We Bought a Fixer Upper! Here’s How it’s Going

Nearly two years ago, we took a risk and purchased a complete fixer upper! After moving across the country for Mr. RFL’s work, we realized the housing market in our new location was more expensive. So when we found a great deal on a fixer-upper in our desired neighborhood that had an open floor plan, large lot and loads of potential, we just went for it. We’ve been working on renovation projects ever since, and trying to do as much of the work as we can along the way. In this post, we’ll share the renovation budget, projects we’ve completed, and how much we’ve spent on our fixer upper so far.

 

How much we paid

I know what you’re really here for… the numbers! We’ll share them all 

The final purchase price of our fixer upper (after inspection concessions) was $547,000. The house is almost 25 years old and two stories, with 5 bedrooms, 3 bathrooms and 3,100 square feet. It also sits on 1/3 acre, which is pretty large for the area and price of the home. That said, nearly everything in the home was original 1990’s builder grade (i.e. crappy and orange/yellow).

For context, a similar mostly-renovated home I loved was listed for $867,000. It sold for $847k, which is $300k more than the house we ultimately purchased. Though most houses are unique and difficult to directly compare, I think the pros and cons of these two balanced out enough to make them comparable.  

 

Why did we buy a fixer upper (with a toddler)?!

Because we’re a glutton for punishment? Just kidding… sorta.

As mentioned earlier, we prioritized location with this move to improve our quality of life. We wanted our new home to be in a great family neighborhood, with access to excellent schools and a short commute for Mr. RFL. After viewing listings online for a couple months, we realized that the local housing market was quite a bit more expensive than the one we were leaving in North Carolina. Fulfilling our wish list meant homes above our target price (though still within what we could afford).

Mr. RFL toured this home and a few others we had seen online on his first work trip out here. The house was listed for $589,000, which was by far the lowest price per square foot in the neighborhood. Given the potential room for improvements from the low price and the oversized lot, we seriously considered taking the plunge.

Despite the leap of faith, I actually didn’t set foot in the home until the day we closed on it. I have a lot of trust in Mr. RFL.

 

Creating a renovation budget

Before making an offer, we created a detailed renovation budget based on photos, measurements and videos Mr. RFL took during his viewings of the home. We created a spreadsheet with all of the projects room-by-room we’d want to complete (or thought we’d need to for the age of the home). Then, we added a low, high, and expected cost for each row. Estimates were based on the various options and research we performed online of products and typical project costs.

Though this process took several hours, I highly recommend doing it if you’re thinking of buying a fixer upper. This step is crucial for a couple reasons. First, it helps you determine if the price is low enough to make the fixer upper worth it. All fixer uppers need work and money, but not all fixer uppers are great buys. This helps to ensure you don’t spend significantly more than the price of a similar home that is already renovated. Additionally, if you decide the home is worth fixing up, this step will help you determine how much you should pay it.

Once we had a renovation budget laid out, we compared the improved cost to comparable renovated homes and concluded that this home had enough potential to make it worth the risk. This step also helped us determine our walk away price, which was below the listing price.

Our original renovation budget was $250,000 to $300,000 (primarily, dependent on whether or not we added a pool). The total estimate range was even larger, $180,000 – $340,000… because it’s really hard to estimate costs for such a large project! We set up a sink fund for costs to cash flow the renovation.

I’ll get into our budget and progress further down, but first…

 

Thinking of buying a fixer upper? Here are 3 things to consider before you buy:

1. Create a renovation budget BEFORE making an offer

As mentioned above, I believe this step in crucial to assessing if a fixer upper is worth it. Just because a house is priced lower than renovated properties nearby, doesn’t mean it’s a good deal.

Creating a detailed renovation estimate will help you determine a fair offer price and make the buy/don’t buy decision.  It’s totally fine to use a range of estimates, and probably a good idea to veer on the conservative side to ensure you don’t overspend.  

If you or your realtor has a general contractor, ask them to walk the property with you and provide a ballpark estimate. Most general contractors will do this, though many will charge you for their time if you don’t yet own the house. However, a $100-$200 investment is well worth it if the project is significant and you are on the fence.

2. Get an inspection

Hopefully, you’ve heard this one before. Unless you’re buying a super cheap investment property in a hot market, you should always pay for an inspection.

Home inspectors are trained to look for many things, but they don’t usually dig deep enough to find every issue. However, a good inspector should at least identify any larger issues or warning signs that you should investigate something further by hiring a specific inspector (i.e. HVAC, foundation, roof, etc.). 

Regardless of the reports, you’ll most certainly find additional issues once you start opening walls… so make sure to factor a healthy contingency into your renovation budget.

3. Negotiate!

Having a renovation budget in hand and knowing what is wrong with the house during the inspection period can help you negotiate a better deal and/or decide if you need to walk away.

A few hours and couple hundred dollars can literally save you from buying a money pit.

Making the first offer

Know your market well, or work with a realtor who does, to understand how much room for negotiation there is. When you’re dealing with a fixer upper, there is a much smaller pool of potential buyers that you’re competing with. You know it and so do the sellers.

In many housing markets, including ours, there are a large number of professional flippers, which can create additional competition even when there may be fewer regular home buyers willing to take on a fixer. However, many flippers focus on homes that in the lower price range or that only need minor cosmetic updates.

Our realtor understood that our home’s renovation would require more time and money than most local flippers and other buyers were willing to invest, which meant we had little to no competition. After speaking with the selling agent, he encouraged us to make an aggressive offer, which was accepted.

Leverage your inspection

Additionally, you can use the inspection report to further negotiate on price. If there are repair items, ask for a credit to the price rather than for the seller to make them. The seller will fix the problem for as little as possible, or worse case, just make it look fixed. Whereas with a credit to the price, you can take care of the issue properly.

We were planning to replace the whole roof in the first year or two anyway, so rather than have the seller pay for some minor roofing repairs that were identified during the inspection, we asked for a credit. Between the roof and some other repairs, we were able to negotiate an extra $3,000 off the price.

 

It’s been 2 years! What have we accomplished and spent?

Exactly two years into this renovation, and we’ve spent a grand total of $164,935!

We completely underestimated the timeline of this project. We expected the renovation to be finished by now, but it’s looking like it will be mid-to-late 2021. Lesson learned.  

On a positive note, we’ve now completed the majority of our interior renovations, replaced of all major mechanical and structural items, and completed some exterior work.

BEFORE photo of our fixer upper kitchen (I’ve spared you the nasty stained tile counters in this photo)

 

and AFTER! 

We are still projecting to be within the range of our original budget, although some line items have been under and others have been over. Since we decided NOT to add a pool, we should be tracking the lower part of the budget range ($250,000), so we’re running a bit above. It turns out that general contractors and “Scottsdale prices” (i.e. rip you off because it’s a wealthy area) are even more expensive than we anticipated.

Here are the largest projects we’ve tackled to date, along with the approximate spend. If you want to know more about any particular project, feel free to ask in the comments and I’ll be happy to share more details.

Fixer upper spend through December 2020:

_{*Total cost for HVAC is $16,700, paid in installments over a 4-year period on an interest-free loan.}

 

How to save money on your next renovation

Clearly, our goal on this remodel was NOT to spend as little as possible. This is not an investment property, rather it’s our home, and we want to enjoy the renovations while we live here.

Additionally, we live in an upscale area, so need to strike the right balance of upgrades in order to get the best return for our renovation costs. Overspending for a neighborhood will always reduce your returns, but so will spending too little, as potential buyers may feel they need to renovate again. Our goal was to create an appropriately renovated home while managing costs to maximize our future return.

In order to prevent this post from turning into a book, I’m splitting it into two posts.

In Part 2, I share 5 ways we kept renovation costs down, including our top recommendations for DIY skills to save money on your renovation! Check it out here.

 

Ready for demo!