Buy a Fixer Upper or Move in Ready?

A good question I get all the time is whether or not to buy a fixer upper or something that is move in ready.

From personal experience, there can be great value and wonderful investment opportunities to buying the "bad apple" in a good neighborhood.  However, you have to weigh some important factors.  First, do you have enough money to not only buy the place, but also to hire a contractor, support the cost of materials and most important of all: do you have the time?  

In real estate you can force the value creation in a sense by transforming something nobody wants into a dream home that everyone wants.  Now another consideration is acting as your own general contractor by hiring out all sub-contractors and saving money.  However, if you don't have the experience dealing with all the various trades it can be cumbersome.

At the end of the day you need a roof over your head, and if that means buying something that is completely ready to move in that is not bad.  As an investment buying a fixer upper also comes with enormous risks on the back end when/if you go to sell it.  Did you keep all the finishes neutral and appeal to all buyers or did you take chances and customize more to your specific taste?  Did you put high end appliances in a house/condo that you won't get your money out of?  Did you have to spend a lot of money on things that no one sees?  For example, new electrical work, plumbing, sewage, foundation issues, etc.  People don't want to pay up for that stuff, they just expect it especially if you are buying and trying to sell for a profit.

Bottom line is that one may work better for one person over another.  You need a roof over your head, and not everyone wants to commit to doing the repairs.  In hot housing markets you can potentially buy something and do nothing to it and make money as well.  It all comes down to the right opportunity.

Real Estate is another bucket that makes up your total net worth.  If done right you can have equity in your home and stop paying rent to someone else..

Until next time...

Eric Marvin, CFP ®