Choosing the home you’re going to live in is one of the biggest financial decisions you will ever make. Being a homeowner is a huge commitment that comes with a lot of responsibility, but it also brings many benefits. You can make the space truly your own.
Part of the home-buying process is determining what kind of home you prefer. Some people want a turn-key property where all they have to do is move in their furniture. Other home buyers don't mind purchasing a home that needs a little TLC so they can remodel the space exactly the way they want it.
To decide if buying a fixer upper rather than a move-in ready home is right for you, consider these four questions:
1. Do I understand the amount of work (and money) involved?
Many home-improvement shows have inspired home buyers to think creatively because they take an outdated home and breathe new life into it. But buying and remodeling a fixer upper doesn’t just mean picking out paint colors, flooring, countertops and cabinets. Unless you or someone you know is in the construction business, you should factor in how much time it will take to select a trusted contractor who can make sure that the other important parts of your home, such as its foundation, plumbing and wiring are all in good condition.
Unlike what you see on TV, it takes more than an hour to get the job done. Depending on the project scale, home renovations can take a weeks or even months to complete. And be prepared for the unexpected because additional costs usually arise.
2. Am I willing to take on all that work?
Just moving to a new home requires a lot of time, energy and money. Then you still have to figure out what you need to do to your new property and map it out. Once you have a clear idea about what is involved, ask yourself if you are willing to take on such a huge project yourself. Some people can handle it, but others may end up over their heads.
3. Are there any move-in ready homes within my price range that I would be willing to look at?
Two of the main reasons people buy a fixer-upper are: they get a blank canvas so they can turn that property into their ultimate dream home, and they get to live in their desired neighborhood.
If you feel at all uneasy about the amount of remodeling work involved, ask your realtor if any move-in ready homes are for sale in the area that you can afford instead.
4. Will the renovations significantly increase the value of my home?
One major advantage of buying a fixer upper is that you will likely increase the value of your home by the amount of sweat equity you put in. But it is not always guaranteed. Some renovation projects give homeowners an impressive ROI. Other remodeling jobs may look nice in the end but do little to improve the value enough to offset their cost. Your best bet is to consult with your realtor and find out about other homes in the area and what they sold for before you decide to buy a fixer upper.
Want to buy a fixer upper, but don’t know what type of mortgage to get? Learn about the 203(k) loan, a mortgage loan specifically for those looking to do a renovation.