The Pros & Cons of Buying a Fixer Upper and Things I Learned

Answering the question, “Is it worth to buy a Fixer Upper? Talking about the pros and cons of buying a fixer upper and things I learned throughout the process of buying and then selling a fixer upper (for profit!)

Today I’d like to talk about and answer a question I get a lot, “Is it worth it to buy a fixer upper? Would you do it again?”.

Of course, for everyone and every situation, the answer would be unique but here’s my experience.

For us, it was 100% worth it, for a few reasons.

Let me take a minute before I answer that, to mention for reference that our home is in Southern California, a place with notoriously high real estate costs.

I also want to say that we planned on living in this house after we fixed it up so it definitely wasn’t a quick flip. My plan was always to stay in it for 3-5 years and then go from there. We ended up staying there for three and a half years.

You can check out all of the before and after photos of our fixer upper here.

Why It’s Worth it to Buy a Fixer Upper

We could buy in an area we otherwise couldn’t afford

Buying a house that needed a lot of work meant that we could afford to buy in an area we otherwise could not have afforded as first time home buyers. We bought this house about three months after I started my first “big kid job” out of college. I didn’t have a ton of money. Because the house was in desperate need of repair, it was significantly cheaper than others in the same city. In fact, when we bought it, it was the cheapest house for sale in the entire city.

We could design the house with our taste in finishes and features

Even though we knew this was not a “forever” home, it was still nice to be able to put our touch on it as far as finishes and features goes. We lived in it for almost four years and in that time, it became exactly what I wanted it to be which is always nice.

We made enough money on the sale of our fixer upper to fund the downpayment of our next house (20% on a house that is 2.5x as big with a lot that is 4.5x as big)

It’s no secret the house we bought was a disaster when we bought it—oil poured all over the carpets, TV’s and light fixtures ripped out the walls, oil poured down the toilets, etc. But with some work and some money, we were able to fix it up to be a great house that we lived in for 3.5 years. When it came time to sell it, we were able to sell it for 30% more than we bought it for. That’s a pretty great return on investment, if you ask me!

The sale also made enough money to fully fund a 20% down payment on our next house. This might not sound impressive at first but when you consider that the new house is 2.5x as big and that the down payment was well over 100k—this becomes a pretty significant amount of money to be made in 3.5 years.

So yes, it was absolutely worth it for us. But that’s not to say that there aren’t also some negatives to buying a fixer upper and that there aren’t many hiccups, missteps and lessons to be learned along the way.

Here are a few Pros & Cons to buying a fixer upper and then below the things I learned throughout the process of us buying a fixer upper, renovating the entire house and then selling it for profit! Hopefully they can be helpful or interesting to you.

Pros & Cons of Buying a Fixer Upper

Pros

1. You can probably afford a bigger house or a better neighborhood if the home is in disrepair.
2. You could pay less in taxes because taxes are based on the purchase price of a property and not the appraised value.
3. Your payments will probably be less than if you had bought an already fixed up place. Homes that are in disrepair are often much cheaper. Even after you fix it up, you’ll still benefit from that initial lower purchase price in your monthly payment.
4. Building equity. As the value of your home increases (which it should with the home improvements you’re doing), you gain equity in your home. You also build equity as you make your monthly payments. Owning more of the home means that when you go to sell the property, you’ll get more money back in your pockets instead of it to the bank.
5. Potential profit when going to sell. Piggybacking off building equity, one of the pros of buying a fixer upper (and fixing it, of course) is the potential profit you can make when going to sell the property. As an example, our home sold for 30% more than we bought it for (and this was at a time when admittedly, it wasn’t a great time to sell). Even with the cost of the renovations, we still made a good bit of profit.
6. You can fix up the house to be more suited to your tastes. We’re pretty specific as far as what kind of design we like in our home, so this was definitely a pro for us—getting to choose finishes that we liked in the renovation process.

Cons

1. Sometimes you can’t move in right away if there’s work that needs to be completed prior. For example, we officially closed on our house in October of 2015 but couldn’t officially move in until December of 2015 because of work that needed to be completed (flooring, kitchen appliances, fixing walls, paint, new fence, etc.)
2. Large upfront costs. Unless you plan on financing your renovation, you’re going to need to pay a lot of money upfront for the fixes. Home renovations aren’t cheap. We only put 3.5% down when we bought our fixer upper so that we could use the rest of the “down payment money” to fix the place up.
3. It takes a lot of time. And money. We’re very open to learning new things, taking on big projects and spending weekends and weeknights after work working on things. We were very excited to be able to put our touch on the place but I’d be remiss if I didn’t acknowledge that this did require a certain amount of sacrifice, mostly in our social life for awhile. If you’re not the type of person who wants to work on their house a lot, this definitely isn’t for you (unless you plan on hiring all of the work out which would be fine if there’s enough margin considering hiring people is much more expensive than DIY).

I’m sharing below things I learned buying a fixer upper to hopefully do two things: 1) inspire you and 2) educate you.

Things I Learned Buying a Fixer Upper

Everything is probably going to take longer than you think or expect.

This seems to be the case more often than not. There are many variables when it comes to a house renovation and often times those variables end up adding time to your project (if you’re lucky, occasionally things will go quicker than expected!).

We had this come up a few times, mostly when we had to rely on other people to get the work done. When we got our kitchen countertops done, they installed the wrong sink, which delayed the countertops being completed which then delayed our floor guy and delayed the painting. So one little blip ended up causing a few day delay in other aspects as well.

It’s probably going to cost more than you expect.

It’s possible that you’ve budgeted correctly and that you have a very good idea of what it will cost but at the end of the day, there will be unknowns. Things will happen that you didn’t count on. You will have to set aside money for new problems that arise as you begin to fix things. So it’s definitely something to keep in mind. It’s a good idea to give yourself a 10-15% buffer for these unexpected costs so you’re not totally unprepared. If you don’t end up needing it, then hey, that’s great! If you do end up needing it, you’ll be glad you set it aside.

Not everything can (or should) be DIY or done by yourself.

It’s important to realize and acknowledge the things that you can do yourself and the things that you really should hire the professionals for. In our situation, we made a list of all the tasks that needed to be done to the house, a timeline that we wanted everything completed and then what we felt we could reasonably do ourselves and what we would hire out.

We also kept in mind that while some things we could do, it would take us much longer to do than if it was just hired out. Considering we were living in a rental at the time and the longer it took for us to rehab the house, the more we’d be paying in rent, it was important to consider that sometimes saving money by doing it ourselves wasn’t really saving much money because it was taking so much time.

I can think of two specific examples of this in our house: 1) flooring and 2) painting kitchen cabinets.

We could have done flooring ourselves but even with how small the house was (1000 sq ft), it just didn’t make sense with the amount of time it would’ve taken since we simultaneously had so many things going on.

We also could have painted the kitchen cabinets (and we did paint our bathroom cabinets) but our painter offered us a great deal to paint the entire kitchen and get it done in less than half the time it would’ve taken us.

This allowed us to save time and work on other pressing matters.

We also limit doing much with electrical, plumbing or HVAC. There are a few small things we felt comfortable doing ourselves but mostly, we brought the pros in because it made us feel more confident.

The internet can teach you how to do (almost) anything.

If you’re willing to do some research, watch some videos and try new things, you would be surprised at how much the internet can teach you. There are so many things we learned how to do from blogs, youtube videos and other tutorials on the internet.

Some of these included how to paint tile, how to paint kitchen cabinets, how to build garden beds, laying a paver patio, replacing a shower door, changing a toilet, etc.

You need to sort out your priorities quickly.

One of the best pieces of advice I can give you is to create a master list of all the tasks that need to be completed and a timeline for when things need to be done. This will very quickly help you sort out your priorities.

Having a tentative schedule and a list of tasks will not only keep you organized but help motivate you to continue to check things off and get things done!

It will also help guide you as to what to accomplish next. No one wants to be changing cabinet hardware when something even more important like getting your toilets to work is still waiting to be done! So make sure you sort out your priorities quickly.

It’s (probably) worth it to buy one.

As this chapter of our life closes, I’ll look back on it fondly not only for the lessons it taught me but also the opportunity it provided me. I can’t wait to be in our new home and I am thankful to Cassidy for helping us get there.

While there definitely are some “negatives” to buying a fixer upper, I also think they can be a great investment and I would say as long as you do your homework and the margins are there… go for it! And have fun while you do it.

What do you think? Would you ever buy a fixer upper?