The pros and cons of investing in a fixer-upper versus a new build By Christian Weaner
If the COVID-19 pandemic taught us anything, it might have been that—regardless of our lifestyle—our homes are likely the most important spaces in our life.
A home is a place where we can retreat after a long day, find shelter from the wintry weather, host friends and family, and make memories that last a lifetime. When we invest time into the process of turning our houses into homes, our dwelling places can become so much more than just a space where we come to watch television for a few hours at night, sleep, and head back out in the morning for the next day of work.
That is why home-buying decisions are so important, especially in a time of financial instability.
A common question in today's real estate market revolves around what the best investment is: buying an older, less expensive home in need of some repairs or purchasing a plot of land and building a new home from the ground up.
Both fixer-upper properties and new build projects have their positives and negatives. As you consider which of these options might be right for you, here are some helpful things to think about when making the home-buying (or home-building) choice.
Pros of Fixer-Upper
With the increasing popularity of shows like HGTV's “Fixer Upper: Welcome Home,” the idea of buying and refurbishing outdated and rundown homes has become more tangible for many Americans.
One of the foremost motivators of buying a fixer-upper is the lower initial cost at purchase. In a time where home prices have hit an all-time high, buying an older home will come at a much more affordable price.
According to a recent article from the Coeur d'Alene Press, the median price of a home in Kootenai County in September 2022 was $550,462. However, Realtor.com has numerous fixer-upper homes listed for less than $400,000.
In addition to buying a home for less, fixer-upper properties also have other perks, like their unique charm, proximity to city centers, and lower average property tax rates compared to homes in newer neighborhoods.
Fixer-upper homes usually are situated in older neighborhoods that often provide residents with shorter commutes and add an antique flair that is sometimes lacking in newer properties. Additionally, fixer-upper units are great long-term projects for individuals who have the time and skills to make the necessary renovations themselves.
If you do not have the financial resources to build a new home but you possess a strong creative drive and enjoy DIY projects, then a fixer-upper might be right for you.
Cons of Fixer-Upper
While fixer-upper properties can be exciting and rewarding investments, the biggest concern with this type of purchase is whether you can keep all the renovations and repairs within your budget. Even when you think you have all costs calculated, unexpected problems often arise, leading to increased financial strain.
Buying a fixer-upper comes with less cost but more questions. Because these types of homes are older, many of the appliances may need to be replaced and you might need to check for asbestos, mold, or potential leaks that could derail your idealistic renovation dreams and cause major issues down the road.
Fixer-upper projects also run the risk of investing in renovations that fail to increase the value of the home. While most successful fixer-uppers will see a growth in home equity and added resale value, not all homebuyers may experience this result.
The best advice for anyone considering a fixer-upper investment is to observe and communicate with the home inspector so that you do not miss any potential issues that could throw off your budget.
As with any purchase, buying a fixer-upper comes with its risks, which need to be evaluated before jumping into something you might regret.
Pros of New Build
Designing and constructing a home of your liking is something that many people dream of, and it does come with its benefits.
The most obvious advantage of a new build is that everything can be laid out exactly how you want it based on the money you invest in the project. While a fixer-upper might come with costly features that are not exactly what you desire—like a swimming pool or finished basement—a new build is a blank canvas that allows you to include (or not include) anything that you desire in your dream home.
Always wanted to have a home office and a theater room? These are added features you may not find in older properties, but you can easily factor into the blueprints for your new construction.
New builds also mean investing in new appliances and amenities that come with warranties and are much more energy efficient, so you will not need to worry about that old stove acting up anymore or fret when the utility bill comes in each month. Plus, the necessary maintenance costs for your home will likely be much lower.
Building a new home can be expensive (see next section), but if you have the funds to pull it off, the design and construction process can be enjoyable and often much less stressful than purchasing an older home.
Cons of New Build
The biggest issue with building a new home, especially in the current financial climate in the Inland Northwest and throughout the country, is cost. The cheapest new constructions currently listed by NewHomeSource and Realtor.com in the Coeur d'Alene region are $400,000, while most single-family homes are going for as much as $700,000 or more.
Not only is the up-front cost going to be higher for new builds compared to fixer-uppers, but homebuyers must also remember that construction projects take time, and delays can be expected. A project that might have been scheduled to be completed in four to six months could take nine to 12, adding additional expenses for the waiting family and pushing back move-in dates.
Another factor is the cost of purchasing land, and the consideration of where it is located. Most new builds are in newer neighborhoods that often provide sidewalks or trails for local walking and leisure activities, but they are generally further from business hubs, causing longer commutes to work, school and the grocery store.
A final consideration is the landscaping and outdoor features that will likely be lacking with a new build. If having mature trees in the neighborhood is something you desire, then a new build might disappoint those expectations.
What is the better investment—buying a home or building a new one? If that is the question you are asking, you are not alone. In a time of financial instability throughout the United States and home costs going through the roof, the decisions we make about where to live have never been more difficult.
Whether you are considering purchasing an older home to become your new fixer-upper project or hoping to build the home of your dreams, there are many factors to consider. Here are some pros and cons of starting a fixer-upper and or embarking on a new build.
Three featured Items:
Whether you are working on a fixer-upper or building a new home, adding a stone veneer outside your home is a great way to make your garden pop and add instant value to the property.
Another great way to increase the value of your home and add some flair to your yard is adding some outdoor lighting. This will help turn your backyard into a space for entertaining and will help you recoup value if you decide to sell.
A simple but effective way to add value to your home is adding some smart technology like a new thermostat, keypad lock doors, security cameras or an energy-efficient lighting system.
To fix or to build ... the decision is based on what is right for you.