Can’t afford new home? Would you renovate a fixer-upper?
Mar 20, 2024, 5:36 PM | Updated: 5:44 pm
Consumers are taking on smaller home improvement projects as higher interest rates and inflation take their toll. Photo credit: Tim Nwachukwu/Getty Images
SALT LAKE CITY — When buying a house seems out of reach, is it worth it to renovate a fixer-upper home?
You can’t go wrong with the age-old adage: “buying the worst house on the best block,” said Dan Bawden, remodelers chair of the National Association of Homebuilders and veteran fixer-upper contractor as quoted by Notability.
Utah Realtor Russell Faucette with The Stern Team joins KSL NewsRadio to balance the cost of renovation vs. amount of work vs. value of property for sale.
Do you have the cash to renovate that fixer-upper?
Faucette said the first question a prospective renovator should ask is — Are you going to hire a general contractor or workers for heavy-duty jobs or are you handy enough to, say, replace a toilet or other smaller repairs.
Also, he said, are you prepared for the possibility the project will likely take longer than you think.
“Maybe your mortgage payment is going to be less because you can get into this fixer-upper. You’re going to have a bigger cash outlay, especially if you’re going to hire people to do it,” he said. “So do you have the cash to be able to do some of these [repair jobs] and then understand if you’re gonna do it piece by piece, it’s probably going to take longer than you expect. Are you prepared for that?”
Rule of thumb for spending on your fixer-upper
Bawden’s rule of thumb is that you should aim to spend 20% to 25% less than what a property in good condition would cost in the area.
Faucette said if you are planning to flip a home (renovate, repair, then resell), purchase a home at a steep discount — 50% to 70% of your “after-repair value.” He said there is no perfect spending formula but it helps to be creative.
“The other thing I’ve done with one of our clients is we actually bought the home and fixed it up, and then sold it to him, and he worked with us to provide sweat equity. So you can also get creative if you have the right partners as well.”
Deal-killers for a fixer-upper home
The best fixer-uppers are ones that mostly need cosmetic updates— kitchen and bathroom renovations, new floors, siding repair or wallpaper removal, Bawden said.
What are fixes or repairs are not worth the expense — deal-killers — when considering buying a fixer-upper?
- Foundation issues
“But the thing that we look for are your most expensive things. Your foundation is Number One going into it,” Faucette said.
2. Roof repairs
“Are you going to have to replace that roof right away,” he said.
3. Water damage
“That could lead to you dealing with mold issues. Are we going to have to rip out walls and things like that? . . . that’s scared me a little bit just because you never know the depth of what that problem might be,” Faucette said.
4. Electrical issues
“If you walk in and it’s knob-and-tube [wiring] — your panels from 1950 — just know that you’re gonna rewire the entire house,” he said.
5. Scope the main sewer line
“That one got us one time. We didn’t scope the sewer. We ended up replacing that mainline from the house to the street,” Faucette said. This is the homeowner’s responsibility.
Related: What are you willing to sacrifice to own a home?
Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.
