Many homeowners like to look for inspiration in a variety of places, including shows on HGTV. This can be a great way to get ideas, get inspired, and learn a little bit about what it means to undergo a home renovation. Two very popular shows on this channel – Fixer Upper and Property Brothers – both deal exclusively with fixer-uppers, or properties that are in rough shape, but are selling for a lot less than a fully finished property would. Purchasing a fixer-upper can be a great way to save yourself some money, while still getting exactly what you want out of the home. Unfortunately, these shows don’t always portray the reality of what buying a fixer-upper involves. Before you start scanning the realty pages for a cheap fixer-upper of your own, make sure you know what you’ll be getting into before you begin.
There Will Be Surprises
In nearly every segment of the show Fixer Upper, there comes a time when husband and wife team Chip and Joanna Gaines need to make an uncomfortable call to the homeowner to tell them about a problem they uncovered. This problem always ends up costing the homeowners more than they expected, but to get the home they want, they need to proceed.
This isn’t just a scripted part of the show; this is the reality of dealing with a fixer-upper. There will be surprises. There will be things that weren’t revealed during the inspection – if there even is an inspection. Low-cost properties can be a hot commodity, which means that you may find yourself having to act fast to purchase one, leaving you no time to inspect it. If this is the case, you can almost be guaranteed to find some big problems once the demo has begun.
Ever wonder why the homeowners on Fixer Upper can swing these big additions to their budgets without getting upset or having to cancel another part of the plan? It’s not because they have endless amounts of money; if they did, they likely wouldn’t be buying a fixer-upper. It’s more likely that they have a contingency fund, or a set amount of money – about 20% of their budget – set aside for problems like this. Having a contingency fund lets you roll with the punches when issues arise.
It Will Probably Take Longer than Planned
Surprises don’t just mean you have to spend more on your home to get it where you want it to be, it also means things will likely take longer than you expected as well. When you watch a show on HGTV, the designer walks in and starts talking about all the changes they’d make. They are not speaking off the top of their heads, though; they’ve already seen the property, taken measurements, and had the time to draw up those impressive plans. They know exactly what they need to order, how much, and how long it will take.
This isn’t the case in the real world. When you buy a fixer-upper, you then have to hire a designer, a crew, and the people that will do the work. They need time to design, plan, order materials, and wait for them to arrive. Then you have to factor in those unknowns that will add to your time and budget. Keep in mind you will likely not be living in the property while this is going on, so you’ll need to make sure you can stay in your current home for as long as it takes – even if you don’t have a firm timeline. If you rent or are selling your current home, this can get risky if you need to leave before the work is done.
You Won’t Always Get 100% Return on Investment
If you’ve ever seen Fixer Upper, you’ve likely noted that at the end of every episode, Chip announces the numbers for the homeowners. He tells them how much the property was purchased for, and how much they put into it. He then tells them what it’s now worth, often telling them they have built-in equity. This isn’t necessarily true. He isn’t lying to them, and he isn’t wrong, but the show isn’t telling the whole story.
First, not all of the budget goes into the house value. Some of that budget goes to the people working on it and another portion will be lost to homeowner’s insurance. A home in need of repairs is a bigger liability for insurance companies, so for the duration of it’s “Fixer Upper” status, your insurance will cost more than average.
The cost of insuring your house will depend on the depth and specifics of what you’re fixing, whether it will be occupied during the process, and how long the process is scheduled to take. For a comprehensive guide to finding the right type and level of coverage to safeguard your home and belongings against the unexpected, check this homeowner's insurance guide. Regardless, don’t forget to factor added insurance expense into a Fixer Upper budget.
Second, you don’t get a 100% return on investment when you remodel a home. In fact, according to Remodeling Magazine’s Cost vs Value report, the best return on investment you’ll get is around 84% for fiber cement siding – some improvements you make will only give you a 50% return on investment, or less. This means that you can’t improve your home’s value dollar for dollar with what you spend on it.
Finally, you need to do your comps. What are the other homes in the neighborhood worth? What do they sell for? Is your home now equal to those? In most cases, buying the worst home in the best neighborhood and fixing it up to be equal to the others will get you a very good return on investment. But this isn’t equity, and it’s not a guarantee. So when Chip says the house could sell for much more than they put into it, he’s probably right, but only if the market agrees. If the home appraises for less or the market in the area takes a nosedive, you could still find yourself underwater – it doesn’t matter how much you pumped into the home. This is particularly problematic if you purchase a decent home in a so-so neighborhood and make it into your dream home. In this case, you will likely not recoup anywhere near what you spent, because you will have made the home too nice for the area.
Fixer Upper is a great show that displays a lot more of the true elements of a home renovation than most. It’s also entertaining and fun to watch. Just be aware that if you plan on purchasing a fixer-upper, things may not go quite the same way.
If you’re ready to begin, sign up with BEYREP to get matched to a Pro who understands these issues and who can help guide you through the process. Sign up today and get started on making your dream home a reality.