Q: Marsha, my wife and I want to purchase a home in a particular school district. The homes are super pricey and going up quickly. There are some fixer-uppers that become available from time to time. What’s your view on buying a fixer?
A: In real estate, there are three variables that constantly interact to create value for the home. These factors are condition, price, and location. In your case, the school location and price are important. That means you’d consider purchasing a fixer-upper in your desired location and price range. There are pros and cons to buying a fixer versus a move-in-ready or turn-key home.
It’s clear that you are not an investor buying a home in poor shape simply to “fix and flip.” You’re going to live in the home. You are willing to buy a home in need of love and renovation to get the location you want. Your improvements will increase the home’s value, and you’ll realize a gain when you move. Most buyers want homes in good to excellent condition.
It’s important to know the type of fixer you are purchasing. Once you are in a contract, you must have a home inspection. This will disclose if you are purchasing a dated, ugly cosmetic fixer or a wreck in need of serious repair. Replacing the orange shag carpeting and updating the kitchen is one thing, but a house with plumbing, electrical, or foundation issues is another.
The home inspection helps you develop a budget. Be sure and crunch the numbers, and then crunch them again. What are home prices in your location for turn-key homes? How much are you willing and able to invest to improve your fixer? Make your budget, double that number, and then add on half again. Things happen. You are tearing into walls, pulling up carpets, and replacing dated fixtures. I guarantee something will be revealed that will add to your costs.
You plan on saving money by doing the work yourself? Be honest and don’t overestimate your handyman abilities. Are you going to design the remodel yourself or hire an expert? We will not always be in the current red-hot seller’s market. Nothing is worse for resale than amateur upgrades and remodels. Think seriously about hiring contractors and experts to do the work.
The plus for a fixer is the initial buy-in. You will get into the school district and location you want for less. There is also the added value you bring to the home. Your work will add more to the value of the home than your financial outlay. You will also be in control of the renovations and remodel.
Arguments against the fixer come down to lots of work, time, and costs. If you plan on saving money by living in the home during the construction projects, plan on plenty of noise, dust, and stress. Your weekends will be filled with sanding, carpentry, and painting. As I said, plan on hidden costs.
Recognize that when you purchase a fixer and take on all the negatives and defects, you are purchasing a home and location you really can’t afford. You are investing your precious weeks, months, and energy into the home instead of saving and waiting to purchase.
It comes down to cost, time, and convenience — and that’s a decision only you can make.
Marsha Gray, DRE #012102130, NMLS#1982164, has been a real estate broker in Santa Barbara for more than 20 years. She works at Allyn & Associates, real estate services and lending. To read more Q&A articles, visit MarshaGraySBhomes.com. She will research and answer all questions submitted. Contact Marsha at (805) 252-7093 or MarshaGraySB@gmail.com.