Home Buying

Should you buy a fixer-upper?

Sources say bingeing a home renovation show and loving DIY Pinterest projects aren’t the only two factors that determine whether a fixer-upper is right for you! Crazy right?
Buy a fixer-upper house. Couple taking a break from painting their home.

Canadian homes are expensive. In fact, they’re so expensive that the Canadian Real Estate Association (CREA) said the average home in Canada rose to $496,500 at the end of 2017. There is no denying it. The high prices in major metropolitan cities mixed with extreme demand make breaking into the market seem unachievable. To be honest, I’m still not there, and I’ve been saving for four years already.

For those of you who don’t know me — which is probably, like, everyone — I’m Alyssa. I’m the Content Specialist at Zolo, and I also write over on my blog Mixed Up Money. I’m a big personal finance nerd, and I desperately want to buy a home. However, the timing has yet to be perfect, and the prices are, well, as ridiculous as people eating tide pods for a good time. For those of you looking at all of your options (like me), one thing I often find myself asking is whether or not I should consider buying a fixer-upper.

What defines a fixer-upper?

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Buying a fixer-upper in Halifax, Nova Scotia Source: Jordann Brown

What exactly is a fixer-upper? It’s a house in need of repair — and a great option for homeowners who want to “fix-up” a property in order to leave their mark (or have the features they desire most in a home). Quite often, fixer-uppers come with a lower price tag, due, in part, to the need for some pretty heavy-duty renovations. Still, these properties are just one way for potential buyers to break into the market. And let’s get real: We’ve all considered it. After binge-watching HGTV’s Property Brothers, or laughing at how adorably fun Chip & Joanne from Fixer Upper make their home design seem, you’ve wanted the opportunity to customize every part of your property, too. But is it really that easy? Is it really that fun?

Sean Godfrey and his fiance seem to think it’s all of the above. After spending over a year looking for a home in Edmonton, Alberta, that fit into their price range and had enough space for them to grow into, a fixer-upper seemed like an excellent option for the young couple. Although it meant they might have to spend most of their weekends working on renovations, they agreed it was worth the hours devoted to saving money on their first home. “I love the home because it’s something we can turn into our own,” said Godfrey. Since their purchase of the 41-year-old property in 2017, Godfrey also realized that he has an eye for the potential in a house that others may not. Fixer-uppers require the right personalities and attitudes to end the project with a successful renovation.

What kind of skills do you need to own a fixer-upper?

Most homeowners who purchase a property in need of upgrading have experience working on construction projects or know the fundamentals of home repair. Although you can always hire a professional contractor to complete the work for you, it will save a lot of money if you are able to do the majority of the tasks on your own.

“Having experience doing projects around the house and working with tools is almost required,” said Godfrey, who admits he’s been working on construction and home improvements since the age of 12. It’s always an option to learn as you go, but the to-do list will shorten much quicker if you can complete the work in a reasonable amount of time.

Among all of the skill-based knowledge you should know, you should also be prepared to assess the risk of each project you’ll have to work on to determine whether or not it will add value to the property. After all, the ability to increase the market value of the home is typically a number one deal breaker for the owners of fixer-uppers. Before you buy, confirm what projects you know you’ll be able to do yourself, and what projects will require professional renovation.

Is the sweat equity worth it?

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Buying a fixer-upper in Halifax, Nova Scotia Source: Jordann Brown

A CIBC poll found that 48% of Canadians plan to renovate their home to increase the property value. The average spent on these renovations works out to $11,795. Put another way: fixer-upper homeowners must save or borrow more than $10,000 to invest in their home. Often, the total goes way, way beyond this national average spend.

In less than a year, Godfrey and his fiance already spent $3,000 on renovations and the couple estimates an additional $25,000 must be allocated to make their $448,000 three-bedroom home liveable. To offset the cost, the couple rationalizes this expense. They anticipate making back the money spent once they sell their upgraded home. It’s a calculated bet the couple made based on the 19.1% average return the top 25 neighbourhoods in Edmonton made between 2012 and 2017. The Appraisal Institute of Canada (AIC) guide for valuing home renovations seems to be in line with what Godfrey predicts. His kitchen, bathroom and decor updates are all high returns on investment.

However, some renovations will make homeowners more equity than others. By focusing on updating fixtures, flooring, bathrooms and kitchens, a fixer-upper will typically increase the value of a home five to six times more than what they paid to do the renovation. The hard decisions are the updates nobody sees. Updating your HVAC system — which includes your furnace, ductwork and central A/C unit — or electrical wiring rarely has a dollar for dollar return, yet neglect these upgrades and potential buyers could start to question whether or not the fixer-upper is putting lipstick on a pig.

In July 2016, Brown and her husband purchased the $270,000 home in Halifax, Nova Scotia. Originally listed at $289,000, she and her husband did plenty of research before coming back with their final price. “We got it under list price due to minor issues that would-be buyers were walking away from after the inspection,” said Brown. A dip in the roof and some non-cosmetic upgrades scared away other buyers, but not them. But Brown, the proud new owner of this 83-year-old fixer-upper, knows a lot about having to make invisible improvements to a home — an area where fixer-uppers might become more costly than anticipated. So far, she and her husband have paid to update their hot water tank and electrical wiring as internal plumbing in the bathroom. Although these upgrades seem unnecessary — as they’re invisible to the blind eye — the next home inspection would surely point them out as areas requiring upgrades and this could prompt potential buyers to back away from the purchase.

To finish the rest of the upgrades Brown and her husband budget $1,000 per month for large renovation projects and another $200 for general maintenance. For each project, Brown admits she saves an additional 15% to 20%, in case they go over budget. With a home that has plenty of quirks, each time they open up a wall, there is something new to be updated.

From her experience, Brown strongly advises not to purchase a fixer-upper if you want to make a quick buck. “Unless you’re experienced at flipping homes, it might be a bad decision to base your financial prosperity on your ability to do this thing you’ve never done.” Just recently, Brown redid her office space and chose to hire professional help to install the window. To save on the overall cost, she completed the window installation herself by adding trim.

Do you have the right temperament and lifestyle?

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At home in her Halifax, Nova Scotia, fixer-upper: Jordann Brown

Depending on the type of person you are, fixer-uppers can be amazing for someone who is patient and decisive. “Your contractor is not going to guide you as much as you want them to,” said Brown. “You need to be comfortable making decisions.” Brown also recommends that you ensure are okay to roll with the punches as things may not go right the first time. After all, “old homes are like wild beasts that resist change,” she joked.

Speaking of rolling with the punches, 86% of Canadians agreed renovation projects end up costing more than they assume and 31% of Canadians do go over budget on those projects. Brown wasn’t joking when she said things might not go as planned.

On top of having the right temperament for a fixer-upper home, you’ll also need to have the right lifestyle. If living in organized chaos for five years doesn’t sound like something you’d be interested in — it’s probably best to look for a home that’s already near completion. Rather than making it seem like a job when you have to scrape paint for 20 hours on the weekend, it’s probably ideal that you see those types of projects as a hobby instead.

A significant reason that Godfrey’s lifestyle works well with renovation projects and busy weekends spent painting, is his career. Godfrey, a firefighter, and his fiance, a nurse, both work shift-work. “Having six days off in a row allows me to do far more work on the house than if I worked Monday to Friday,” said Godfrey.

So, should you buy a fixer-upper?

If you’ve ever watched me put together IKEA furniture, you’d understand why a fixer-upper is out of the question for someone with my temperament. I’d like to think that I’m capable of doing a minor home renovation if needed, but the fact of the matter is that even if I could watch a YouTube video and figure it out, my lack of patience would win and my home would suffer. For all the reasons Brown and Godfrey enjoy their fixer-uppers, I would skip the process and buy a home that is already complete and as up to date as possible.

As expensive as it is to buy a home in Edmonton and Halifax, the city that I’d like to buy property in, Calgary, is even more expensive. As I’m still planning to spend a reasonable amount of money on my first home — if reasonable is even possible — rather than buy a fixer-upper close to downtown, I’ll be opting for a new build outside of the city limits.

Brown and her husband may spend less on a mortgage, but they’re temporarily paying a tonne more for renovation projects. Godfrey and his fiance may love their chance to grow a hobby, but they do admit it takes away from their love for travel. “Traveling has been a big part of both of our lives, so changing our short-term mindset to saving money for the house has been a major adjustment.”

There are a few solid reasons that these couples threw out in regards to their pro-fixer-upper-life — but just because you can, doesn’t always mean you should. The bottom line is that we all buy homes because they provide a safe and functional space for our individual needs. So, before you go all HGTV on me, consider the real costs and real personality traits it takes to become the owner of a brand new, old, fixer-upper.

I’ll say it louder for those in the back. A fixer-upper is not right for me. But maybe it is for you.

Alyssa Davies
Alyssa Davies

Alyssa is a personal finance blogger who focuses on mixing finances with laughter. Through her blog, Mixed Up Money, she helps people relate, learn and become inspired. She recently joined Zolo as the content specialist and brings her passion for property and smart money matters to this growing brand.