Move In Or Fixer Upper

Is it better for a couple in their 20’s to purchase a fixer-upper home or a move in ready home?

To answer “Is it better for a couple in their 20’s to purchase a fixer-upper home or a move in ready home?” let’s propose a ludicrous example to illustrate the point. We’ll assume that closing costs is roughly based on the same percentage (it’s not) and that your down payment is going to be the same on each home (it’s not).

For our answer let’s assume you’ll be putting 5% down. Keep in mind that many loans require less (FHA is 3.5% for example) and some, particular homes that need to be fixed require as much as 10% or more. We’ll ignore that for this example.

For this example to work you’ll have to assume we’re comparing to nearly identical homes in the same neighborhood. They’d be the same size and floor plan and overall lot size.

Move In Ready VS Fixer Upper

Let’s say you have a $50K fixer-upper and a $100K move in. Immediately the fixer-upper seems like the best move, it’s cheaper! Let’s assume that the fixer-upper needs $25K in work as well. If the homes are similar then the work needed to get this home to $100K would likely be at least this. Again, this is not a real example. Let’s look at each. …. In this corner…

Move in Ready.

The home is ready to move in, almost like new. You might have some light painting to do but overall, there are no appliances to buy, no carpet to replace, no decks to redo. You call your fam and your movers and move into this home. The same home for sale in Frisco TX or wherever you saw online.

The Numbers

The Fixer Upper

This fixer upper is 50% the cost of most the homes in the neighborhood however, it’s not been bought buy any of the investors that typically help home sellers avoid foreclosure. It’s not been bought by banks or we buy houses people.

It’s got cat urine odor in the carpet, smoking odor in the walls, the cabinets have been removed from the kitchen and someone walked off with the A/C. The floorplan is great but it’s going to require a total HGTV- esque gut. You might even have to replace the fireplace.

The Numbers

  • Purchase Price: $50,000
  • Closing Costs: $2,000
  • Down Payment: $2,500
  • Monthly Payment: $240.68 based on this Dallas TX Mortgage Calculator
  • Repair Costs: $25,000

The Winner of Move In House vs Fixer Upper For Couples In Their 20’s?

Move-In Ready Home

The out of pocket expense of a fixer uppper is significant, despite the equity position and lower monthly payments.

The reason is that couples in their 20’s are starting out and don’t usually have the funds to repair the home. The benefit of move in ready is that you can finance the entire move (excluding down payment and closing costs which are a given), whereas a fixer-upper will often cost out of pocket. Even if the couple plans to make repairs over time, there will likely need significant out of pocket money to make the home livable.

Note: In this example we didn't discuss the fees associated with low loans (under $100K), the high fees associated with homes with repairs, the difficulty in working with contractors via escrow with these kinds of loans or calculating interest on a small renovation loan.  

About the Author Candice Cole

Candace loves writing about homes and new communities. She currently lives in Atlanta and enjoys helping others relocate to the area. Candace sometimes works with Real Estate Agents for information for the blog and/or just in general.

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