Just looking for advice from homeowners who have experience in choosing between the two. I am a first home buyer and can't decided. I am comfortable with home improvement and do not mind living in a construction zone for a while. please do not preach taxes and up keep as I do have experience with rental properties having worked with my dad. Thanks
Posted Jan 3, 2017, 6:06 PM UTC
If you don't mind doing the repairs and have the time/expertise/money to do them, I'd go that route. It's never a good idea to buy at the very tippy top of your budget. Buying a fixer upper and fixing it up can mean you have instant equity, a lower payment long term, and you'll also have things fixed up the way you want them.
How much money would you truly save by buying the fixer upper though? Make sure to factor in all estimated repair costs, rounded up for unexpected repairs that you find later. You might end up breaking even, which at that point obviously it would have been better just to buy the move in ready home.
Unless of course you value having things done exactly how you want them over just having a "nice" thing. Many people just care about having "granite" countertops...well personally I think most granite looks like shit, so if I did it myself even if it cost the same in the end, I would be happier.
redoing a granite counter top you don't like is a much smaller project than fixing a broken house with many problems lol
We bought a home that is functionally but needed updated and we knew things would start breaking in a few years and need replaced(home was 16 years old and everything was original when we bought it besides the new carpet.)This worked for us because we could take our time fixing it up since it didn't need to be done asap and then we were able to pay cash for the things that needed to be done. We bought our home for 160k 5 years ago. We have put 30k into the house so far(new windows, paint interior and exterior, new deck, tiled all 3 bathrooms and replaced 2 vanities, replaced 2 toilets, replaced garage doors and garage door openers, replace water heater, replaced all appliances, fenced in the yard). Luckly the roof and gutters got destroyed from hail so that was only 1k to fix last month(saved us 9k since we were going to replace it next summer anyways!).We still have some more to update and fix(the kitchen counter tops and floor and redo the front porch, and replace the ac/heater) but it can be done over the next couple of years. Our homes now worth 230k. It's been nice doing it up how we like and increasing value! For us this has been great and since we bought it so cheap and pay cash for updates and repairs so it will be paid off I 5 years! If we would have bought our dream home brand new it would have cost 350k+ and the value would have hardly gone up in the last 5 years and we would have at least another 20 years to go on the mortgage.I personally wouldn't buy a complete fixer upper though that's just too much! I'd just do what we did buy something functionally but ugly and outdated!
It depends if you want to do the projects or not. Like others are saying, it really can suck if the project takes a lot longer than thought.
For me, I can do some basic plumbing, electric, painting, patching walls, ect. But if I needed to redo my kitchen I would have to pay someone which eats at your profit quick.
I always go low end, but it's a matter of preference.
Buy a cheaper property as long as it is currently livable. Build some equity to roll into your next home as your needs and family grow. Having a mortgage that is a large percentage of your take home pay limits your financial choices for many years. It is also risky if there is an unexpected change in income.
Best advice I got told is ignore budget at first, and consider the houses. Find the one that is the worst on its street,but the street is great. You can then improve to meet the average, whereas the best house on the worst street can only go one way. Down in value, when compared to potential. After that, consider whether you want to do up, and then look at budget for buying or buy and reno.
Is location a consideration? Quality of schools nearby? Perhaps not right now but down the line it may be an issue.
On my first house, I would have rather spent the money on a house that had everything I want. Granted, I did the minimum and then rented it out. If you go this route, I wouldn't top out at your budget, try to go under that so that you can make changes or improvements. It may be move in ready and all nice and up to date but you may learn that you absolutely hate how something is setup and want to change it. Is there a middle ground you can look at, or are you stuck between two specific houses?
You should be buying the neighborhood NOT the house!!!!! If you buy a fancy new construction home in a bad part of town you will never get your money back out of it! I am a huge proponent of buying a fixer-upper in a nice neighborhood. You DO NOT want bad / low income neighbors. Trust me. I learned this the hard way.
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Thank you all for the comments!
Try to envision your longterm with each home. Even the higher end might come with some costly surprises. Is that higher monthly mortgage payment something you can live comfortably with when, say, a heater needs replacing?
We went the route of affordable fixer upper, for the specific reason that it had considerably more square footage and a larger lot size than the average home in our urban area. making it more enjoyable right now, and a nice investment for when it is fixed up. Look at the area around your fixer-upper. Would it be a good investment to fix it up? If it really doesn't have any competitive edge besides you buying it cheap, it might not be a worthwhile investment. Especially considering all the time and money that one can bury into the various projects/surprises that will come up.
You're only 22, it is very possible you may find yourself in a position to move/sell in the next 10 years. Would you get a good return on your time/financial investment if you had to do that?
Find yourself a really good inspector before making an offer. Walk through the house with him/her. Bring up little things you notice and ask lots of questions. You want to factor in any sort of immediate repairs when making this decision.
What is your time worth if you will be doing the repairs? If it doesn't make sense for you to move into a lower end home, then don't. Looking back on it now, I would have rather have paid more for a house that had what I wanted rather than waiting on doing the repairs. Sometimes the projects start with good intentions but end up taking way too long to complete.
And costing way more money than you planned