend that money on upgrading the interior. I have a list of ten expenses to consider when buying a home that covers some of the major things you should check before jumping into a home purchase.
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Your Income and Cash Flow
When it comes to a fixer-upper, many of the purchases can be put off for months or years. A renovation to an outdated kitchen can be literally put off for a decade if you want. Nevertheless, with a fixer-upper there will always be cash outlays. Doorknobs alone cost us $500 to upgrade in our house, and we still have another $100 worth to purchase that we decided to put off for a while. Paint is relatively inexpensive, but if you are painting 8 rooms it can add up.
What I’m getting at is that even without major renovations, there will be cash outlays each month that you need to budget for. Yes, homes are more affordable that are outdated and in need of upgrades (both large and small), but if the constant loss of cash flow is going to stress you out, it may be a good idea to rent and save money. On the flip side, if you can handle spending some of your monthly income on improving your house, a fixer-upper can be a great investment.
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Your Preferences and Lifestyle
If you want to learn more about home improvement, a fixer-upper is easily the best way to learn. You can watch home improvement shows, read blogs and books on the topic, and even help friends and family with projects. Having your own house where you get to choose what to do will teach you very quickly how to perform home maintenance and renovations. If you want to spend time on these sorts of things, putting in a little sweat equity can benefit you long-term.
There are some situations where it could be a better decision to simply purchase a home that has been recently upgraded with no projects for you. For example, if you have chosen a career path that requires sixty-plus hours of your time each week, you may simply not have the time to perform all the work a fixer-upper would require of you. I personally would be very hesitant to buying a fixer-upper if I had children unless I was planning on hiring out a significant amount of the work.
As with pretty much anything in life, there are pros and cons to purchasing a fixer-upper. It can be a great investment for young adults, or a burden on their lifestyle and bank accounts.
What are your thoughts on purchasing a fixer-upper?
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Photo by T Chu
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Ouch $500 for doorknobs! I think it is a good move to wait until you really have the money to do exactly what you want, instead of a cheap fix and wanting a chance in 2 years. To the upper fixing one needs to add regular maintenance and there always seem to be something to be fixed, but it is nice to be hands on.
@RFIndependence And I still have about $150 more to spend on them :0 It’s because there are five doors with deadbolts in our house, each costing $50.
I am definitely all for a fixer upper, as long as the value is there. I wouldn’t want to have to buy a bunch of brand new things if I don’t get enough value out of it.
@SenseofCents Good point, it’s not always worth it and there are no guarentees you will get your money back…which is true with any investment.
I totally see the value in buying a fixer upper, especially as you get to add some of your flavor to the house. However, I am NOT good when it comes to working with my hands and would not be worth it in the long run.
@FrugalRules I’m learning a lot, it will be interesting to see what we end up choosing for our next house…I may be over all these projects by then!
I married a super handy guy so we could get a fixer upper. Unfortunately his employer has discovered his many talents as well, so by he time he gets home there is little time to fix things up :)
@MoneyMasterMom Nice! At this point I would definitely not call myself handy, but I hope to gain a lot of useful skills from the house that we bought. I’ve already learned so much.
I am for a fixer-upper, but only mildly so. We can’t do any major renos ourselves, so my preference is to buy a less than perfectly new place and do some tweaking to it!
@GillianatMAG Sounds like a great plan! And a great way to get a nice house within your budget.
All great points. I am all for buying a fixer-upper however you need to really do your homework. It can end up really costing you financially if you are not careful.
@OneSmartDollar I agree, a good inspector is a must.
I purchased a semi-fixer upper. Everything was livable, just not pretty :) We’re slowly upgrading and once the student loans are gone we’ll tackle the kitchen!
Providing you don’t mind getting your hands dirty and you are at least semi handy I think buying a fixer-upper can be a rewarding experience.
@MonsterPiggyBank Sure seems like it! Even though everything takes twice as long as expected and is twice as expensive ;) I’m having fun learning about houses, though. I usually don’t pay attention to things that don’t affect me (like houses before I owned a house), but now I am all about learning the ins and outs of the house (even going to delve into electrical and plumbing a bit).
If I had kids I think I’d much prefer a house that does not need much work at all.
We have purchased two fixer uppers and I suppose I’m glad we did. There were definitely unplanned expenses that crept up but I think we did well overall. We spent about 20K fixing up the house that we live and and I’m super glad we did that. I got it just the way I want it. We spent just enough to make it nice but not so much that we would never get our money back if we were to sell.
@Holly at ClubThrifty Holly, thanks so much for sharing that! I think the major issue is that you can spend a CRAPLOAD of money making the house ridiculously amazing, but you will never get it back. A few days ago I started to think about how I wanted to gut the entire main level and put in a whole new kitchen, bathroom, newer bigger closets, doors, trim, windows, overhead lights, bathroom vent fan….. you can see where this is going ;)
Hopefully I can just DIY projects for a few years and resist the major renovations so I don’t spend more than I’ll get back. This is a starter home, after all.
Our first home was a fixer, and then we built our second home. There are pros and cons to both. I actually am kind of hokey because I like the idea of taking a run down house and making it nice again. That’s what we’ll do for any future rental properties we buy. The deals are just too good to pass up if the work isn’t too extensive.
@Eyesonthedollar I’m not sure what I will do for my second home. If I have more cash at my disposal to immediately update some of the bigger things I think I’d go for another fixer-upper. On the flip side, I also like the idea of a house that is completely move-in ready/newly built. I’m not sure what we’ll decide! It will totally depend where we are at in life.
I love hearing about your rental properties because my wife and I would love to do the same thing in 10+ years. We’d love to have 2-4 rental properties bringing in income.