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Buying a Handyman Special
There is a wide-spread belief that buying a 'fixer-upper' and renovating it yourself will save you money. Much of the time, this is not true.
Why a handyman special does not often save you money
To begin with, the reduction in price on a 'handyman special' generally reflects the anticipated cost of repairs, and no more. You are no more likely to find an underpriced 'special' than you are an underpriced 'normal' home, because buyers bidding on a 'special' have been appraised of its true value by their agents.
Another point to consider is that the vast majority of renovations do not return their full value when a home sells. (See my article, The Value of Renovations). To put this another way, it is often cheaper to buy a home that has already been renovated than it is to do those same renovations yourself.
If the idea is to save money by doing the work one's self, rather than hiring a professional, the result is no different. Many people mistakenly think of their own labour as 'free'. If you are a skilled builder, renovator, or handy man, each hour that you spend renovating your own home is an hour that could have earned you money elsewhere. To make a correct estimate of the cost of renovations, you need to include your own 'wages' in the price.
When a handyman special may be a good idea
If you cannot afford to pay a professional to renovate your home, or if you are retired and have an abundance of free time, then a 'handyman special' may fit your lifestyle better than a previously renovated home. Keep in mind that in this situation, you are paying more overall for your renovations, but are paying some of the cost in your time and effort rather than in dollars.
Another potential reason to buy a fixer-upper is when no homes in your target area have the renovations you desire. For example, if you want a home with a pool, but are moving to a subdivision where no homes have pools installed, you will have no choice but to do the renovations yourself. (Again, this is not a money-saver, but may be necessary to create the home you desire).
And finally: There is nothing wrong with buying a home to renovate it simply because you enjoy renovating! Building can be an enjoyable and rewarding hobby - but do it for fun, because it won't save you any money.
Curious whether a handyman special is right for you? Just ask me, I'll be happy to help.