The humble fixer-upper apartment or house is always a target for buyers seeking to either enter the property market or renovate and re-sell for a quick profit.
The logic of buying a property that needs TLC seems undeniable. But like many things in life, it’s not always that simple.
Labour costs and availability have become a huge factor for renovators, and the price for building materials has skyrocketed in the aftermath of the pandemic.
As an experienced agency, our agents believe buyers need to balance the cost and ease of purchasing a home that is ready for you to move into, against a lower price and the cost and stress of overseeing building work.
New data indicates building costs continue to rise but the pace is slowing.
The latest Cordell Construction Cost Index (CCCI) says residential costs grew 0.4% nationally over the March quarter – the lowest quarterly increase since March 2010.
Cordell said that while the cost of building materials was slowing, it has risen 31.3% since the onset of Covid.
The situation has not been helped by the boom in government and private infrastructure projects, which has created a highly competitive market for trade skills. Cordell said this challenge was “likely to persist for several years at least”.
With the property market now witnessing rebounding values again – it’s up 0.4% in March against February prices – the pressure on the residential building sector was likely to become more acute.
CoreLogic research director Tim Lawless said, “While growth in construction costs eased over the quarter, the cost to build a dwelling is still rising from an already high base.”
There was room for optimism, however. Higher prices across the established housing market could support the feasibility of renovations.
If you have your heart set on a fixer-upper, here are some essential tips.
Detailed inspection – Don’t just do a walk-through. Engage qualified building and pest inspectors to identify both cosmetic and, more importantly, structural issues. Foundation problems, roof issues, electrical and plumbing faults, and pest infestations are expensive to fix.
Good bones – Focus on properties with sound underlying structures (foundation, roof, framing) in desirable locations. Cosmetic issues like outdated kitchens, bathrooms and paint are easily managed.
Estimate realistically – Get quotes from multiple reputable contractors for necessary repairs and renovations. Material and labour costs are elevated, so factor in higher prices than you might have seen in the past.
Contingency fund – Add a further 10%-20% of your total renovation budget because you don’t know what you don’t know when it comes to renovating.
Negotiate based on repair costs – Use the inspection report and renovation quotes to negotiate the purchase price of your fixer-upper. The cost of necessary repairs should be factored into your offer.
Be prepared to act – Well-priced fixer-uppers in good locations attract attention. Have your finances ready to make a timely offer when you find the right property. Explore renovation loans.
Prioritise repairs – Focus on addressing structural, safety (electrical, plumbing), and weatherproofing issues first. These are critical for the long-term integrity and livability of the house.
DIY assessment – Determine which projects you can realistically and safely handle yourself to save money.