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Rapid price growth during the pandemic-fueled housing market has made saving for a down payment a moving target for many first-time homebuyers. As prices for new-build and turnkey homes slip out of reach, younger homebuyers are turning toward fixer-uppers to lock in a fixed housing payment, start building home equity, and make a house their home.

Although it may not be your first option, a fixer-upper can be a blessing in disguise. Older homes in need of some renovations present opportunities to personalize a home and earn sweat equity.

Beware: Renovating an older house looks easy and sexy on HGTV, but buying and overhauling a fixer-upper takes careful planning and consideration.

Is it worth buying a fixer-upper? Read on to get a better sense of risks and rewards for this endeavor.

What's in this Article?

Why buy and renovate a fixer-upper?
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Buying a fixer-upper home
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What’s the cost of renovating a fixer-upper?
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Things to consider for your renovation
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Renovation loan programs
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Frequently asked questions
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Why buy and renovate a fixer-upper?

There are several reasons to buy and renovate a fixer-upper. Perhaps the most prevalent today is that the turnkey homes in your target area are out of your budget.

Home prices grew a record 18% nationwide in 2021. That means a home priced at $350,000 in late 2020 might be worth $413,000 by the end of 2021, and would require an extra $2,800 for a 10% down payment than it would have the year before. In an era of price growth, fixer-uppers present an opportunity to buy with lower purchase prices and down payments, giving first-time homebuyers in particular a chance to break into the market.

“In a competitive purchase market, looking at a home that may need some work might be your best bet,” said Sandy Krestan, a senior loan officer at Fairway in Phoenix, Ariz. “Looking at homes not everyone is initially attracted to.”

Fixer-uppers can also make great investments. Homes typically appreciate by 3-5% per year (the last two years have been outliers), but putting in the work to upgrade and modernize a home can increase its value on top of standard appreciation.

Putting in the work to upgrade and modernize a home can increase its value on top of standard appreciation.

Data from Fairway shows that 69% of borrowers earned instant equity after buying and updating a property with a renovation loan. That means that in most cases the appraised value of the home afterthe renovation was greater than the purchase price and renovation costs.

Finances aside, fixer-uppers can also offer charm. You simply can’t build decades – or centuries – of history into a newly built home. Some homebuyers simply prefer vintage touches or a blank canvas to make their own.

Buying a fixer-upper home

Buying the fixer-upper is the largest expense of your project, so spending extra time and effort to bring down the cost can leave you extra room in the renovation budget.

Before you shop for homes, come up with an all-in budget (home purchase + renovation costs + contingency fund) and think about the types of renovations you are willing to take on. Are you willing to strip down to bare studs for a complete overhaul, or are you more comfortable with cosmetic fixes like new floors and paint?

Also take some time to research your target housing markets. How much are fixer-uppers selling for there? How much are homes that have already been renovated selling for? As you shop, make a list of the renovations you would make and contact a contractor to get a ballpark idea of how much they would cost.

When you’ve found an eligible fixer-upper, make sure to get a detailed home inspection from a reputable inspector.

“It’s important to investigate the possibility of hidden issues prior to closing on your purchase,” says Joe Pessolano, Fairway branch sales manager in Garner, N.C. “Most fixer-uppers were built in a time when building codes were not as specific as they are in the current day. You may experience unexpected costs in bringing the home up to code for certain items.”

If, or more likely when, the inspector finds an issue, you can try to get the sellers to cover some expenses. This may be difficult in today’s competitive market, but getting them to reduce the sale price by even $1,000 because the house needs a new paint job – or getting them to do the painting before you close on the home – helps your renovation budget.

“It’s important to investigate the possibility of hidden issues prior to closing on your purchase ... You may experience unexpected costs in bringing the home up to code for certain items.”

Joe Pessolano, Fairway branch sales manager

What’s the cost of renovating a fixer-upper?

The cost of renovating a fixer-upper depends on a variety of factors, so it’s impossible to put an exact number on it. However, you can get a better sense by considering the expenses that go into it.

There are three major types of renovations: cosmetic, major remodels, and structural improvements. Here are some ballpark estimates for common renovations in each category.

Related: 5 Home Renovations that Increase the Value of Your Property

Cost of cosmetic fixes

These are the easiest and least expensive projects, and they include jobs such as interior painting and new floors. With a little help from YouTube, these can often be inexpensive DIY projects.

Project Cost per square foot of floor plan Cost for 1,000 square feet of floor plan
Interior painting (DIY)$1.46 to $1.96*$1,461 to $1,960*
Interior painting (hired labor)$3.70 to $7.31*$3,700 to $7,209*
New vinyl plank laminate flooring (material only)$2.50 to $5.00**$2,500 to $5,000 (materials only)
New vinyl plank laminate flooring (materials + labor)$4.00 to $10.00***$4,000 to $10,000***
*Estimate from Homewyse calculator. **Estimate from Bob Vila. ***Estimate from Remodeling Calculator.

Cost of major remodels

Fixer-upper renovations are often more involved than just new flooring and paint. Your renovation may include remodeling entire rooms, replacing windows, or replacing the roof.

Costs will vary based on the size of your project and the cost of labor and materials, and it’s important to get several estimates from reputable contractors. Here are some ballpark figures to give you an idea of what to expect.

Project Average cost Details Average return on investment
Entire kitchen remodel$19,720Includes labor, new cabinets, floor, backsplash, countertops, appliances, sink, lights, and painted walls59%
Small bathroom remodel$7,830Includes labor, fixtures, tub, toilet, vanity, vanity top, medicine cabinet, sink faucet, tile, and exhaust fan70.1%
Asphalt shingles roof$6,288 or $3.88 per square footIncludes materials and labor for one-story house with tear off of old roofing material68.4%
Replace vinyl windows$390 to $580 per windowIncludes installation of double-paned, removal of old windows, and select framing74.3%
Cost, details, and return on investment based on estimates from Remodeling Calculator.

Cost of structural improvements

It may turn out that your fixer-upper requires a complete gut job. Hopefully that is something you recognize and plan for early on. Structural improvements include foundation, plumbing, electric, and room additions. These are labor- and cost-intensive projects that more often than not require professional planning, labor, and permitting through your city.

On the bright side, it gives you a chance to rebuild your home from a blank slate. But according to Remodeling Calculator, a complete gut renovation can cost between $75 and $185 per square foot. That can add serious overhead to your renovation budget and should be carefully planned for ahead of time.

Miscellaneous costs

Plan all you want, but every fixer-upper renovation comes with surprise expenses. That’s why most contractors recommended setting aside 5-10% of your renovation budget as a contingency fund. This is an emergency fund that has the potential to help cover cost overruns and unforeseen events.

In fact, when choosing a renovation loan program such as the FHA 203k or Fannie Mae HomeStyle®, the lender will require and collect a contingency reserve as part of the transaction. More on these loan types later.

Miscellaneous renovation costs may include (but are certainly not limited to):

  • Permitting expenses for bringing house up to code
  • Changes in material costs due to inflation (especially in 2021-22)
  • Hidden structural damage
  • Improper building practices that need to be redone
  • Living out of home during renovation (boarding pets, eating out, finding a place to stay)
  • Your own time

And the ultimate hidden cost of remodeling your home: Changing your mind. Things don’t always turn out exactly as envisioned and you may find yourself repainting entire rooms or switching out fixtures.

Or worse. You may discover additional issues, such as rat infestations like this couple did, and need to address those problems. Having a contingency budget helps to soften that financial blow.

Things to consider for your home renovation

Renovating a fixer-upper looks fun on TV. Knock out a few walls, slap together a design, and watch your home increase in value. But there’s a lot that gets left on the cutting room floor.

Here are a few things to consider before diving in.

Establish a goal

Are you buying a fixer-upper as a permanent residence or an investment? How long do you plan on staying? Your underlying goal will determine which projects you undertake and how much you are willing to spend on them. A renovation for a quick flip will look a lot different than one for your dream home.

Be honest and calculated while shopping for a fixer-upper

Before you fall in love with a home or its price, be honest about whether you are ready to make the required renovation. Get the best estimates possible and crunch the numbers. Do you have the time, money, and energy for a home that needs a full gut renovation?

Get several renovation estimates

One of the best ways to keep your renovation project on track and on budget is to hire a trustworthy contractor. Get several estimates, ask for references for each contractor, and call those references. The cheapest bid may not end up being the cheapest if the contractor is sloppy or slow – or just plain runs off with the money.

Don’t forget about permits

Structural repairs, layout changes, additions, and outbuildings often require inspection and permits through the city. Skipping this crucial process can set your budget and timeline back in a big way.

Renovation loan programs

One way to finance your renovation is to build it right into your home loan. Depending on what you qualify for, there are a few loan programs to consider.

Keep in mind, you can also use these renovation loan programs to refinance your current mortgage.

Fannie Mae HomeStyle®

Fannie Mae HomeStyle® is a conventional mortgage that lets borrowers finance renovations and home improvements. This product can be used to purchase or refinance.

Loan highlights:

  • Financing for up to 75% of the appraised property value or purchase price (whichever is less).
  • 3% minimum down payment
  • Can be used for 1-4 unit primary residences, second homes, single-family investment properties, and manufactured homes.
  • Includes 10-15% contingency reserve
  • Includes luxury improvements that are permanently affixed to the property (landscaping, swimming pool, outdoor kitchen)

Check your Fannie Mae HomeStyle® eligibility here.

Freddie Mac CHOICERenovation℠

Similar to HomeStyle®, Freddie Mac’s CHOICERenovation℠ is a conventional loan program that allows borrowers to use their home loan proceeds to finance their renovation in a single purchase or refinance transaction.

Loan highlights:

  • Financing for up to 75% of the appraised property value or purchase price (whichever is less).
  • 3% minimum down payment
  • Can be used for 1-4 unit primary residences, second homes, single-family investment properties, and manufactured homes.
  • Includes 10-15% contingency reserve
  • Includes luxury improvements that are permanently affixed to the property (landscaping, swimming pool, outdoor kitchen)
  • Includes the CHOICEReno eXPress℠ mortgage  option to finance renovations between 10-15% of the purchase price or appraised value

As conventional loan programs, Freddie and Fannie’s renovation loans are subject to conventional loan limits.

FHA 203k loan

The FHA 203k loan is a government-backed renovation loan that allows homebuyers to finance their purchase and renovation in the same loan. With no maximum repair limit (although local FHA loan limits apply), the standard 203k loan allows for structural repairs. The limited 203k loan has a $35,000 cap and does not allow for structural changes.

Loan highlights:

  • The home must meet FHA loan minimum property standards (structural integrity, available services, adequate living spaces)
  • Primary residences only
  • Minimum 3.5% down payment for borrowers with a credit score 580 or above (although it varies by lender); 10% down payment for credit scores below 580
  • Requires a renovation bid from a contractor and an FHA appraisal
  • Repairs must be complete within 6 months

VA renovation loan

This renovation loan is reserved for eligible veterans and active-duty servicemembers who want to purchase and repair a home with a single loan. The maximum loan amount is capped to the “as-completed” value of the home – or the home value expected after the repairs are finished.

Loan highlights:

  • Borrower must meet basic VA loan eligibility requirements and typically a 620 credit score (although this varies by lender)
  • Only available for primary residences
  • Requires VA credentialed contractors and builders
  • Renovation must be completed within 120 days of note date (the date your documents were drafted)
  • Upon completion, the home must meet minimum VA appraisal and property requirements

Buying a fixer-upper FAQs

Is it worth buying a fixer-upper?

With careful planning, buying and renovating a fixer-upper can be a good investment. Industry statistics show that a significant number of renovation loan properties received instant equity with values exceeding the total acquisition costs (sales amount plus renovation costs).

Fixer-uppers also offer an affordable entrance into homeownership for first-time buyers, and a successful renovation can increase the value of the home beyond the purchase price and cost of renovation. This sweat equity is the reward for a well-thought out renovation. However, not all renovations go as planned and there is significant financial risk. Ample research, budgeting, and contingency planning can minimize this risk.

Where do I start buying a fixer-upper?

If you’re considering buying a fixer-upper, start by working with a mortgage lender to understand your budget and loan options. Then take an honest self-assessment of how much time, money, and effort you are willing to put into renovating a home, and shop for homes accordingly.

Break into homeownership

With home prices soaring, first-time homebuyers are turning to fixer-uppers to ditch rent payments and start building home equity. Although these homes take time, money, and talent to renovate, the payoff in sweat equity can be sweet.

Before busting open a wall, talk to a lender about your fixer-upper budget and loan options.


Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.

†Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.

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