I’m buying my third house! But this time, I’m doing something a bit different (and kind of scary!). Instead of buying a completely updated ready to live in home, we are buying a fixer upper!
Why would we want to buy a fixer upper?
We decided to buy a fixer upper this time around because we didn’t want to have another mortgage. I’m already paying over $1200 a month on the Georgia house (though I’m renting it out now, so I can call that an investment!) and I didn’t want to add to the debt load. We also both thought it would be great fun to learn some DIY skills and make the home our own. Be on the lookout for a YouTube series about it!
The financial perks of buying a fixer upper
Buying a fixer upper can be a great financial decision. In our new market, property values aren’t very high to begin with, so you can find an amazing house for a super low price if don’t mind doing some work. We are buying a giant 4-bedroom Victorian style home for just over $50K! You can’t get that kind of deal in most areas (though to be fair, no one really wants to buy a house in this area). Buying a fixer upper in inflated real estate markets can also be a great idea. You can get a house with great potential for an amazing bargain! It’s definitely a great way to get the type of house you want without having to pay top dollar.
The Costs of Buying a Fixer Upper
Nothing is without its downsides. The biggest issue with buying a fixer upper is that you actually have to fix it up! You can either hire contractors to make the needed renovations, which can get crazy expensive, or you can opt to do most of the work yourself.
Brian and I are going to try to do the majority of the work ourselves and document it all on YouTube (and here, of course!) so you can see where we fail and how we succeed. However, we’ve already decided that we are going to leave anything potentially dangerous or that could cause major issues to the professionals (mostly electrical and major plumbing issues). We don’t want to make anything worse!
Thinking of Buying a Fixer Upper?
There are a few things that you need to take into consideration if you are thinking of buying a fixer upper. First, is the resale value. Look at the cost of renovation versus the potential resale value of the home. The housing market in Central Pennsylvania is not good. There aren’t a lot of nice homes on the market, and the ones available don’t sell for more than $115k. If we can stick to a renovation budget of $30K, we might be able to make an additional $30K when we eventually sell it. Because of these tight margins, we have to be very careful about the amount of money we put into it. We don’t want to put so much money in that we can’t recoup it when we do eventually sell.
Some people buy fixer uppers with the intent to fix them then rent them out. This is a great option for building your real estate investment portfolio. However, you do need to make sure that the rental market in your area is worth the hassle. Do you want to do all that work to fix up a house to make a net of $100 per month? Probably not. Look at all of your costs (purchase price, potential mortgage payment, and renovation costs) and compare those to the potential monthly rental income to get an idea of whether this would be a good option. It could work really well in some markets, but could be a money pit in others.
What you want
Although the money parts (resale or rent) are important considerations, they not the only considerations. We plan on living in this house for a long time (and hey, maybe property values will increase some day!) so we do want to make it our own. We don’t want to get too excessive with the renovation costs, but we also want to build a home that works for our needs (a great thing about a fixer upper is that we have the ability to do that!). Our goal is to make the house a home.
If you are buying a fixer upper with the intent to live in it, deciding on what you want is the most important part. If you plan on living there for a long time, making it your own is more important than the resale value or potential rent.
What was your experience with buying a fixer upper?
Have you every considered buying a fixer upper? How did it turn out? I’d love to hear all about it in the comments!