It’s a first-time homebuyer’s dream: Snag a rundown house in a terrific neighbourhood, and then revamp it to your heart’s content. But fair warning, that fixer-upper could become your worst nightmare.
“You have to really know what you’re getting into,” says Zillow.com real estate expert Brendon DeSimone. “It could be the case where it seems like a good price and then you dig deeper and find that the windows are off, the electrical foundation is messy, and so on.”
Translation: You could wind up spending more than you bargained for.
We asked DeSimone to list the pros and cons:
PRO: More room for upside
Fixing up the bathroom or kitchen will add value to your home, especially if you snagged it below market price.
“You’re not buying the top of the top appliances and finishes,” says DeSimone, so “there’s room to renovate it, and it’s going to cost less. You’re building equity into the place as you fix it up.”
CON: You might go overbudget
Beyond the stress of waking up to the sound of power drills, there’s the issue of going overbudget, something that’s easy to do with fixer-uppers.
“The home may seem lower than the neighbourhood, but when you get into it, it could actually end up costing a lot more,” says DeSimone.
An inspector could find one problem that leads to another, or say some repairs can’t be completed until the rot is cleared, the plumbing’s installed, etc.
PRO: You can have it your way
Putting a personal stamp on a house is what makes it a home. And with a fixer-upper, “you can customise it and pick out exactly what you want,” says DeSimone. “You’re not getting somebody else’s curtains, carpet and light fixtures.”
CON: You might get stuck with it
“If you’re in a bind and things happen, you lose your job and you’ve gone overboard, what’s your exit strategy?” says DeSimone. “You might not be able to sell the house quickly,” especially in a down market.
His rule: If you’re not planning to stay in the house for at least five to seven years, “don’t be buying.”
Carrying costs, or the cost of “carrying a home” while you rent another, can also add up. This is especially true of fixer-uppers that require new additions or construction, where the homeowner can’t be nearby.
“You may have bought the home with a loan, but then you’ll have to get a construction loan on top of it,” DeSimone says. “If you’re carrying it for two years, that’s two years of carrying this, plus paying your old rent.”
PRO: A cheap route to your dream neighbourhood
A fixer-upper in a great neighbourhood can get where you want to be. Per DeSimone: “If you can spend $375,000 and put some $75,000 into it, now you’re in the neighbourhood for $450,000 rather than $500,000.” It’s a great deal.
CON: It could wreck your relationship
For some couples, rebuilding a home is the ultimate bonding experience. Others find it utterly time-consuming.
“It’s an emotional, physical stress, and I’ve seen it tear relationships apart,” says DeSimone. “The husband might be all gung-ho while the wife’s all focused on the baby.”
Managing the renovation can be like a second, part-time job, where every worker feels spread thin.
“If things go wrong, people fight. You could be arguing over changes to the architecture drawings late at night,” he says.