Buying A Fixer-Upper vs. A Move-In Ready Home
Finding the right property to buy is always a strenuous task, regardless if it’s your first home, your second one, or just a weekend getaway home.
It’s a process that requires a lot of planning, a lot of research, and of course, a lot of money.
And all up until recently, most of us thought that the house we’re buying has to be completely intact, with new appliances, fresh paint, functioning heating and cooling systems and 100% updated.
However, in recent years, a new way of house hunting has been popularized – fixer-uppers.
Although they gained their popularity thanks to TV shows, many people have started taking action and buying fixer-uppers themselves.
You might’ve thought of buying one yourself, but before making any rash decisions, make sure to think about it twice.
Fixer-uppers are not for everyone and there are some things you need to be aware of before buying one.
The same goes for move-in ready homes.
Not everyone wants to have someone else decide everything from their room layout, flooring to the wall paints and details. Some of you may want to create your home paradise on your own.
So, to shed a bit of light on both options, in today’s article we will go over the advantages and disadvantages of buying a fixer-upper as opposed to those of buying a move-in ready home.
Fixer-Upper – Pros And Cons
Advantages Of Buying A Fixer-Upper
1. Lower price
Of course, fixer-uppers are far cheaper than move-in ready homes. They are usually older, abandoned properties where no one has lived or invested in for ages.
That’s why in general, fixer-uppers sell for 8% less than the market value of other properties in the same neighborhoods.
2. Creative freedom
One of the best feelings when buying a property is being able to organize it to your taste.
With fixer-uppers, you can plan the room layout, the interior and all the details as you want – something you wouldn’t be able to do when buying a preset, move-in ready house.
3. You can postpone costs
With move-in ready homes, you’re paying the price for the full property, all rooms included. However, you may not need all those rooms.
The children’s rooms, for instance. You may be planning to have kids in the future and don’t need fully designed rooms for them yet.
But if you’re buying a move-in ready house you have to pay for them as there is no option to remove them from the contract, nor the property.
What fixer-uppers allow you to do is that you can just plan where the rooms will be, build them, and then leave them as they are until you’re ready to invest more in them or need them.
This allows you to shift the money and invest it into other areas of the house, like getting a modern kitchen with up-to-date appliances, buy that furniture you wanted but compromised not to buy, or landscape your yard to make the whole property even more appealing.
4. Tax advantages
Since Canada largely calculates property tax based on the sales price and ‘market value’ of the home, you will pay far fewer taxes by buying fixer-uppers and potentially save thousands of dollars – especially in the early year.
The same also applies to land transfer-tax – which applies to the sale of all homes in Ontario – you’ll save a lot of money here too.
5. You can flip it
In the worst-case scenario that you don’t like the result of what you made with the fixer-upper, you can always sell the property for a greater price of what you paid for.
Yes, you will lose the time you’ve invested into fixing it, but you will make some extra profit on the side, a profit you can use to buy another, better property, maybe a move-in ready one.
Usually – if you’re planning and running project correctly – every $1 you put into the home will usually be worth more than $1 when you go to sell it. So if you put in $25,000 of work, that might be worth $30,000, $40,000 or even more when you go to sell – sometimes more in hot markets (like Toronto).
Disadvantages Of Buying A Fixer-Upper
1. The money may not add up
The thing with fixer-uppers is that no matter how well you plan, unexpected costs always arise.
There may be some underlying costs you didn’t expect at first, whether it is accidental damage you make, additional permits you need to buy, not having information about how much everything costs or just needing new tools and machines for a specific upgrade.
As they say, “you never know what’s hiding behind those walls”.
2. High time and effort commitment
Fixer-upper projects can take a lot of time, sometimes up to several years.
During this time, you will not only have to go back and forth to it but also find temporary accommodation until your fixer-upper is move-in ready. Needless to say, this will bring additional costs.
3. You still need home inspections
Although you’re buying an old property you want to invest in, there are still some basic requirements it needs to meet.
A home inspector will not only tell you if the house does meet those basic requirements, but they can also advise you whether the home is worth the investment or not.
4. Permits, process and red-tape
Unfortunately, you can’t just to whatever you want to your home with zero permission. Many things will require permits, process and other red-tape – to get approval.
Not only will this money but could sometimes take a good amount of time. In addition to this, there is also the potential that your requested changes get rejected and you can’t actually build the home that you want to build…
Move-In Ready Home – Pros And Cons
Advantages Of Buying A Move-In Ready Home
1. It’s move-in ready!
When you buy a move-in ready house, the troubles end there. You can just pack up from the old place and unpack in your new place.
No spending more money on upgrades, no need to get your hands dirty with fixing things nor waiting for your home to be done.
2. You know the exact costs
Unlike fixer-uppers that come with great unpredictability, with move-in ready homes you know almost exactly how much money you will spend.
Of course, there may be some divergence from the original plan, but in most cases, this is nothing to be concerned about.
3. Modern and Energy efficient
Most move-in ready homes have the latest modern conveniences as well as energy-efficient apparatuses and systems, so you can expect far lesser utility bills in the future too!
If they don’t have what you’re looking for then you’re not really buying a move-in ready home…
Everything else is also in great shape most of the times, so there is almost nothing left that you would need to repair or buy.
Disadvantages Of Buying A Move-In Ready Home
1. More expensive
To compensate for the costs of the updating they did, most sellers list the move-in ready homes with a quite higher price than other properties.
Plus, you can’t customize them to your taste, since they are already built according to an architectural plan that is mostly not recommended to be changed.
2. Uncertainty on quality
When you have a fixer-upper and you work on it 24/7, you know the quality of what you’ve used, the durability of materials and the expertise used to make it.
This cannot be said with move-in ready homes.
What you see is what you buy, and you can never know if whoever built it did it with the highest grade materials used by experienced professionals.
3. Everything is pre-selected
By buying a move-in ready house, you let out on the possibility of choosing your flooring, cabinetry, furniture and appliances.
Yes, you can renovate it, but that will come with huge additional costs which not many are ready for right after buying a new house. And those costs mean the savings of buying a move-in ready home in the first place can be wiped out.
So, should you buy a fixer-upper or a move-in ready home?
A good starting point for your analysis would be asking yourself some important questions that will help you determine if you would be able to go for a fixer-upper project or a move-in ready home.
Check which permits you would need
Before you even buy the fixer-upper, make sure you know which construction permits you will need. Sometimes, some of the permits can cost several thousands of dollars and your budget might not afford that.
Get an estimation of the costs
If you don’t know how much the renovation costs will be, a home inspector can help you with an estimation of the costs.
This will give you an idea of how much you would need to invest, and by comparing that info with the market price of neighboring properties, you will know if you’ll be overpaying the house.
See if you have the skills
Fixer-uppers, in order to be affordable, need a lot of DIY which requires some creative skills. And if you don’t have them, you would need to hire several handymen.
This by itself brings more costs, something you should budget for appropriately.
Do you have the time?
No matter how much you love the idea of creating your perfect home on your own, if you don’t have the time for a fixer-upper project, don’t do it.
It’s just that simple.
If you don’t have the time, you may end up building the house for 5, even 10 years, a time when the market value of the property may plummet.
If you want to be in your new home as soon as you pay for it, then move-in ready homes are your thing.
Check the finances
In the end, the most important question is – what can you afford?
If you desperately want a new house, but can’t afford one that is move-in ready, fixer-uppers are always an option. Instead of money, when you buy a fixer-upper you would only need to invest your time and effort.
In the end, it’s you who makes the final decision.
Yes, a fixer-upper project can be tiresome, take a lot of time and finances, but you get to add your personal touch to every single corner of it.
However, if you don’t want to be living in the middle of a construction project for months or years, then you should probably move away from the idea of a fixer-upper.
Turn-key homes have one major thing over fixer uppers – you can just unpack and call it day. Make sure and review all the information in this article and consult with an expert Real Estate Agent or contractor before you make your decision.