Home / Daily Dose / The Pitfalls of Home Renovations
Print This Post Print This Post

The Pitfalls of Home Renovations

For many homebuyers and investors, buying a fixer upper is a challenge they were not prepared for. A recent study from Porch.com takes a look at the tradeoffs between buying a fixer-upper versus buying a move-in-ready "turnkey" home.

When renovating, those who purchased a fixer-upper home and went over budget on repairs spent 38% more than planned on average. Much of these extra costs went toward things such as new HVAC and plumbing.

For those who chose turnkey homes over fixer uppers, a majority of buyers (63%) stated that they chose their home simply because they liked the house or neighborhood. On the other end, most fixer-upper buyers stated that they made their purchase decision based on finances, stating they believed they could get a better price on a fixer-upper than a turnkey house.

Despite the expectation of spending less, fixer-uppers ended up costing homeowners about the same or more on average as move-in ready homes. According to Porch.com, 44% of buyers ended up spending more than expected on repairs, going over budget by 38% on average. The rooms most likely to go over budget were basements and bathrooms.

For rental investors, the move toward existing and fixer-upper homes is being reflected in the rental market. According to the National Association of Homebuilders (NAHB) and the Census Bureau, the number of single-family homes built-for-rent declined at the start of 2019.

Though built-for-rent single-family rentals have been on the decline, the overall single-family rental market has been on the rise. The market for single-family rental (SFR) securitizations continued to grow month over month. It increased to 4.7% in March from 4.2%, according to the latest Morningstar Credit Ratings report on the SFR market.

The report indicated that the average vacancy rate had declined overall to 4% in March—the lowest since May 2018.

The average retention rate for expiring leases also dropped to 78.9% in February, the latest month available, from 80.4% in January.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
x

Check Also

A Major Factor Behind Mortgage Delinquencies

Click through to find out what caused annual increases in overall delinquency rates in Iowa, Minnesota, Nebraska, Wisconsin, and Rhode Island.

GET YOUR DAILY DOSE OF DS NEWS

Featuring daily updates on foreclosure, REO, and the secondary market, DS News has the timely and relevant content you need to stay at the top of your game. Get each day’s most important default servicing news and market information delivered directly to your inbox, complimentary, when you subscribe.