<prompt> Human: Hi all. Looking to buy property in a town outside a major US city. The area itself is a bit out of our price range but we are considering buying a house at below-average price and fixing it up as we go along. The house would be livable but around the century mark and would need some updates. The area itself is very desirable. The school district one of the top in the state, it is a short commute into the city center via a direct train line and it is a rare suburb that has walkabilitynightlife of its own. Given that the houses we are looking at are older, is it worth going this route or should we go for a less desirable area with a newerupdated house?We found a very nice single with a yard and a garage that we would like to put an offer in on but it does need some updating. This is hard to find in our price range in this area as it is an older area with mostly row homes.We will be first-time home buyers so were a little hesitant to get in over our heads on this. Any advice or experiences would be appreciated.Thanks!Edit: I apologize for not being able to respond to many comments- this blew up way more than I was expecting so I cant respond to everyone! Seems like the consensus is to make sure we know what were getting into with big things like plumbingelectricalfoundation issues but that if its just cosmetic work to go for it. Thanks everyone!Just to answer a few common questions, we are not so much interested in this as a return on investment as we see ourselves staying in this housearea long term. We are more interested in putting some work into it to make it exactly how we like it and be able to be in our preferred area instead of buying a fully renovated house in a worse area. While I wouldnt exactly describe us as handy we are definitely willing to learn how to do some work ourselves. The house is not run-down by any means, just outdated but it is an old house so there are bound to be some issues even though it has been maintained fairly well.Assistant: The general thought is that you get the most equity out of buying the worst house in the neighborhood.Consider two case examples:House A is purchased at 400K and is a perfect remodel and the comparables are equal to the neighborhood. Theres really nothing you can do to it that would make it worth more. We will assume that it appreciates at the same rate that all other comps do in the neighborhood. Well be conservative and peg the appreciation at 4 per year so that in 5 years, the house has appreciated 20. In 5 years, the house is now worth 480K as is all other houses in the neighborhood. sidebar - this is not how the market actually works, but lets make it simpleIts worth some more money, but once you take out the closing costs lets assume 4 on the buyers side and 6 on the sellers side - remove all other extra purchases needed for moving. Lets assume you put 20 down. Thats 96K out of pocket down paymentclosing during the purchase and then another 29K for closing costs on the sell. In 5 years, your mortgage amount is going to be about 290K given a standard interest rate and no extra payments. That means450K final check amount after closing costs - 290K 160K back in your pocket. Given that you put in about 96K up front, you gained about 64K in equity. Not bad!House B is purchased at 325K. It needs some work and you have to put in some remodels. Some of it are purchased renovations and some of it is sweat equity doing the renovation yourself. Lets say you put in 50K of work into it. Your final all in number is 375k and you have the house the way you want it and comparable to the neighborhood.325K at 20closing is 78K out of pocket for the purchase 50K remodel for a total of 128K. Lets say that the house is now comparable to House A and sells the same amount as House A at 480K. The difference is that with your purchase price at 325K, your remaining mortgage balance is now at 235K. Lets do the math.450K final check amount after closing costs - 235K 245K back in your pocket. Given that you put in 128K of your own into the house, you gained about 117K in equity. Thats a lot more!Now, there are a lot of assumptions in this, but I just wanted to give you the picture of why you want the worst house in the neighborhood instead of the best one. That doesnt take into consideration lower monthly payments from buying a 325K house instead of a 400K house, lower property taxes for the most part since the appraisal will come in lower, and the house the way you want in instead of accepting however the house was sold to you.Its not easy though.Your remodel costs can quickly spiral out of control. A house that might just have little problems on the surface could suddenly have huge problems sewer line broken, mold, cracked foundation, replaced roof. Those are pretty much non-negotiable items in terms of replacement and will completely screw over your remodel budget. Unpermitted work from the previous owner most likely will need to be permitted and if you have a county inspector that doesnt think its up to code, youre going to have to tear it all down and try again. Theres going to be a lot of personal stress in the makeover and emotional stress if you have an SO. Lots of fights over stupid things like the handles on the cabinets or what color the door frames should be. It sounds little, but its pretty hard on a relationship.You want to make sure your worst house can be renovated to be comparable to the other houses in the neighborhood. No use in buying a 32 with 1100 square feet when it will never sell as much as the 32 with 1600 square feet. No point in buying a house thats below market when your renovation budget will exceed the comparables in the neighborhood.If you want a short summary to ease your mind or sell it to your SO the harder part, here you go: You will have more equity if you buy the worst house in the neighborhood and renovate it to make it comparable to the rest of the houses Your monthly payments will also be lower lower mortgage payment and lower property taxes and you will have less invested overall depending on if you have the cash on hand or credit for the remodel Be mindful of your remodel budget. Dont buy the worst house if the foundation is cracked and the roof needs replaced. You will never be able to recoup your investment Prepare yourself for the stress and hardships of a remodel. Its very taxing to be doing constant work on your house. Most people will still be working while this remodel is going on and it can exhaust you quickly. Always over budget and over estimate how much time it will take. Make sure the house you buy can be fixed up to the rest of the houses in the neighborhood.Human: Thank you so much for your reply. Renovated comps in the area are going for around 300k and the asking price on this place is 260k. We want to come in a little lower because it has been on the market for a while. Not sure yet what our reno budget would be but we arent looking to tear down walls or anything, mostly just replace outdated fixtures.  <response>: Yeah if you can snag it for 240K and put in 40K of work into it, youll probably come out ahead at the end of day.That being said, I echo what others have said in the thread. Make sure you bring a home inspector of your own choosing to point out the flaws so you can walk away if you need to. Most of the time, its not JUST replacing outdated fixtures. Go back to the house and see if you can spot the following: Go to your countys property appraisal site and make sure the number of beds and baths match up with the county. If it doesnt, thats unpermitted work. Verify the square footage as well. Go to the local city, neighborhood, or county website and search permits for big ticket items. While it is not always necessary and most people dont pull permits for everything, look to see if they pulled permits for big ticket items like roofing, AC, additional structures, additional outside structures, and any enclosures. It can potentially cost a lot of money if something isnt permitted correctly and they force you to tear it down and start over. Check the roof. Is there any damage? Do they have extra tiles or shingles lying around? Ask them if there were any leaks, fires, or termite damage. In most states, they are obliged to reveal this, but they wont if they dont have to. Take a look around the house to see if there are any cracks and if all the walls look straight and not bowed. Check the floors and ceilings for cracks as well. If youre in an area that rains with any frequency, make sure all the drainage is running away from the house. Check to see if theres any standing water that collects around the house. Have someone check the plumbing and electricity. Older houses are notorious for needing the plumbing replaced and if your electrical isnt up to code, it can be potentially dangerous.You have to make sure your fundamentals are correct and that a coat of paint doesnt gloss over what other problems the house might have. Remember that most home buyers are like you and will be looking for the same thing. Theres usually a reason the house is below market. 