Move-In Ready Vs. Fixer-Upper: What to Buy?

Gilman

When you buy a new home, two things to have at the back of your mind are how much you will spend to maintain it and how much you will make when you eventually sell it. Believe it or not, the maintenance cost of a building and its ROI is often determined well before you buy the home.

What are the factors that influence these numbers?

The three most important things to consider before you buy a home are its location, selling price, and the physical condition of the building. Of these three factors, location is evidently the most important. But after you have decided on your preferred location, you want to look at the prices of the available house.

Perhaps, the biggest influence on the selling prices of the homes you will consider is their physical condition. Typically, you will have a choice between homes that are in good condition but are being sold at a higher price and homes that are in poor condition and are more affordable, as a result.

The higher-priced houses, called move-in ready homes, will be ready for you to move in as soon as you complete the purchase. However, you will have to pay more for that house. The lower-priced home will require further investment of money and effort to bring it to the place where you can live in it.

Between the move-in ready home and the fixer-upper home, which one should you buy? Naturally, you want to save as much money as you can when buying a house and the fixer-upper might seem to offer this opportunity. But things are never that simple, which is why you should read this blog before you make the decision.

The pros and cons of a move-in ready home vs a fixer-upper home

The better option for you depends on the combination of your appetite for risk, how much time you have, your level of know-how (are far as home remodeling is concerned), and of course, how much money you have. Below is a list of the pros and cons of both options.

Fixer-upper home

Pros

  • It is more affordable – The average fixer-upper home will sell for 8% below its market value. The lower price often means you can buy a home in a location you would not typically be able to afford.
  • Lower property taxes – Since property taxes are based on the selling price of a home, you will pay significantly lower taxes on a fixer-upper than if you buy a move-in ready home.
  • Instant value appreciation after renovations – The value of the home will increase as soon as you complete your renovations, and you may sell it for immediate profits.
  • Freedom to customize the home – You are free to create the home you want instead of being stuck with somebody else’s design. A fixer-upper gives you the chance to make your dream home.

Cons

  • The risks are higher – The risk involved when buying a fixer-upper home is considerably higher than the risks you face with a move-in ready home. You are never quite sure what your eventual costs will be.
  • You need to manage contractors – Unless you have experience with home remodels, a fixer-upper could prove more trouble than you could handle because of the different sets of contractors and workers you have to deal with.
  • Potential for unpleasant surprises – Even with the most thorough home inspection, you never really know what lies behind the walls or flooring until you start to tear them up.
  • Additional living expenses – You have to live somewhere while you renovate the fixer-upper. You might have to maintain two homes during the period or bear the cost and inconvenience of living in a hotel.
  • Renovations are unpredictable – Building projects are notorious for never going to plan due to unforeseen events. Your renovations could take a lot longer than you envisioned.
  • You may need permits – If you will be making structural changes to the building, you will need permits. This can be a lengthy and expensive process.
  • Problems with financing – Most conventional lenders will not give you money to buy a fixer-upper because of the difficulties they will have when evaluating the home.

Move-In Ready Home

Pros

  • You can predict your costs – You know exactly how much you are going to spend on the property. Beyond the purchase price of the home, you really don’t have additional costs.
  • No wait-time – Buying a move-in ready is like buying a plug-and-play device. It is ready for use the moment you take it off the shelf.

Cons

  • More expensive – You have to pay more to get a move-in ready home. You could be forced to buy in a less desirable location.
  • Very little room for customization – There is almost zero opportunity to customize a move-in ready home. You have to live with the preferences of the person who designed the home.
  • You will eventually have to renovate – At some point, you will have to renovate the move-in ready home, to boost its market value or to make it more home-like. In reality, there is no way you can completely avoid spending some extra money on the home.

by Gilman