Is a Fixer-Upper Right for You? Key Considerations Before You Buy

When you hear of a home on the market that is a fixer, what comes to mind for you? For me, I see it as an opportunity. Yet, for others, it may seem like a daunting project. Read on to understand key considerations before you buy a fixer-upper.

As a realtor, I’ve worked with investors to purchase homes that will become a “Fix and Flip”, or families that are considering a home that they could live in while upgrading, and then there is the strategy to fix and hold the home as a rental property.

What is certain, whether to buy a fixer-upper or not is a very personal decision. It will greatly depend on your skill set, financial situation, and resourcefulness - in many ways. 

Speaking from experience, there are definite ways not to do a fix and flip. I’ll share some of the key elements of a successful fixer below.

If you are considering buying a fixer, I’ve broken it down into these three areas of consideration. I encourage you to honestly rate yourself in these skills and resources that either you personally possess or have access to in your community or partnerships.

The three areas of consideration when buying a fixer-upper are:

• Skillset and building knowledge

• Financial picture and types of funding 

• Mindset, emotional capacity, and general resourcefulness

Questions to ask yourself when considering buying a fixer-upper:

Skillset: How is your skillset in project management, building and construction knowledge, hands-on building skills? The more you know about these things the more you’ll either be able to do some of the work yourself, have a greater ability to manage the people you hire to do the work, or better evaluate the quality of work as it’s happening. 

Financials: Do you have the financial capacity for a fixer-upper project? You’ll either have a large enough amount of capital, qualify for financing to fund a rehabilitation project, or you’ll have a financial partner that will finance the project. 

Capacity and Resources: Are you resourceful? I break this down into two important aspects… Do you have good connections to contractors, other trades, as well as a lender and relator experienced in purchases of fixer-uppers? AND do you have the emotional capacity to ride the potential treacherous journey of a project? Unfortunately I’ve heard all too often about a couple whose marriage did not survive a renovation project. The stressors of a renovation of a fixer are real.

How did you respond to the above questions? If you answered no to any of the questions, perhaps you aren’t ready for a project yet, or it just isn’t in the cards. And yes you can work on these things, and build up your resources, find support in a realtor, lender, or co-investor to be prepared in a good way.

Let’s dive a little deeper into considering starting a fixer project, it brings both possibilities of great risks and great rewards. Let’s take a look at the downsides and upsides of buying a fixer-upper.

The Downsides/ The Risks of a fixer-upper project:

• The economy is always changing. At this moment in the U.S.A. we are in a period of inflation and uncertainty of how tariffs will impact the price of construction in the coming months. It’s very important to account for rising costs of materials, construction, labor, and permits. And as these economic factors change that will often impact the home’s purchase price and resale value- unknowns to factor into your cost evaluations.

• The cost of time. Related to the economy as noted above is to factor how fast will the project take to complete. A project often takes longer than expected. The culprits include delays due to permit processes, unforeseen snafus in designs, product availability and delivery. Delays cost money, especially when your project is financed!

• Funding for renovations are more limited and can carry a greater risk. Many fixer-upper homes will not qualify for conventional loans. Some funding resources include government backed loans such as FHA 203(k) and VA loans, home equity loans/HELOCs, and privately funded Hard Money loans. For more information on what each of these financing options are, I highly recommend speaking to a lender to discuss. Or reach out to me and I’ll point you to some great loan brokers to talk to.

• Renovating beyond or below the local market expectations. This one is most important when considering the resale of the property. It’s essential to renovate the property at the level of design and quality of materials for the area. It can be hard to sell a property that is either done cheaply, not fitting current or timeless design styles, or over-done for the area; all of this can create a scenario of a home being hard to sell at a good profit.

The Upsides/ the Potential of a fixer-upper project:

• Create what you want. This is the fun part! When you have a renovation project you have the opportunity to change the layout, select the materials that make you happy, and add in details that make your life easier. Of course funding also greatly dictates these choices, and whether you plan to hold the property or flip it.

• Add equity. Some will do this with sweat equity- if you have some of the skills to do the work yourself. Or you have the ability to live in the property and make improvements over time.

• Getting into a desired neighborhood at a lower price-point. I think this is most people’s dream- a common reason to think about buying a fixer. And while this will get you into a neighborhood at a lower price, when the neighborhood is popular, this can still bring in a good amount of competition for the property.

So how do your responses to these elements stack up? Do you think you are ready and qualified to take on a purchase and rehabilitate it to the next level? For some of you, you still may not quite know how to answer some of these questions. In a way, this is just the tip of the iceberg when considering taking on a fixer-upper project. If you’d like to discuss your personal situation and goals around fixer opportunities please reach out to me. I’d love to help.