Buying a Fixer-Upper

A close look at the pros and cons of buying a fixer-upper house and what to tackle first.

By Emily Southey | 11 minute read

Aug 29

As a first-time homebuyer, you might be wondering if buying a fixer-upper is the right choice for you. Though the prospect of buying a home at a cheaper price and renovating it to your liking might sound appealing, there is a lot to consider, especially if it’s your first-ever home purchase.

Should I Buy a Fixer-Upper for My First Home?

If you’ve stumbled upon this article then you’re probably asking yourself “Should I buy a fixer-upper for my first home?” Unfortunately, there is no clear-cut answer to this question. However, we can help provide you with the necessary information to make this decision for yourself.

First off, what is a fixer-upper? A fixer-upper is a property that requires major repairs or renovations to live in comfortably. Since extra time and money are needed to get them in a livable condition, fixer-uppers are usually priced significantly lower than similar homes in better condition. Fixer-upper homes might also be referred to as renos, distressed properties, flipper houses, or rehab homes.

The repairs that fixer-uppers require are usually substantial. For example, they might involve replacing walls, floors, or even the roof. They usually also involve minor upgrades, like painting and redecorating. While there are many reasons why a first-time homebuyer might purchase a fixer-upper, one of the most common reasons is to save money.

Move-in-ready homes stand in direct contrast to fixer-uppers. Although the term “move-in-ready” is a slight misnomer, the general idea is that these homes require little to zero repairs, upgrades, or maintenance before the homeowner can move in. In theory, if you purchase a move-in-ready home, you should be able to occupy the home and start living in it as soon as the deal closes. With a fixer-upper home, this is rarely possible as the necessary renovations and repairs are major and can take considerable time to complete.

The Pros and Cons of Buying a Fixer-Upper as a First-Time Homebuyer

Now that you know what a fixer-upper is, let’s dive into the pros and cons of buying one as a first-time homebuyer. The pros and cons of buying a fixer-upper are as follows:

Pro: Cheaper purchase price

The first and most significant pro of buying a fixer-upper is the cheaper purchase price. Fixer-uppers are generally much less expensive than similar homes that are move-in-ready. Cost is an important factor for many Canadians, but especially for first-time homebuyers who might not have as much money in savings as those already in the housing market. Though you’ll have to factor in the cost of renovations, if you choose to do some of them yourself (for example, painting or hanging curtains), you could save yourself hundreds or even thousands of dollars.

Pro: Lower mortgage payments

Cheaper purchase prices often translate to lower mortgage payments since you won’t require as large a loan. Therefore, by purchasing a fixer-upper, first-time homebuyers may have lower monthly mortgage payments. However, if you need to take out a renovation loan to fund the necessary upgrades, you should budget for this.

Pro: Faster home appreciation

First-time homebuyers might be pleased to learn that when you buy a fixer-upper and renovate it, your home’s value typically appreciates much faster than the general real estate market. This means more potential for profit, especially if you decide to turn around and sell it in the near future.

“A fixer-upper is a property that requires major repairs or renovations to live in comfortably. Since extra time and money are needed to get them in a livable condition, fixer-uppers are usually priced significantly lower than similar homes in better condition.”

Pro: Eligibility for homebuyer assistance or special mortgage programs

Another advantage of buying a fixer-upper is that doing so might make you eligible for special mortgage programs or homebuyer incentives. As a first-time homebuyer, you likely already have several incentive programs to take advantage of. But if you buy a fixer-upper, there might be even more. For example, if you substantially renovate an existing house in Ontario, you might be eligible for the provincial government’s GST/HST rebate.

Pro: Greater opportunities for customization

Renovating a fixer-upper provides a rare opportunity for customization. If you buy a move-in-ready home, chances are there will be some aspects of it that aren’t to your taste. But with a fixer-upper, you have the chance to update everything to your liking. For example, if you prefer light hardwood flooring to dark walnut, you can choose to go that route since you have to replace the floors anyway. Ultimately, you get to make your own design choices, customizing the space to your tastes. This is a major pro for many homebuyers.

Pro: Living in a neighbourhood you otherwise couldn’t afford

One final pro of buying a fixer-upper house is that it might allow you to live in a neighbourhood you otherwise couldn’t afford. If location is top of mind but the homes in your dream neighbourhood are way out of your price range, finding and purchasing a fixer-upper might be a great solution.

Con: Fewer options

The first con of buying a fixer-upper is that there aren’t nearly as many options on the market. The vast majority of houses are move-in-ready. Therefore, finding the right fixer-upper for you can take time and patience.

Con: Renovations are expensive

The second disadvantage of buying a fixer-upper as a first-time homebuyer is that renovations can be expensive. Although the purchase price of the home will likely be less, you will need to account for the cost of substantial repairs. Repairs are expensive and often end up costing more than you initially thought. Therefore, you’ll have to make sure you have room in your budget for the necessary renovations (plus a little wiggle room). Remember that during this time, you will likely also be responsible for making monthly mortgage payments.

Con: Renovations can be stressful

Renovating a home can be extremely overwhelming. Whether you choose to take a DIY approach or hire a contractor, renovating is stressful, disruptive, and time-consuming. It can put even the best relationships to the test and can add a lot of stress to your day-to-day lives. You will need to be prepared for the realities of renovations if you want to buy a fixer-upper.

Con: You might be reliant on a contractor

Depending on the extent of the repairs, you might need to hire a contractor to complete them. Finding a reputable contractor requires considerable research and can be risky if you don’t have word of mouth to rely on. Plus, contractors are known for delays, so you should expect the project to take longer than you think.

Con: A lot can go wrong

Finally, a lot can go wrong when you purchase a fixer-upper. The reality is that, even with a proper home inspection, you won’t know the full extent of the home’s condition until renovations begin. From asbestos in the walls to knob-and-tube wiring, a lot can go wrong that can significantly increase the cost and timeline of your renovation project.

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Buying a Fixer-Upper — What to Do First

Now that you know the pros and cons of purchasing a fixer-upper, let’s delve into what to do first after you decide to buy one.

1. Find a fixer-upper property

The first step is to find a fixer-upper that meets your criteria. As mentioned, this might be easier said than done as there likely won’t be too many options. To get started, find a realtor and start scouring the Multiple Listing Service (MLS) and other online real estate marketplaces. You might even go for a drive in a desirable neighbourhood and look for potential fixer-uppers. If you see one you like, you could find out who owns it through public records and contact them explaining that you’re interested in buying their property. The key to finding a fixer-upper property is patience. The entire process, from finding the right home to renovating it, will take time, so it’s best to start practising patience early.

2. Get a home inspection

Once you’ve found a property you’re interested in, be sure to get a home inspection. A home inspection is important for any type of home, but especially so for fixer-uppers. A professional home inspector will examine the structural elements of the home, as well as the roof, plumbing, electrical, HVAC system, and overall safety of the property. Keep in mind that a basic home inspection likely isn’t enough for a fixer-upper. For this reason, you should consider paying extra for a specialty inspector, such as a pest, sewage, or roof inspector. For good measure, we also recommend having your realtor and a contractor assess the property as well. If you plan on knocking down walls, adding another level or extension, or digging out a basement, a contractor can offer their professional opinion on the feasibility and cost of such renovations (a home inspector won’t be able to do this). Ultimately, before buying a fixer-upper, it’s crucial to take a full inventory of what repairs and improvements need to be made.

3. Obtain a cost estimate for repairs

The next step is to obtain a cost estimate for the repairs. With your inventory of necessary improvements, contact contractors in your area and get a quote on how much your project will cost. Add up the costs of each improvement and compare the total cost against your savings. You can also compare the total cost against the cost of buying a similar property that is move-in-ready. Keep in mind that renovations almost always cost more than you think. Therefore, if the estimated cost of repairs is already at the top end or even stretches your budget, buying this particular fixer-upper might not be the smartest decision.

4. Ensure you are financially and emotionally prepared to buy a fixer-upper

The final step to purchasing a fixer-upper house is preparing for the financial and emotional realities of doing so. Renovations aren’t easy. They’re expensive, time-consuming, and energy-draining. First-time homebuyers must be prepared for these realities before purchasing a fixer-upper property. This involves having a budget and sticking to it and having a plan of where you will live until your home is ready for occupancy. Homeowners also need to prepare to make their renovation a top priority and have the flexibility to tackle challenges as they arise.

Frequently Asked Questions

What Are the Pros and Cons Of Buying a Fixer-Upper House?

The pros of buying a fixer-upper are as follows: cheaper purchase prices, lower mortgage payments, faster home appreciation, greater opportunities for customization, the ability to live in a neighbourhood you otherwise couldn’t afford, and eligibility for certain homebuyer incentives or special mortgage programs you wouldn’t otherwise be eligible for. Meanwhile, the cons of buying a fixer-upper house range from the high cost and stress of renovations to there being fewer options on the market, the hassle of finding a reputable contractor, and the potential for things going wrong. 

What Should I Look for When Buying a Fixer-Upper?

What to look for in a fixer-upper is similar to what you should look for in a move-in-ready home. For example, you want to choose a property with an ideal layout and location. However, when it comes to the condition of a fixer-upper, it’s best to look for one with easy fixes versus expensive ones. Easy fixes may include painting, patching walls, replacing baseboards, refinishing floors, replacing doors, or fixing broken windows. In contrast, expensive fixes are reroofing, replacing plumbing or electrical wiring, remodelling the kitchen, and replacing HVAC systems. 

How Can I Assess the Real Cost of a Fixer-Upper House?

The best way to assess the real cost of a fixer-upper house (including the cost of necessary repairs or renovations) is by hiring a home inspector and having contractors visit the home and provide estimates.

How Much Money Does It Cost to Fix Up a House?

The cost of fixing up a house varies greatly in Canada. The size and location of the home, as well as the specific renovations required, all impact the price. Therefore, the only way to know how much money it will cost to fix up your home is by having a contractor or inspector assess it, make a list of necessary improvements, and provide a cost estimate. The average cost to renovate a 1,000-square-foot home in Toronto is between $100,000 and $200,000, or between $100 and $200 per square foot.

What Kind of Renovation Loan Do I Need for a Fixer-Upper?

If you cannot afford to pay for the necessary renovations out-of-pocket, you may consider taking out a renovation or home improvement loan. Many financial institutions in Canada offer renovation loans to homebuyers. Loan options vary but may include lines of credit, mortgage add-ons, or mortgage refinancing.

Can You Take Out More Money on a Mortgage for Repairs?

Yes, you can take out more money on a mortgage to fund home repairs or renovations. This is what’s known as a purchase-plus-improvement mortgage. With this type of mortgage, you can complete the required work on your home using your own money. But once the renovations are complete, the mortgage lender releases the funds to you, and your mortgage amount increases. For example, if you were to purchase a fixer-upper with a mortgage of $500,000 and a purchase-plus-improvement amount of $50,000, you would use your personal savings to complete the necessary renovations, but once complete, your mortgage amount would increase to $550,000 and you would receive $50,000 in cash to replenish the money spent. 

Emily Southey

Wahi Writer

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