For prospective fixer-upper home buyers, one of the hardest decisions in the entire process is likely the first: Which fixer-upper candidate will benefit the most from a renovation? Taking the financial plunge and investing time and money into a home that requires TLC is one thing, but capitalizing on your efforts—financially and otherwise—is another thing entirely.
We analyzed data from Realtor.com, the U.S. Census Bureau, and Zillow to discover how homeowners can evaluate fixer-uppers to determine whether they’re worth the investment. We also explored multiple financing options prospective home buyers can use to reduce the financial burden of renovation costs.
Every transformative renovation requires a strategic plan and budget to maximize the value of your available resources. Knowing when to hire an expert and when to do the work yourself can help you allocate funds elsewhere. Hire cheap moving companies in your area to set aside more of your savings for renovations rather than moving expenses.
Key Takeaways
- One in 20 homes in the U.S. listed for sale needs some kind of work, according to a Realtor.com study, with the Midwest and Northeast having the highest share.
- You should spend no more than 30% of the fixer-upper home’s value on renovations and keep the home’s value within 10%–15% of the median sale price of comparable homes in the neighborhood.
- You can find fixer-uppers via real estate agents, foreclosures, online marketplaces, and public auctions.
- Consider location, purchase price, structural integrity, renovation costs, and potential resale value when evaluating the ROI of a potential fixer-upper.
- New owners of houses built before 1950 tended to spend more on upkeep—a median of $3,900 a year, according to the Census Bureau.
What Is a Fixer-Upper?
Homes characterized as fixer-uppers require enough work to give the average prospective buyer pause despite a correspondingly lower listing price. However, fixer-uppers can appeal to investors looking to turn a profit or first-time home buyers who aren’t afraid to pick up a few power tools to maximize the home’s potential. Although fixer-uppers may require common renovations to improve their value—such as kitchen and bathroom remodels, new flooring, or a fresh coat of paint (inside and out)—the results are often as remarkable as the house itself.
Fixer-upper listings can be found in almost every part of the U.S. About one in 20 listings of homes for sale in the U.S. requires repairs or renovations, according to a Realtor.com study. However, regional concentration favors states in the Midwest and Northeast, according to Realtor.com:
- Midwest: 6.4%
- Northeast: 6.3%
- South: 4.4%
- West: 4%
Illinois ranks as the state with the highest concentration of fixer-uppers, with nearly one in every 10 listings fitting this definition. Of the top 10 cities with the most fixer-upper homes listed for sale, the average list price ranges from $26,500 in Flint, Michigan, to $519,000 in Aurora, Colorado. In New Haven, Connecticut, fixer-upper listings occupy nearly a third (30%) of all homes listed for sale.
How Much Does a Fixer-Upper Cost?
According to our analysis of home renovation trends, you shouldn’t spend more than 30% of your home’s market value on remodeling. Working within these parameters ensures you’re able to recuperate your renovation investment if you plan on selling the home at a later date. With the average home value at $355,328 in February 2025, according to Zillow, we can calculate a reasonable renovation budget based on an estimated market value of $350,000:
- The maximum amount you should spend on renovations should total no more than $105,000 (30% of $350,000).
- Aim for a 10%–20% cushion to account for unexpected expenses.
- If you budgeted $90,000 for renovations, an additional 15% cushion would bring your total renovation budget up to $103,500—within your $105,000 cap.
- To profit from selling your newly renovated home, you must have paid less than $246,500 (and sell it for more than $350,000).
You can perform these same calculations if you want to determine if buying that fixer-upper makes financial sense. Ask yourself if you can reasonably renovate a fixer-upper based on the estimated market value, renovation budget cap, and purchase price necessary to turn a profit. Even if you decide not to sell, incorporating these calculations into your renovation plans builds potential equity into your home’s value to avoid overspending on improvements the housing market won’t necessarily support.
In addition to accounting for materials and labor costs—depending on what work you decide to do yourself and what you hire a contractor to complete—consider the hidden costs many homeowners encounter during renovations, including the following:
- Hidden structural issues
- Overhauls of critical systems, such as plumbing or electrical
- Pest and mold infestations
- Repairs necessary to meet local building codes
- Temporary housing until the house is inhabitable, if applicable
It’s also important to budget for home maintenance costs unrelated to renovations. New owners of older homes spend more on annual upkeep compared to owners who’ve lived in older homes for longer, according to the Census Bureau. Whereas longtime owners spend roughly $1,500 on average on annual upkeep, new owners spend an average of $3,900 more.
How To Find Fixer-Upper Homes
Driving around neighborhoods to find fixer-upper properties isn’t the most efficient use of your fuel or time, especially if you’re exploring an unfamiliar area. Real estate agents can help simplify the process, in addition to locating foreclosures, online marketplaces, and public auctions. Use the following resources to discover your first—or next—fixer-upper.
Real Estate Agents
Working with a buyer’s real estate agent connects you to a much larger network of homes via the Multiple Listing Service (MLS), which you need a real estate license to access. Using the MLS, buyer’s agents can gather a list of potential fixer-uppers, including properties that aren’t yet officially listed. Many agents also leverage their connections and local knowledge to provide insight regarding a specific community or neighborhood.
Foreclosures
The state of foreclosed homes varies greatly, from neglected to turnkey. Because the previous homeowners were unable to afford their payments, it’s reasonable to assume that foreclosure properties need more work than the average home for sale. Prospective buyers can discover foreclosed homes in their areas by contacting a real estate agent, connecting with local banks, or searching online.
Online Marketplace
Most of the homes listed for sale on the MLS can also be found on online marketplaces like Zillow and Redfin, albeit with some exceptions. When searching properties on these websites, look for homes that have been on the market for more than 90 days. If banks are unable to auction off homes after foreclosure, these properties are then considered real estate-owned (REO) and may be priced to sell.
Public Auctions
Online and in-person auctions enable prospective buyers to explore more fixer-uppers than are available in their immediate area. However, financing a house sold at auction may require a cash deposit, depending on your lender. A thorough investigation of any properties listed at auction—including the existence of any tax liens—can help inform your bidding decisions.
What Should You Look For in a Fixer-Upper Home?
Evaluating a fixer-upper requires taking into account multiple aspects to determine your potential return on investment. Consider the home’s age, location, and list price alongside the estimated cost of renovations based on structural issues. Analyze your ability to turn a profit based on these factors should you choose to sell.
Home Age
Renovating older homes can be rewarding and profitable. However, prospective buyers should be aware that they are more likely to find outdated electrical systems, plumbing, and appliances in older properties. Depending on when the house was originally built, asbestos and lead paint may also be concerns.
Structural Issues
Distinguishing mere cosmetic touches from significant structural issues can help prospective buyers more accurately budget for fixer-upper renovations. A fresh coat of paint, new flooring, and some thoughtful landscaping pale in comparison when you consider the time and cost involved in revamping the electrical or plumbing systems, removing load-bearing walls, and replacing the entire roof.
A home inspection can also help prospective fixer-upper home buyers gauge the level of renovations necessary to bring the house up to local building codes. Professional home inspectors can help identify issues that may not be as apparent to the inexperienced eye, enabling prospective buyers to allocate renovation funds more effectively.
Location
If the want to sell your fixer-upper is part of your future plans for the property, choosing a home in an up-and-coming neighborhood can help increase your chances of turning a profit. Desirable areas include those close to highly rated school districts with low crime rates and proximity to community amenities and public transportation.
House Price
A fixer-upper’s purchase price significantly impacts how much you should allocate toward renovations and your return on investment. Buying a fixer-upper at the lowest price possible leaves more room for necessary improvements, giving you a bit more freedom to spend funds strategically. Carefully consider the market values of comparable homes in the area and integrate them into your renovation plans.
Cost To Renovate
Completing many of the repairs yourself can decrease the capital you invest in renovating your fixer-upper. However, certain projects will require a professional licensed contractor, especially if they require pulling permits. As you begin quoting out materials, create a separate list of tasks you’ll take on versus those you’ll need to quote out.
Resale Value
One of the final steps in evaluating fixer-uppers requires looking at comparable homes in the immediate area based on the following characteristics:
- Number of bedrooms and bathrooms
- Similar features (attached garage, backyard, pool, etc.)
- Square footage
- Style (ranch, multi-story, etc.)
A good rule of thumb is to stay within 10%–15% of the median sales price of these comparable homes. If the price is right, prospective buyers may be more likely to purchase a recently renovated—but slightly more expensive—house with more appeal than similar properties. That built-in 10%–15% cushion safeguards against pricing the home out of the target market.
How To Finance a Fixer-Upper
Paying out of pocket for improvements (on top of obtaining a mortgage loan) gives you the freedom to spend renovation funds as you see fit. However, there are several home and renovation loan programs you can use to make necessary improvements without leveraging your finances. FHA 203(k) loans, CHOICERenovation loans from Freddie Mac, and Fannie Mae’s HomeStyle loans are three popular alternatives.
Traditional Loan
Prospective home buyers can opt for a traditional mortgage loan and set aside extra money to fund renovations. This option limits the mortgage-related debt homeowners take on and frees them from lender oversight and limitations. However, home improvements can quickly eat into any emergency savings if homeowners don’t establish and follow a strict renovation budget.
Fannie Mae HomeStyle
With a 620 minimum required credit score and a down payment ranging from 3%–5%, Fannie Mae HomeStyle loans finance the purchase and renovation of a fixer-upper home. There’s no minimum dollar amount required for this loan, which carries a loan-to-value (LTV) ratio of up to 97% for first-time home buyers. It permits “luxury” improvements—cosmetic upgrades—so long as they’re a permanent fixture of the home or land.
Bundling your home and renovation loans isn’t the only perk a Fannie Mae HomeStyle loan offers. You can also combine a HomeStyle loan with HomeStyle Energy and HomeReady programs to maximize your return on investment. The former offers homeowners selective financing for energy-efficient upgrades, while the latter supports low-income prospective home buyers.
FHA 203(k) Loan
The Federal Housing Administration (FHA) offers a bundled purchase and renovation home loan. To qualify for a standard FHA 203(k) loan, you must have a credit score of 500 with a 10% down payment or 580 with a 3.5% down payment. Loan funds must be used only for structural improvements, and a U.S. Department of Housing and Urban Development (HUD) representative oversees the renovations.
Home buyers can also opt for a limited FHA 203(k) loan, which covers restoration costs up to $35,000. These loans are ideal for minor improvements, such as new carpeting or a kitchen remodel. Aside from the loan limits, many of the same restrictions apply to both the standard and limited FHA 203(k) loans.
CHOICERenovation
Freddie Mac offers home improvement loans under the name CHOICERenovation. These loans require multiple appraisals throughout the process to ensure the renovations improve the home to its estimated value. However, you can obtain a down payment credit if you do part of the renovation work yourself.
