I'm Considering Buying a Fixer-Upper. Here's Why

I have been in the process of trying to buy a new home for several months, thus far with no success. As a result of the difficulties I am facing -- despite being pre-approved for a mortgage loan and having a down payment ready to go -- I'm thinking of buying a fixer-upper. Here's why this is something that's now on my radar when it wasn't before. 

1. Fixer-uppers are priced lower

Fixer-uppers in my chosen neighborhood are generally priced well below the cost of buying a new home. That's to account for the fact that renovations will be necessary. 

To figure out what the finished price of my fixer-upper would be, I looked at how much I would have to pay for the house plus the renovations -- then added an extra 10% to account for any unexpected costs that might come up during the remodeling process. 

Even after adding in the likely renovation costs, I found that I could get a house that needs repair (and then fix it) for less than it would cost me to buy a brand new comparable property. This meant that the fixer-upper would be better for my pocketbook. 

It was especially attractive to me to buy a lower priced fixer-upper because most of the comparable properties that were ready to move into in my chosen neighborhood were actually priced above the amount I wanted to spend. So, without buying a home in need of repairs, I might have been priced out of where I wanted to live. 

If you're on a tight budget, you also may be able to find a house in need of remodeling for less than the cost of a new home. If this can help you get into a neighborhood you want at a comfortable price point, then it may be worth looking into. After all, the old adage is that you should always buy the worst house in the best neighborhood and buying a fixer-upper is a way to do that. 

You will want to make sure you understand how much the fixes will cost though, and factor that in when you consider your out-of-pocket spending. If you can buy the home and do the remodeling for less than the cost of getting a mortgage for a house in the same location that's already remodeled, you will end up better off than if you bought a finished home that needed nothing.

2. I can pay for renovations over time

One big benefit of buying a fixer-upper property is that I can finance renovations over time. If I pay for a perfect, updated house, it's going to cost more so I have to borrow all the money I need to buy it at once. But, if I buy something that's cheaper due to its issues, I can correct them as I get money and pay cash for the upgrades.

If you want to keep your own mortgage costs down, this could be a great technique for you as well. You can keep your initial investment down and save up over time to make changes to the home. If you can do some of the work yourself, you can also reduce renovation costs so you will end up spending less by saving on interest and because you won't be paying as much to bring the house up to your standards as you would to buy a finished home. 

3. I can personalize the house to my style

Finally, the last benefit of buying a fixer-upper is that I can renovate it to the style I like. If you want to make a home of your own, it may make little sense to buy a perfectly finished house. After all, you aren't going to tear out a brand new, nice-looking kitchen just to put in one you think is prettier. 

If you don't like the idea of designing your own space, you may prefer to have a house you don't need to make any changes to. 

Ultimately, my reasons for buying a fixer- upper may extend to others as well. If you can't find a house in your preferred location on your budget, if you would prefer to design a house to your specifications but don't want to build a new one, or if you want to keep your upfront borrowing costs down, you may want to look for a home in need of remodeling.