Is buying a fixer-upper really worth it?
It was the cheapest house we looked at and it was the biggest. It had bright airy rooms, a big backyard and tons of room for us to grow our family. There was just one problem: it was also a big dump. We figured we’d need to sink at least 50 percent of the purchase price into it in renovations, including new wiring, a new kitchen, a new bathroom, new floors … basically new everything. Those unknown costs ended up driving us away.
If you’ve been house hunting for awhile, you might have come across a similar dump — a siren song of good bones and sizeable rooms that needs a ton of work. But before you take the plunge and buy a fixer-upper, you should ask yourself some important questions:
1. What’s it going to cost?
Make sure you pay for a good home inspection and find out if there are major problems that can’t be fixed within your budget. You should also consider doing a walk through with a contractor to get a rough idea of what it would cost to do the work. Unless you have limitless amounts of cash, you'll need to scope out the size of the job before you can take it on.
2. Is it worth it?
If the dump you’re in love with needs a ton of work, then that cost needs to be factored into the purchase price. Again, make sure you’re clear on exactly how much this project is going to set you back.
3. Do you have the money?
You can afford to buy the house, but how much money will you have left over to pay for renovations once the deal has closed? Before you buy, make sure you have the financing (or savings) in place to get your home ready to move into.
4. What can you live with?
Ideally, you won’t need to do much fixing up before you move in. If you think you can live with the purple wallpaper and the pink bathroom tiles for awhile, then you’ll have a bit of breathing room to take your renovations slow instead of depleting your finances all at once.
5. Are you handy?
They don’t call some of these houses a “handyman’s dream” for nothing — if you can do some or all of the work yourself, you’ll save big dough. Or consider acting as your own contractor — you’ll need to source and hire trades people but in the end you’ll cut out the middleman and save more.
6. Do you have nerves of steel?
Doing a major renovation can test even the most mellow among us. You might be living in the middle of a construction site for many months or your renovations could uncover even bigger problems that require more time and money to fix. A major renovation can be extremely satisfying when it’s done, but it’s not exactly a fun journey getting there. Make sure you know what you’re getting into.
Caroline Cakebread has been Chatelaine.com's money expert since 2006. She is also a recovering academic and the mother of two small kids. She lives in Toronto where she writes and reads about all things financial.
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