Fixer upper vs. Move in ready (do you see yourself living there)

09/16/2017 Author: Payleaf Team

Many first time home buyers are weighing their options as the housing market surges with new health and abundance.  How do these potential first time buyers gather information to make their selection?  They turn to Google for advice.

So we did something similar.  We asked our baby boomer mentors and our millennial peers for advice on one of the biggest financial decisions of a lifetime: the purchase of a first home.  And we also asked Google.  Here is an amalgamation of the top answers to our questions.  

How do you decide if you want to purchase a property that needs work?

When you are in the market for a house, houses that need help may seem like bargains.  Especially if this is your first house, the price of a fixer-upper looks appealing in comparison to move-in-ready homes.  When you are eyeing the bargain remodel, you need to ask yourself one question: are you the best person to give this house a renovation?

Here are the pros:

You can make your home right for you.

You can make your home desirable to the next home owner.

You have the opportunity to buy the worst property in the best location.

You have the potential to sell the property at a higher value than what you purchased.

You will gain new skills, new knowledge, meet new people, and make a profound improvement in the neighborhood.

Here are the cons:

You will have to determine if the renovation is cosmetic or structural.

You will need liquid funds to perform the changes you need.

You will need to establish relationships with contractors and service providers.

You will need to dedicate time and energy to your project that would otherwise be spent elsewhere.

You may not be able to move in right away, and if you do, there may be dust and on-going project work.

You will become an expert at DIY.  This is you, YouTube-educated tile-setter, laying down thinset for a tiling project during your first major house renovation.

Remember Bob Vila, the American home improvement television show host?  Bob Vila hosted This Old House (1979-1989), Bob Vila’s Home Again (1990-2005) and Bob Vila (2005-2007).  He is a renovation expert who offers tried, true and trustworthy advice about first-time home owners-turned-renovators. 

Many baby boomers who have purchased fixer-uppers will emphasize that you will want to know if your target house has cosmetic problems or structural problems.  An example of a cosmetic problem would be a kitchen that is outdated by several decades.  A structural problem would be a load-bearing wall that separates your kitchen from your dining room, and would prevent any modern open concept re-modelling plans.

You will also want to know if you have the time to commit to a renovation.  Devoting all your spare hours to a renovation project is sometimes the only way to get it done.  Weekends, evenings, early mornings.  Can you do this?  And can your partner do this?  Sometimes, the biggest factor that determines if a renovation is possible is the commitment and support of your partner.  Can your relationship handle a new house, with a rehab project to boot?

How will you finance your fixer-upper?

A typical fixed-rate mortgage is not going to cover the remodeling and repairs that you plan to perform.  Lenders tend not to approve loans that exceed the value of the house, even if you plan to add value to your home in the form of a renovation.  There are four government-backed loan programs that are designed for purchase re-modelers.  Bankrate has a great article that covers the financial options and loans available to first-time home buyers who also want to renovate. 

In addition to the multiple loan options available to you, you will have to select a contractor and seek a budgetary estimate on the work you would like to have done. has an in-depth article that explains the nuanced features of each of the different home renovation loans.  There are several common features to home renovation loans, all of which are based on the budget that a contractor provides for a proposed scope of work.  In each type of loan, the lender is involved in the selection of your contractor.  From the home-buyer’s perspective, the trick is selecting a contractor in whom you can place your trust.  If you use contractors, ask lots of questions and get multiple bids.

If you are a deep-pocketed buyer, chances are you do not need a loan to accomplish both the purchase of the property and the execution of the remodel.  However, regardless of whether you partner with a bank or do it on your own, you will need to fund your project.  Why not open a Payleaf account to accomplish your goal?  

Get Started

Payleaf   is a great way to save for an upcoming life event, like buying your first house.  With Payleaf, you define your timeline and your target fund amount, and then you can save over time with the help of friends and family.  When you reach your goal amount within one year of your target date, Payleaf rewards you with higher interest earnings.  If you do not meet your goal, Payleaf provides the same low interest rate as a brick-and-mortar bank.  In the meantime, friends and family can cheer you along the way.  Payleaf provides the option to enlist the help of those closest to you so that you meet your target, either with one-time gifts or automatic deposits.  

Additionally, Payleaf has a bucketed savings option to help you divide your account into multiple goals.  This is a great way to save for both your initial down payment and for your remodeling budget at the same time.

How do you decide if you want to purchase a property that is move-in-ready?

Many first time home buyers want to buy a home as-is, without the hassle of a remodel.  They want to purchase a move-in-ready property without having to initiate any type of improvement or perform any additional work.  With popular home furnishing trends and shows that focus on furniture layout and staging, this direction seems flawless, easy and free of headaches.

Here are the pros:

You do not have change anything prior to moving in.

You only need to save for the down payment and ongoing maintenance costs. 

With proper maintenance, you may never have to worry about a big ticket project – until you are ready to take on a renovation at a later time.

You can focus on furnishing and decorations right away.

Here are the cons:

The price may be higher because the home is move-in-ready.

You may be limited in your search location because you are looking for move-in-ready homes.

You will have to figure out how to accept any pre-existing design and layout flaws.

You may have to perform a big ticket project, like a kitchen or bathroom renovation, prior to selling in order to be competitive in the marketplace.

What does a move-in-ready home purchase budget require?  You are looking at saving up for your initial down payment, plus your maintenance budget after you have moved in.  Payleaf is a fantastic resource for saving for this combination of big-ticket item and ongoing fund.  You can separate each goal within the account using the bucketed savings features, and Payleaf will reward you with a higher interest rate when you meet your goal within the timeline you specify. 

What is the best way to prepare for home ownership?

Save, save, save!  Our baby boomer mentors reiterated this message again and again.  You never know what the future holds, and home ownership is no different.

Our millennial peers also emphasized the time commitment involved in home ownership.  You never know when you will wake up to the sound of squirrels chewing at the walls in your attic.  That is exactly what happened to a millennial friend of ours, within months of purchasing her first home.  She woke up early one morning to the most curious noise.  A strange scratching was coming from her ceiling, just above her bed.  Sure enough, it was a squirrel.  

She dedicated several weekends to removing the squirrel from her attic.  Over time, her methods became more and more desperate, but she was dedicated to humanely capture and release the squirrel.  Finally, she succeeded.  But not before the squirrel had chewed several holes in the roof.  Two weeks later, the seasonal rains began.  Our friend woke up one morning to a strange dripping noise coming from the ceiling just above her bed.  Sure enough, it was a leak.  The water spread across her attic and seeped into the ceiling above her bed, leaving a huge stain.  Our friend contacted a roofing repair company and a painter.  Within another week, the roof was repaired and ceiling repainted.  But the hammering had loosened the gutter connection at the corner of the house.  Within another few weeks, the ceiling was stained again – this time from a new leak at the corner where the gutters connect.  

The moral of the story is this: if you are ready for a home, be prepared to spend a lot of your time there performing maintenance and upkeep.  

The tools needed for home ownership, other than those you can buy at Home Depot, are sweat, tears, patience, and experienced friends. If you go the do it yourself route, find trustworthy resources, educate yourself on building code, and learn to enjoy the process as well as your results.  And keep saving!



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