Amid soaring home prices and interest rates, both homebuyers and real estate investors might find value in purchasing fixer-upper properties across various cities in the United States.
A recent report from StorageCafe reveals that fixer-upper homes, on average, are priced 29% lower than move-in-ready residences. In some of the largest 50 cities, these fixer-upper bargains can be as much as 50% less than standard homes.
Interestingly, there's a growing trend towards fixing up homes. Despite the additional investment and expertise required, a RE/MAX survey indicates that over half of prospective homeowners are open to purchasing properties needing remodeling.
Jason Gelios, a Realtor based in Michigan, notes the increasing interest among millennials in renovating homes to suit their preferences, driven by limited available housing options and fierce competition in the market.
Identifying the Best Fixer-Upper Markets
StorageCafe, in collaboration with Point2, analyzed over 70,000 listings in major U.S. cities to pinpoint the prime locations for fixer-upper investments. They assessed price differentials between homes listed as fixer-uppers and those advertised as move-in-ready, considering characteristics like "as-is" and "TLC."
Among the top cities for fixer-upper enthusiasts is Los Angeles, where despite steep prices, fixer-upper homes offer substantial savings compared to turnkey properties. Chicago follows closely, with significant renovation potential and lower home improvement loan amounts. Meanwhile, cities like Minneapolis and Dallas present attractive opportunities for investors, with ample fixer-upper listings and reasonable renovation costs.
However, not all fixer-uppers come at a discount. In cities like Austin, San Jose, San Diego, and New York City, purchasing a fixer-upper could actually cost more than buying a move-in-ready home due to factors like location and increased living space.
Despite the challenges, investing in fixer-uppers can be financially rewarding, especially for those with renovation skills and patience. With rental potential and the possibility of substantial returns upon resale, buying and renovating fixer-upper properties remains a viable investment strategy, even amidst high market prices and interest rates.
It's essential to recognize the significant commitment and potential risks involved in undertaking a fixer-upper project, as unexpected costs and market fluctuations can impact the overall investment outcome.