Buying a Fixer-Upper: What You Should Know

Moving in with you

For some homebuyers, the dream is to find a property that's been recently updated or has at least been well-maintained over the years. But the unfortunate reality is that move-in ready homes tend to be more costly—especially when the housing market is booming. Budget-minded homebuyers might consider buying a fixer-upper, which is an older home that's more affordable upfront because it requires (or could benefit from) major improvements.

Buying a fixer-upper can be a risky strategy, however. Repairs and upgrades will have a significant time and money cost in the long run, so it's important to understand if the decision will ultimately work out in your favor.

What Is a Fixer-Upper?

Some homes on the market are move-in ready, meaning everything is in working order, and you could start living there as soon as your moving truck pulls up. This usually applies to newer builds, but there are plenty of updated older homes that can be comfortably lived in without needing any big repairs or renovations.

Fixer-uppers are homes that could use extensive improvements, and they're at least somewhat less expensive because of it. Some fixer-uppers may be livable but simply have outdated features and aesthetics that can be gradually updated. Others are in need of major repairs that must be tackled before the buyer can move in.

While the price tag on a fixer-upper is often lower than on a comparable move-in ready home, repairs and renovations can be costly. When done right, however, making improvements will increase the home's value and can even help you turn a profit when you sell. A savvy real estate agent can help you determine how much you'll have to spend to update the home, and how much value you're likely to get in return. A financial planner can also help you make the cost calculations.

Because of the extra time, money and risk involved, buying a fixer-upper isn't for everyone. According to a 2021 study by the National Association of Realtors (NAR), 44% of recent homebuyers said they avoided homes that required renovations or needed plumbing or electrical repairs. When looking at homebuyers aged 22 to 30, that number went up to 61%. But that can mean facing less competition in the buying process, depending on the market, which could be advantageous.

If you're interested in buying a fixer-upper, your real estate agent can help you find one that works for your budget. They can also help you determine the cost of updating, and whether the expense would likely pay off in the long run. When viewing properties online yourself, you may find that some properties are described as fixer-uppers in the listing. You can also spot a fixer-upper if it's an older house with no major issues, but it's cosmetically outdated.

Though if a listing for property that includes a home instead focuses on the value of the land or an opportunity for a new build, or the owner is selling the house as-is, you're probably looking at a house that needs hugely expensive repairs or should be torn down. Having an inspection contingency (or inspection clause) gives you options in case you decide to buy a home with deeper issues than expected.

Pros and Cons of Buying a Fixer-Upper

Depending on the property, the extent of renovations and the costs involved, buying a fixer-upper can be a great return on investment—or a money pit.


  • Listing price is typically less than what a comparable newer or updated home would cost.
  • You can customize a home to your liking when renovating.
  • You may experience less competition among buyers since not everyone wants a fixer-upper.
  • You add equity to the home, meaning you could potentially sell it for more in the future.
  • You might receive tax breaks for improving the home's value.

Potential Downsides

  • You may need to make renovations before you can move in, or if you can move in, you'll have to live in a construction zone while it's under repair.
  • Home renovations aren't covered by conventional mortgages, so you need to either tap your cash savings or secure other financing.
  • Renovations can be extremely expensive, and they may expose deeper problems that need pricey repairs. Improperly completed renovations can cause costs to spiral out of control.
  • You may need to obtain building permits, which add extra time and cost (or you may be limited in what you can do to the property based on zoning laws).

Budgeting and Financing a Fixer-Upper

A conventional mortgage doesn't cover home renovations—only the cost of buying the property. And renovations aren't cheap. According to a 2019 report on remodeling by NAR and the National Association of the Remodeling Industry, homeowners can expect to pay the following for common upgrades (prices vary by location, materials, etc.):

  • Convert attic to living area: $80,000
  • Add new bathroom: $60,000
  • Kitchen upgrade: $38,300
  • Bathroom renovation: $35,000
  • New vinyl windows: $22,500
  • New vinyl siding: $15,800
  • HVAC replacement: $8,200
  • New roofing: $7,500
  • Closet renovation: $6,300
  • New fiberglass front door: $2,700
  • Hardwood floor refinishing: $2,600
  • Insulation upgrade: $2,400
  • New garage door: $2,100

The report also notes how much potential value the homeowner can expect to get back from each improvement when they sell the house, so consider these metrics as you decide what to update in a fixer-upper. Keep in mind that some older homes may also need repairs from water damage, and you may need to update exterior features like landscaping to prevent things like erosion or damage caused by roots or falling branches.

So, how do you pay for a fixer-upper that needs costly repairs? You have a few options. Before you decide, go over the limitations of each options, and make sure you understand what your renovations are likely to cost:

  • Buy the home with a renovation mortgage. These are mortgages specifically for those buying a house that needs major upgrades. They allow you to roll the costs of the purchase and the renovations into one mortgage loan.
  • Purchase the property using the Federal Housing Administration's 203(k) Rehab loan program. This rolls the cost of repairs into a mortgage for purchasing the house.
  • Move in first; renovate later. If the home is livable, you could buy the home using a traditional mortgage, then later finance the renovations through a home renovation loan or with a home equity loan or line of credit.
  • Explore other ways to finance repairs. For smaller repairs or upgrades after move-in, you could utilize other forms of financing such as credit cards or personal loans.
  • Do some DIY. Doing repairs yourself doesn't mean they won't cost you any money, but going the DIY route is one of the best ways to save money. You probably should have an expert repair your air conditioning, plumbing or electrical. But for some smaller fixes, such as painting, flooring, landscaping, tile or updating fixtures, you can cut back on costs by learning how to tackle some of it on your own (or with the help of YouTube and home repair classes).

Keep Your Credit Move-In Ready

If you plan to finance a home—especially one that may require additional financing for renovations—you'll want to make sure your credit is in solid shape. The higher your score, the better chances you'll have of qualifying for a loan, and for nabbing favorable terms like lower interest rates. Check your credit report and credit score for free and see if there's any room for improvement before you apply for financing.