This is a tough question to answer and it really depends on your future goals and financial situation. However, there are 2 main considerations you should take into account before making this decision.
Before you purchase a home, in any market, you should be looking at many homes and paying attention to the different price points. By doing this, you’ll soon be able to tell, quite accurately, the difference in cost of two comparable homes -one completely renovated, and one needing extensive work. Now everyone automatically assumes that if you buy a home that needs work and you then do a complete renovation, that you’re obviously going to come out ahead, right?
Not necessarily. It depends on the market.
Sometimes when it’s a sellers market, buyers get so frustrated losing bidding wars on the nice remodeled homes, that they end up over bidding on the fixer uppers. If a totally remodeled home in an area goes for $350,000, and a comparable fixer upper on the same street goes for $320,000, that means there’s $30,000 to be made on that fixer upper, right? Wrong. Renovations are extremely expensive, especially when done properly. If all the cheaper house needed was a coat of paint and little TLC, maybe that would be a great deal. But, if you’re looking at a new kitchen, new bathroom, new flooring,new baseboards and trim work, you’re going to lose money on the less expensive home.
What’s the right answer?
Do the math. You might have to do some inquiries with local trades people, but do the calculation of the renovation cost before you buy. That way, you know for sure if you’re coming out ahead. Sometimes it’s worth it just to buy the renovated place right off the top.
Here’s the big kicker: what if you can’t afford the renovated place, even if it is a better bang for the buck?
This brings us to our next consideration.
Are you willing to live in a dated home for a while if that’s what it takes to get the home you want in the future?
The nice thing about renovations is that they can usually be done whenever it works for you. You don’t need to gut a dated home the second you move in. You can space the renovations out over several years and still end up with that fantastic remodeled home that you’ve dreamt of, plus you can save up for the renovations if you don’t have enough money right away.
The fact of the matter is, it’s much easier to take a home that has a good size and layout and update it, than it is to take a smaller remodeled home and eventually make it bigger. If you’re in a position where you can’t afford the home you really want, you should definitely evaluate homes by looking at what the future potential of each home could be.
Many people get stuck in a rut of looking at homes that are unaffordable,for months and even years, and thinking somehow, one day a magical listing is going to pop up and it will be the perfect home for the perfect price. This rarely happens, and if it does, it’s probably perfect for everyone else too (hello bidding war!). Sometimes having a vision for the future goes a long way.
Five years goes by quickly, and in five years from now you could still be looking for a house or you could be already done all your renovations and living in the home you really want! Future you loves it when you make good decisions today! Find two comparable homes this weekend, one renovated, and one not. Do the calculations on the upgrades and see what you learn. This will give you incredible insight into the market that you’re in.
As always, happy house hunting!