To Fixer-Upper or Not Fixer-Upper.... That is the Question!

by Allen Faircloth

Fixer-uppers: Ah, the siren song of a diamond in the rough! These properties are like that super cool, slightly scruffy kid who gets into the popular club (aka, desirable neighborhood) for way less than everyone else. That's because, let's be real, you're not just buying a house; you're buying a project.

But before you dive headfirst into a demo day montage, you gotta get real with yourself and ask the million-dollar question: "Will this house be worth all the sweat, tears, and questionable fashion choices I'm about to make in it?" To figure that out, follow these three crucial steps:

The Fixer-Upper Formula: Don't Get Fooled!

Add Up the Damage (and Then Some!): First things first, grab a notepad and list everything that needs doing in that house. And when we say everything, we mean everything. Always, always, always assume it's more work than you initially think. Tally up all the costs for materials and, if you're not a DIY wizard, labor. If you are planning on getting your hands dirty, remember your time is valuable, so factor in your own "labor costs" too (think of it as payment for all those late-night pizza runs).

Pro Tip: This is where a home inspector becomes your best friend. They're like real estate detectives, sniffing out hidden costs behind walls or under roofs that you (and your starry-eyed dreams) might totally miss. Don't skip this step unless you enjoy expensive surprises!
Calculate the Glow-Up Value: Whether you're flipping this house or planning to live in your beautifully renovated masterpiece, you need to estimate what its final value will be once all the magic happens. Your best bet here is to scope out "comps"—comparable listings that have recently sold in the area. This gives you a ballpark figure of what to expect. A friendly Realtor can pull these up for you faster than you can say "renovation loan."
Find the Sweet Spot (Before It Becomes a Money Pit): This is the moment of truth! Take your estimated final value from step two and subtract your total estimated costs from step one. Now, here's the crucial part: subtract an extra 5-10% for unforeseen issues. Because trust us, something will pop up. The number you're left with? That's your absolute upper limit for what you should offer on this fixer-upper. Go even a penny over that, and your "great deal" can quickly morph into a full-blown money pit that'll haunt your dreams.

If that final number gives you a warm, fuzzy feeling and doesn't make your wallet whimper, then congratulations! That fixer-upper might just be your destiny. Now, go forth and secure that renovation loan!