The term “fixer-upper” has largely been coined a real estate term in recent decades due to the popularity of several home renovation TV shows. Buyers can be drawn to purchasing a “fixer-upper” due to the potential to get a great deal on a property, and be able to customize it so it becomes their dream home. However, are fixer-uppers really worth all the hype we’ve given them lately? We will explore this together in this article.
Why Do People Buy Fixer Uppers?
Many people can see fixer-uppers as an ideal way to enter a hotter seller’s market due to fixer-uppers generally having a lower market value then the houses around them. They can make living in your dream neighborhood more attainable for many people. The lower price comes at a cost however, as most have major cosmetic or potentially structural shortcomings that are not always evident at the time of purchase.
Another major draw of purchasing a fixer-upper is the potential to flip the home for profit. This has been made popular by many renovation TV shows, and there are countless others who flip homes for a living. The premise is that you would purchase a home significantly under market value due to mainly cosmetic challenges, and then renovate it up to modern day standards, significantly improving the home’s market value and putting it on par with other homes in the neighborhood. Then, you would be able to sell the home for a profit. Flipping homes in this way has the potential to act as a way to invest in the real estate market for some, but it is not without risk.
Purchasing a fixer-upper home also allows you to customize the home how you like as you would have additional capital on hand due to the lower purchase price of the home. Adding a walk-in closet, additional storage space, or a custom chef’s kitchen are all possibilities when doing a complete renovation, and can significantly improve the market value of the home.
Risks Of Fixer Uppers
Fixer-uppers can also be notorious for taking large amounts of capital to bring them up to modern standards, both cosmetically and structurally. Often they are sold “as-is” and may even require skipping a home inspection as they are perceived as being such a good deal by many people. Renovations in any home can uncover issues that were not expected going into the project, such as electrical not to code, or even asbestos as is the case with predominantly older homes. These types of issues can drain the bank account very quickly, but must be completed in order to live in or sell the home due to safety concerns. Completing any renovations on a fixer-upper can not only be costly, but can take a lot of your time as well.
To complete the project without going over budget, often the new home owners will contribute some “sweat equity” into the project, and DIY some of it themself, barring any projects left to the experts such as wiring or structural repairs. This would be additional time spent on top of the standard time spent designing the new spaces, picking materials and colours, and hiring contractors. This time can be minimized if an interior designer is hired, but at a monetary cost.
Our First Recommendation
Obviously fixer-uppers can carry a lot of risk with them, but that does not deter everyone due to their potential. So, how can you avoid these risks and make the most out of your investment? The first thing we recommend when looking at purchasing a fixer-upper is consulting with an experienced real estate agent. They will be able to give you an accurate idea of what the market value for both the neighborhood you’re looking at is, as well as the fixer-upper itself. As you will be pouring capital into the project after you have purchased the home, it is critical that you do not overpay on any property.
A seasoned Realtor® will often have connections with builders/contractors in the area, and could recommend some trusted people that they have worked with in the past for you. It is important to have someone you can trust and have a strong track record renovate your home as a lot can be on the line. You are also able to interview multiple Realtors® in the area to see if they have any experience in the areas you want to purchase in, or with fixer-uppers in general.
Our Second Recommendation
Our second recommendation for purchasing a fixer-upper is to only buy contingent on the results of a home inspection as structural repairs can drain a lot of capital very quickly. If this is not possible, going in knowing that there could be major expenses not uncovered yet and being prepared is a good idea. Based on the age of the home and any visually accessible structural issues (such as a large crack in a basement foundation wall), your real estate agent should also be able to help give you an idea of the types of expenses you could stumble across during the renovations.
Another thing to keep in mind when deciding if a fixer-upper is worth it for you, is to properly define the scope of work that would need to be carried out for the project. This can help give you some semblance of the final cost of the project, and also give an idea of what the final value of the property would be. Perhaps you are only looking for a home that needs a fresh coat of paint and some kitchen/bathroom renos to bring it up to the current century. Or, you may be more adventurous and be looking to completely gut and redesign a home. It is important to understand how far you are willing to go, and then look at homes that would accommodate those renovation scopes accordingly.
Fixer-uppers can be intimidating to some, but can allow people to purchase a home in their ideal neighborhood that they may not have been able to afford otherwise. With the correct experts, such as an experienced real estate agent, in place, the project can have a lower risk to it, and more chance of it turning out for the buyer’s benefit. If you have questions about what it would look like to purchase a fixer-upper in Calgary and would like to speak to a Realtor® with 17+ years of experience, please reach out to us today. We would be happy to help you with any of your real estate needs.