Fixer-Upper or Move-in-ready Home?

Receiving regular inquiries about fixer-upper homes, the necessary conversation between buyers and Realtor – that would be me – often ends with a deep sigh and then silence – showing that enthusiasm does not compensate for lack of knowledge, a detailed plan and especially a good budget with fat reserves. 

Not to mention a lack of candidates in the SE Florida housing market, where modern fixer-upper homes have become a unicorn. 

Today's first part of this post covers what to take into account before a purchase; a second part will lay out everything that matters after the closing. 

Things to Consider When Buying a Fixer-Upper vs. a Move-in Ready Home

The home improvement market grew by 23.8% between 2020 and 2021, outperforming the economy. The increase in DIY renovations more than made up for a reduction in professional projects.

Their confidence buoyed by this period of self-reliance, Americans who can afford to take on a fixer-upper may well become tempted to do so — especially in the favorable conditions of some cities. But buyers should consider the following factors before leaping into such a massive project:

Your budget

Some 59% of first-time buyers are in the market for either a fixer-upper or modest starter home, with more than half of those citing “current market conditions” for their decision. A fixer-upper is often significantly cheaper to buy than a regular home, but the cost of renovation, alternative accommodation, and other factors such as temporary heating solutions, can quickly strain your budget. 

Your capacity for admin

You may be drawn to a renovation project to save money, put your DIY skills to work or express your secret inner designer. But building codes and contractor negotiations will account for a big chunk of the time you sink into the project.

Your time and emotional state

A big renovation job can quickly eat into your schedule — especially if you’re particularly passionate about it or plagued by setbacks. You can afford the building, but can you afford the mental real estate to manage this project on top of work, family and other interests?

The potential return on investment

A home can be a lifelong investment, accumulating value and memories as the years and decades pass. Or it can be a short-term investment if you plan to turn it around quickly with a smart renovation ("fix & flip"). If thinking about the latter option, it’s essential to do some hard math and look at the market forecasts before sinking time and money into the project.

From Distressed Home to Dream Home

Americans are likely to spend around $479 billion on renovations in 2023. And what they spend it on can make a big difference. According to the National Association of Realtors, the most profitable interior fix-up in 2023 was to add hardwood floors, offering a renovation ROI of 147%. Other top returns come from improving insulation (100% ROI) or complete kitchen renovation (75% ROI).

But it all depends on where those floors, walls and kitchen counters are. If your city doesn’t fare so well in comparing fixer-upper costs versus returns, it might be wiser to put your project on hold — or look further afield for a high-potential fixer-upper.

Your thoughts?
_________

Original post by frontdoor.com, edited for clarity and length. Photo courtesy of Swanes RE