Whether you’re struggling to find an affordable home, or flush with cash and looking to flip, these cities show the highest return on investment for buying and renovating a fixer home.
Even as the real estate market begins to cool somewhat, it’s not easy to buy a home these days. Mortgage rates have gone up and prices are still higher than last year, making affordability tougher than ever.
But in one bright spot, the median cost of a fixer-upper in the U.S. is $225,000, 45% cheaper than a turnkey home of the same size and in the same city, according to an analysis by Porch.com, a software platform for home service industries. And, fixers seem to be going down in price compared with last year—they’re 24% cheaper than in 2021, according to the analysis.
But if you’re not a cash-rich flipper, and you are just looking to buy your first home, is a fixer-upper the way to go? Real estate brokerage Redfin defines a fixer-upper as “a home that can usually be lived in but needs maintenance work (redecoration, redesign, or reconstruction) and is typically offered at a low purchase price.”
So a fixer might be something you can afford to buy, but can you live in it, can you afford the repairs, and is the savings worth the time, trouble, expense, and risk?
To find the best cities to buy a fixer, Porch.com analyzed data in 90 U.S. cities on fixer-upper and regular listings, prices, square footage, and number of bedrooms and bathrooms from Redfin, which offers a “fixer-upper” filter on their search site.
Only cities with at least 10 fixer-uppers on sale as of May 15, 2022, were included in the analysis.
They looked at how much it would cost to renovate in these cities, and added that cost to the price of the fixer, then compared it with the listing prices of turnkey homes. Renovation costs are based on a median $130 per square foot and assumes a “complete gut renovation” (full removal of all interior fixtures that leaves only the structural skeleton and foundation behind).
One of the best places for bargains is Chicago, where you can get a fixer for $200,000, spend $195,000 on renovations and still come in at 35% lower than the $605,000 turnkey home price.
But a fixer home isn’t always a bargain. The median price of fixer-uppers in both San Francisco and Austin, Texas, is more than $1 million.
For the cash-rich flipper, some of these high-price cities might present money makers. In Los Angeles, for example, if you can come up with nearly a million dollars to buy a fixer plus the money to renovate, you can almost double your money if you sell it at the turnkey price.
But even where fixer homes are cheap, renovations may not be worth it. In Gary, Indiana, where 23.4% of listings are fixers, with a median price of $31,500, the cost to renovate is about $187,000—and you can buy a turnkey home there for around $64,000. In fact, Porch’s analysis found that 50 cities show a negative return on investment in renovating a fixer.
Depending on the square footage, the average cost to gut and remodel a house can be anywhere between $100,000 – $200,000, according to Rocket Mortgage.
Here are 30 cities where the cost of buying a fixer and renovating it is the cheapest compared with a turnkey home. We highlighted some of the home price figures that are below $500,000, and other data points that stand out for anyone looking for a more affordable home.
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This story was originally published July 16, 2022 9:00 AM.
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