In real-estate terms, a fixer-upper is a property that will require significant renovations, reconstructions or redesigns.
Is a fixer-upper a bargain brimming with potential? Or should it be avoided like the plague? It really depends on a number of factors, including a potential home buyer's personality.
Often people buy a fixer-up home for the location. They're determined to be in a particular area or neighbourhood and if that means having to fix up the home, that's part of the deal.
So what kind of a buyer would think of purchasing a home that needs a lot of work?
Older people aren't typically buying fixer-uppers neither a first-time home buyer because they've already taken on so much. [Fixer uppers] are expensive and you can't often finance a renovation. You have to pay for it out of pocket. Typically it's a second-time or third-time home buyer, someone in their early 30s, mid-30s or early 40s – and who has a little experience with fixer-uppers.
Buying a home to renovate gives people an opportunity to create “designed equity” – a customized ability to add value to a home while getting exactly what they want in the home itself.
The types of buyers that I typically see ranges from people looking for an affordable deal and a project they can sink their teeth into (in an effort to build their “forever home”) to seasoned investors seeking poorly-maintained properties, aiming to create value for both investors and tenants.
Home buyers need to consider their time, money and knowledge when tackling a renovation. Is the time and money involved in fixing up a home worth it in the end?
And of course, there are hazards to be wary of, like taking on a project that is too large or beyond your comfort or expertise. There are also hidden concerns, such as asbestos or structural issues. Potential buyers will also need to do their due diligence in advance on municipal regulations around permitting.
Coming up with a budget and sticking to it can also present an issue if needed repairs start to get out of hand. And then, of course, there's the project management side of things. Do you hire a contractor or do you manage contractors and trades yourself?
If you're hiring trades for everything, it can be a challenge to coordinate if you've never done it before. The key for people intent on buying a fixer-upper is finding the right neighbourhood and planning for as much as you can – budget, list of repairs, professionals to rely on, permits – in advance. If you find the right location and the home has features you like and good bones so to speak, then it makes sense.