Years ago, Alessandra Pollina and her husband, Ondre, set out to find a property that required just a few cosmetic changes. However, they ended up purchasing the ultimate fixer-upper: a two-unit, single-family-style home that had been stripped to the studs. Despite the daunting task ahead, they were thrilled by its potential and the rare half-acre of land it sat on, which is quite unusual for Boston. “It’s the biggest backyard ever,” Alessandra notes.
Fast forward several years and numerous renovations later, and Pollina estimates that their home in the Dorchester neighborhood is now worth 56% more than its original purchase price. This impressive return on investment underscores that a fixer-upper can be a golden opportunity. With the right approach, you can transform it into your dream home and build substantial equity.
A common misconception is that you need to be a DIY expert to make a fixer-upper worthwhile. In reality, time and patience can often suffice. Here’s how to determine if a fixer-upper is a wise investment or if you should pass on it.
First, it’s crucial to evaluate the price. A fixer-upper should come at a reduced price, reflecting the work required. Don’t fall in love with a property too quickly when the listing says “needs a little TLC.” Do your homework, and consult your real estate agent about the selling prices of similar homes in the neighborhood. This will help you gauge how much you can invest without over-improving, which is important if you plan to sell in the future. Wendell De Guzman, a real estate investor and house renovator in Oak Brook, Illinois, advises treating the remodel like a business. “It doesn’t matter how much money you put into the house,” De Guzman says. “You’re limited by the market value of what nearby houses are selling for.”
Next, assess what improvements are needed. The best fixer-uppers offer opportunities for “instant equity,” meaning that if you sold the home immediately after renovations, you’d recoup that investment. Simple projects like painting or landscaping can be done with sweat equity. The Pollinas began their renovation with landscaping, reviving the grass, planting fruit trees and a veggie garden, and enjoying the positive reactions from neighbors.
They then focused on the kitchen, a project that often requires professional help and a significant budget. These high-impact projects should be evaluated against the home’s price to ensure they are worth the investment.
Certain home improvements consistently add significant equity. According to the “Remodeling Impact Report” from the National Association of REALTORS®, new roofs, refinished hardwood floors, and upgraded insulation are top projects for adding value. A new roof, costing about $12,000 on average, could recoup its cost at resale. Refinishing hardwood floors, costing around $3,400, could return 147% of that investment. Insulation upgrades, costing about $2,500, can also pay for themselves and offer energy savings.
While these projects are safe bets, other renovations can also be worthwhile if the fixer-upper is priced right. For instance, a complete kitchen renovation can be costly but can significantly enhance your living experience if the home is discounted enough.
Lastly, evaluate your ability to deal with disruption. Whether you plan to do it yourself or hire professionals, consider if you have the patience for a long renovation process. Renovating a bathroom can take two to three weeks, and adding projects like hardwood flooring and a new kitchen can extend the timeline considerably. Assess your emotional endurance for potential project pitfalls and delays. A fixer-upper is suitable only if you have the time, patience, and energy for it.
If you can budget your time and money effectively, you might end up with a double reward: a home that’s worth far more than you paid and the satisfaction of knowing you helped transform it.