The Pros and Cons of Buying A Fixer-Upper

Let’s look at the pros and cons of buying this type of property.

Purchasing a property is one of life’s major moments. Purchasing a “fixer-upper” property has a whole other layer of complexity attached to it. Knowing that your new property is about to undergo a minor (or major) transformation and looking forward to seeing the end result of all your renovation work is exciting.

However buying a property that requires some tender love and care is not without its headaches. Fixer-upper properties require some extra planning, budgeting and consideration. Especially if you’re a first time buyer or a first time flipper.

Sometimes listed as a property with ‘excellent potential’ or ‘in need of repair’, a fixer-upper is typically a property which obviously needs some maintenance, repair and renovation work.

When done well, buying a fixer-upper can turn out to be a profitable strategy. When done badly you may not recoup the money you spend on fixing it up! Before you dive in, let’s look at the pros and cons of buying a fixer-upper property.

The Pros of Buying a Fixer Upper Home

If you wish to purchase a property requiring some work to make it shine, it’s worthwhile to go through the benefits of investing in such a property. Here are some:

Reduced competition.

Typically there is less competition between buyers to purchase a fixer-upper. Homes requiring renovations and repairs are sometimes seen as “too much work” especially for first time investors and young families with limited purchasing and renovation history. With reduced competition comes a reduced threat of being pulled into an intense bidding war with other potential buyers. It means you can purchase a property inline with the rate you feel is ideal to pay.

Less competition also implies the sale of fixer-upper homes tends to execute quickly and you can close the deal effectively.

Reduced purchase price.

Fixer uppers can come with needs for major repairs, renovations and replacements. They can be priced significantly below the current market value to compensate for their extra needs. This makes fixer-uppers attractive opportunities for potential investors who are searching for affordable properties.

With fixer uppers you are expected to spend money on repairs and home improvements aher the settlement. However, you can spread out the repairs and improvements over time, when it makes sense for you and your budget.

Older and larger dwellings.

This will be the case for some fixer-upper properties you see come onto the market; older dwellings with larger floor plans on larger block sizes. The simple fact is; they don’t make them like they used to! In the 40’s and 50’s Australia had plenty of space, so homes and block sizes tended to be larger. Nowadays, that spacious five bedroom corner block is a hot commodity. Even if it’s a little worn and torn.

So your fixer-upper could be covered in lime green wall paper and need a lot of care to make it sparkle, but the bones of the property are sturdy and there is plenty of space to work with.

Your fixer-upper find could come with interesting design and building features which could be worth saving and returning to their former glory; adding character and charm to the property.

Create the space you want.

With a fixer-upper property you get a clean slate! Create the space you’d like to see and customise the property to suit your needs. This is one major benefit of purchasing a fixer-upper property. Throughout the process of renovating you can invest in curating the specific upgrades you want. Expand the space, create more open-plan living, upgrade the appliances and fixtures, you can go to town with any changes you’d like to see.

If you are renovating with the view to keep the property as an investment and put tenants in then you can think of including attractive features which will make the house more appealing to potential tenants and increase the weekly rental price.

Improved property value.

When you purchase a fixer-upper property that needs improvements you have a chance to boost its value. By selecting specific upgrades to the layout and aesthetics you can help in potentially adding more value. The property could fetch a higher price when you decide to resell.

It is crucial to work out the extent of the needed renovations and repairs before starting out so you’re not spending a lot more on the property than what you could potentially resell for.

Tomoro Agent Tye Thies says “Knowing your buying price limit as well as the maximum you’re willing to invest on improvements and renovations before you purchase a fixer-upper property is key. That way you will go into the transaction with a clear goal and plan if you want to “flip” or resell the property aher the renovations are complete”.

The Cons of Buying a Fixer Upper Home

Whilst the pros of purchasing a fixer-upper property are appealing, there can be some important drawbacks to consider. Here are some cons of buying a fixer-upper property:

Expensive works and upgrades.

Whilst buying a fixer-upper is exciting, once the work starts on renovations so does the influx of bills. Home repairs or renovations can be expensive and unpredictable. Especially with older properties that can hide years of neglect and a myriad of issues. You might end up spending more than you had initially bargained for.

The strategy is to avoid getting a bill shock by budgeting accordingly and working with a builder to ensure all the renovations are outlined with costings and timelines before you sign off on the dotted line. Having a builder inspect the property before you purchase, and explain what your vision is for the renovations will help to get an idea of costs.

Unexpected issues. 

Fixer-upper properties may come with unforeseen complications or unexpected issues which even the best building inspection and plumbing inspection missed. Sometimes you won’t know ‘what lies beneath’ until you purchase the property and start ripping it up.

Complex plumbing, unsafe or unfinished previous works, materials which are falling apart, foundation issues, the existence of asbestos or harmful materials; anything can pop up come renovation time.

In the midst of renovations mother nature may throw a spanner in the works with storms, rain or weather events which haven’t been budgeted for.

It’s necessary to surround yourself with experts in renovating properties to help you carry out the repairs and upgrades you wish to see. That way, whatever comes their way, they will be able to advise you on the correct course of action.

Unplanned expenses.

Unexpected issues can lead to additional costs which will escalate your budget while leading the investment project to be more expensive and less profitable. Additional costs are one of the major demerits of purchasing properties which require improvements and renovations.

Whether it’s more building work, emergency plumbing work, roofing work, additional labour costs; it can all add up.

Our advice is to plan for the unplanned. Have an area in your budget that is set aside for some unexpected expenses during the renovations process.

Change in the market.

If you had been wanting to flip your fixer-upper quickly and have come into some unexpected issues which delayed your renovations you may be reselling your property in a very different market to which you bought it. As such the market value of your property may have gone up or down. At Tomoro our advice is to stay close to your agent and keep abreast of property market changes in your area.

Your decision to buy a fixer-upper property over purchasing a ready-to-move-in property will ultimately depend on your primary purchasing purpose and your budget. At Tomoro our team can help to provide you with current market information including trends and values and provide a list of our current available properties. Please reach out to our team now on (07) 4580 0811. We are looking forward to helping you secure your next property.