Fixer-Upper or Fixer-Downer?
Shopping for a home can be a nerve-wracking process. Consider all the factors that going into the decision, including whether or not you’re willing to invest in a fixer-upper or opt for a home that’s move-in ready.
Many overlook fixer-uppers due to the financial and time commitments required. And they can be considerable. But don’t dismiss the idea until you’ve also evaluated the benefits of choosing the fixer-upper.
Start with these:
Fixer-uppers can be less expensive
Because even the seller acknowledges that work must be put into the home, fixer-uppers rarely are listed at full market value because they simply wouldn’t attract offers. So opting for a fixer-upper could allow you to afford a larger home and/or a home that’s located in a pricier neighborhood. If you’re searching for a home located in the nicest school district and don’t want the financial burden of paying full market prices, you might opt for the fixer-upper.
As an added bonus, since you paid less for the home, you’ll have lower mortgage payments even after renovating the space and turning a fixer-upper into the home of your dreams.
Many will shy away from fixer-uppers because they either don’t want to commit to or don’t have the time and resources to dedicate to getting the home up to snuff. Because of this, there are usually fewer competitors if you’re considering this type of abode. With fewer bids likely on the table for a home, you can often swoop in and negotiate a better deal.
Oftentimes when buying a move-in ready home, you have to settle for the previous tenants’ tastes. However, if you choose a fixer-upper and have the time and money to put into it, you can customize the entire place to reflect your style and completely make the space your own.
Along with having a blank canvas to work with and tailor to your tastes, if you perform the renovations yourself, you’ll have a great sense of pride in your home.
More potential savings and tax benefits
First of all, fixing up a subpar home could allow you to qualify for renovation loans – specifically, Federal Housing Authority 203k loans. These loans are available to assist with a wide variety of needs, including cosmetic fixes and large-scale structural work in order to make the home habitable.
Along the same vein, renovating a fixer-upper will likely increase your home’s value, which, in turn, could afford you quicker equity. Better equity can boost your net worth and allow you to refinance sooner, if needed.
Lastly, purchasing a fixer-upper could result in tax savings as property taxes, initially at least, are based on the home’s sale price. These types of houses also could qualify for an investment tax credit for eligible rehabilitation costs.
Just keep in mind…
Before you go running off to bid on a fixer-upper, remember the amount of time, work, and money that would be required. Have a home inspector that specializes in older homes check out the space and know your limits before you buy.
Realistically, you won’t be able to move into the home until most or all of the fixes are finalized, so make sure you consider your plan for the future and have enough time and money to put into the project.
Remember, however, that your repairs and renovations ultimately will increase the value of the home – and the cost to rebuild it. That means you’ll likely need more dwelling coverage, which could result ina larger home insurance premium. Be sure to address this with your home insurance provider.
Fixer-uppers will test the limits of your patience, but they can be so worth the effort in the long run.