Some homes need a lot of TLC before they’re even habitable – but their bargain-basement price can make them appealing, especially when you’re on a tight budget. So what are the pros and cons of buying and renovating a fixer-upper?
What’s a fixer-upper?
When a listing says a property has “so much potential”, it can be agent code for ‘it needs lots of work’. Welcome to the world of fixer-uppers. These are homes that need improvements – which can range from minor cosmetic renovations to full-on structural repair.
A lower purchase price
When you’re just starting out on the property ladder, affording your dream home can be a daunting task. A fixer-upper generally comes with a lower price tag, reflecting its current condition. While you might have to spend more to improve the property, a lower purchase price means you have to borrow less and save for a smaller deposit.
Many Australians are put off by the work involved in tackling a fixer-upper, especially when they have a full-time job and family responsibilities. Less competition can be great news for you – as you may be able to drive an even harder bargain at the negotiating table.
A blank canvas
One of the biggest benefits of a fixer-upper is the endless possibilities it presents. You get to put your own stamp on a property rather than live with the previous owners’ tastes. Love cooking big meals for your family and friends? Then build the kitchen of your dreams.
Live in a better neighbourhood
If you’ve always wanted to live in a particular neighbourhood but local property prices are too high, buying a fixer-upper could be your way in. And if you make the right improvements that add value, you could get a great return on your investment when it’s time to sell.
Get more house for your money
Buying a big house on a tight budget can be next to impossible when it’s move-in ready. But if it requires work to get up to scratch, the purchase price is generally lower to compensate. So you might be able to buy a bigger property than you could otherwise be able to afford.
Potential for profit
While you might have to invest money, sweat and time to polish up your diamond in the rough, these efforts could bring you a great return. That’s why house flipping is a that some investors favour.
Taking on more than you can manage
Renovating a fixer-upper doesn’t just take money and time, it also comes with an emotional toll – particularly if things go wrong or if your budget spirals upwards. You can end up taking on more than you can manage, particularly if you’re juggling a job and a family on top.
Renovation costs could climb
Even the best-laid plans sometimes go wrong – and it’s challenging to accurately predict how much renovations will cost. So if you do decide to take a fixer-upper project on, add a buffer to your budget to cover any nasty surprises.
Always expect the unexpected even if you’ve had an expert building inspector examine the property beforehand. New problems can pop up or previously unknown issues can be uncovered during the project. These could impact your budget and your timeline.
The possibility of living on a construction site
Depending on how big a job you take on and your budget, you might need to rent another place while the project goes on or face the prospect of living on a construction site.