Landlording & Rental Properties

Is a Fixer-Upper Worth Your Investment?

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Finance, Real Estate News & Commentary, Business Management, Real Estate Deal Analysis & Advice, Real Estate Marketing, Mortgages & Creative Financing
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Rental properties have the potential to net you a return in two different ways: You can charge more in rent than you pay on the mortgage, resulting in a stream of revenue that could last indefinitely, and you can invest in a property with the potential to appreciate over time, so you can eventually sell the property for more than you paid for it.

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In either case, if you can get a property for less money up front, you’ll have the potential to earn more money. This idea is partially why “fixer-upper” properties are so popular. Prospective landlords or property investors believe they can purchase a problematic property for a low amount of money, invest some extra time and money into making it more livable, and collect on the home’s final value (which they expect to be higher than the combination of their total investments).

But are these properties really worth your time and money?

Judge the Scale

Obviously, not all fixer-uppers are going to require the same amount of work, and what qualifies as a “fixer-upper” to you may not to someone else. Almost any property you purchase is going to require at least some repair and maintenance before you try to attract tenants for it or sell it to other buyers; the question is, how much is it going to take?

If you can knock out the repairs in a weekend, such as by replacing the carpet, repainting the walls, and having the place professionally cleaned, you shouldn’t worry—these projects don’t have the power to significantly change the value of your investment.

Related: How I Bought a Fixer-Upper Fourplex for $1 Down: A BRRRR Case Study

However, if you’re looking at a project that could take months to complete, you may want to reconsider. Not only will it take a much bigger investment, it will also delay you from collecting income to start offsetting your investment.

cash-on-cash return

Do the Math

This should go without saying, but before you buy a property with the intention of flipping or fixing it, you need to do the math.


  • The cost of your planned projects. Get quotes from a few different contractors, or visit your local home improvement store to estimate the cost of the supplies you’ll need. Come up with a total figure for making all the renovations you’d like.
  • A buffer to protect you from unforeseen events. When you’re done estimating costs, increase your total estimate by at least 5 to 10 percent. There will almost certainly be new repairs you didn’t notice or unforeseen developments that make your initial projections more expensive. This buffer will serve to protect you and your investment.
  • The expected ROI of your projects. Next, evaluate the expected ROI for each of your projects (again, estimating conservatively). Some projects, like installing new windows or painting your home, will return almost as much home value as you spend on them. Others won’t pay off nearly as much.

If your projects will increase the value of your home or the price you can charge in rent by an amount that exceeds even your most conservative cost estimates, it might be worth pulling the trigger.

Value Your Time

Here’s another variable to consider: the value of your time. Let’s say you plan on doing a lot of the repairs yourself and you’ve determined that $10,000 in supplies will be enough to get the job done. At the end of the day, that could boost the value of your property by $15,000.

Related: 5 Questions to Ask Before Investing in a Fixer-Upper

On the surface, this seems like a no-brainer, but you should also consider how many hours the project is going to take. Let’s say it’s going to take 100 hours of work to finish the repairs, and in your normal job, you make $60 an hour. Essentially, you’ll need to spend $6,000 worth of your time to complete the repairs, bringing your total costs up to $16,000 and making the project not worth it. If you enjoy doing the work, that’s one thing—but don’t count your labor as free.


Trust Your Expertise

You should also taper your expectations based on how much experience you’ve had. If you’ve never flipped a house before, or if this is one of your first properties, you should expect to make lots of mistakes—including misestimating your costs and expected returns. It’s ideal to start with smaller, less risky projects if you don’t have much experience. If you’ve done this many times before, trust your gut—you probably know when a fixer-upper is worth the investment and when it isn’t.

Ultimately, there’s no single answer to whether a fixer-upper is worth your time or money; there are too many variables to consider. However, with the right calculations and enough self-awareness to determine your own judgment skills, you can make the right call.

Any questions regarding fixer-uppers or advice you’d add?

Comment below!

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include Entrepreneur Media, TechCrunch, and When he is not writing, Larry assists both entrepreneurs and mid-market businesses in optimizing strategies for growth, cost cutting, and operational optimization. As an avid real estate investor, Larry cut his teeth in the early 2000s buying land and small single family properties. He has since acquired and flipped over 30 parcels and small homes across the United States. While Larry’s real estate investing experience is a side passion, he will affirm his experience and know-how in real estate investing is derived more from his failures than his successes.
    Katie Rogers from Santa Barbara, California
    Replied over 2 years ago
    Is dealing with contractors worth the aggravation?
    Barry H. Investor from Scottsdale, AZ
    Replied over 2 years ago
    @Katie Rogers That is a great question and I have found the answer is NO, until unless you have spent the time and aggravation to find a contractor you can trust. When I was first starting out, I did not have an endless stream of projects for a contractor to work on, and they (contractors) will tell you EVERY investor promises more jobs if the first job is done well, under budget and on time. As such, my advice, in retrospect, is that if you do NOT have a solid relationship with a contractor, avoid the urge to buy the BIG rehab project for a Flip or a BRRRR. Start with somethig that needs cosmetic fixing so you can make your budget mistakes and vett a contractor with less overall risk.
    Christopher Smith Investor from brentwood, california
    Replied over 2 years ago
    Some good common sense many times lacking on these posts. It always amazes me how so many novices think they can acquire a “fixer upper” and presto changeo they can capture all this profit on a rehab when folks with a lifetime of rehab experience would approach the very same deal with a very healthy degree of skeptisism. When I bought my competitive advantage was timing and funding. It was at the depth of the housing crises when prices were less than half of what they were at the height of the pre crash bubble, and banks had almost shut down lending so no one except cash buyers were relevant. Over and above that there were many properties available just a couple of years old in really great areas needing very minimal rehab. I even turned over all the minimal rehab work to the property manager people I retained to manage all the properties I acquired during that period. Not to say you can’t do rehab profitably, but there is more than one way to skin a cat, and sometimes a whole lot easier way than convincing yourself you can become an emminiently successful contractor out of the box. It’s my guess that becoming a fix and flip afficinado ain’t gonna happen without a lot of time, patience and pain except in one’s overly active imagination.
    Costin I. Rental Property Investor from Round Rock, TX
    Replied over 2 years ago
    I’m not clear/sure on the “value of your time” assertion. Let’s say it’s going to take 100 hours of work to finish the repairs, and in your normal job, you make $60 an hour. If you take time off your job, those 100 hours of work for sure will cost you $6,000. But if you can’t generate $60 an hour through other means when not at your work, and you do the project, isn’t that 6K saved? Or let’s say you make $40/hr in your job, and your tile contractor wants the equivalent of $70/hr for the tile work needed, but you are decently skilled in laying tile…wouldn’t that be saving or value added to your project, even if you take time off? Or a clear $70/hr saving if done outside work? Should that be counted at $40/hr or at $70/hr? Ultimately, a dollar saved is worth more than a dollar earned.
    Rob Cook from Powell, WY
    Replied over 2 years ago
    You make good points Costin. It is so common for people to make real errors in accounting for their own time invested in rehabbing a property. And MANY types of errors too. First, if you “make $60/hour” at your day job, you are almost certainly salary-exempt – meaning you cannot increase that pay by working more hours. So your off time spent on a rehab is EXTRA income, a side-gig and the only “opportunity cost” of time spent rehabbing then, is trading off leisure time for a side income instead. A rational choice for many ambitious investors. Second, losing the opportunity to create sweat equity (forced appreciation) can make the difference in success or failure in this game. Paying retail price for a house is universally considered stupid by most, but yet they talk about paying full retail to a contractor to perform work you could have on a rehab, is somehow okay. or even smart. Third, people talk about cash flow is so important, which it is, but neglect to consider the built-in conflict within their own statements. I.e., only buy rentals which need $5K in rehab, tie up as little cash as possible in a deal, and focus on cash flow? Right. A house which needs only $5K in rehab is not going to be bought for a bargain price at all, period. This is not 2009 anymore. And having less cash in the deal means a larger mortgage burden. BOTH of these make getting a cash flow difficult if not impossible, in most markets and situations. Sounds good till you really peel back the layers of such statements. So, the alternative many of us work under, including me, is to buy properties which need a LOT of rehab work which we do ourselves. This essentially assures a bargain price (motivated seller) and provides instant equity as a result of the bargain purchase price. AND provides a lot of equity creation thru sweat equity. Only by having equity can the “BRRRR” strategy be implemented. And the more equity, generally, the better the cash flow. And ALL of these are wealth building pillars in my opinion. The author makes the important point that failing to account for rehab costs properly BEFORE purchasing the property, as well as neglecting to value your own time appropriately in the analysis, can doom you to buying a low paying “job” and poor investment. This does NOT translate into the conclusion that performing your own rehab work is an error. If you do not have the knowledge or skills or interest in performing rehab work, you either have to settle for poor cash flow, paying and dealing with contractors, and/or paying all cash so you can have a chance at a cash flow. Glad I have other options. And so do most people if they are willing to develop skills, do work, and gain experience. Rentals are not passive investments for any other than those fortunate enough to have the cash to pay others to do everything for them and also own the properties outright. Just the reality of the situation for the vast majority of markets and investors.
    Frank Grimm
    Replied over 2 years ago
    Wow, I have spent the weekend considering the issues raised in this response to the main article. It is nice to see that someone else has had the same thoughts/or come to similar conclusions. There seems to be a paradox in the teaching on real estate investing. Low repair costs= market high prices for property acquisition, and that will probably not provide good cash flow. And- risky cash-only deals are required for unstable property purchases and rehab. For a new investor the odds seem overwhelming. Here’s a thought. A flipper flips a home and seeks market value for the home. Investor purchases the flipped home at market value and seeks to rent the property for the mortgage payment and an allowance for vacancy. Over a period of time say, 36 mos, the principle on the property is paid down a bit and property values rise a bit and the property can be refinanced. Refinance the property at that time and take that cash to purchase a distressed property, perhaps something that will work for a BRRRR. The way I see it, the flipper has forced equity in the home and will benefit from it in the sale. If the property price after the flip is reasonable for the market, rent should be as high as mortgage if not higher. This allows the rental investor to skip the recon on the property and go straight to landlord. What’s wrong with this formula? Does anyone have experience doing this? Essentially, the rental owner buys a finished property without the haggling, seeking distressed property, alignment of contractors and schedules. etc. Tell me, is this a dream?
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied over 2 years ago
    Yes, Frank, it’s a dream that comes true only in a perfect world. The best way to purchase a hold property is with equity already in it – the more the better. Prices do not always appreciate and, when values drop again – which they will – you don’t want to owe more than it’s worth. Also, you need to be able to lower rents when the economy changes so you need as much cash flow from the start as possible. Cash flow is not income. Hopefully, you’ll get enough cash flow from a rental to cover all of the maintenance and upkeep that it costs to hold the property. Holding rentals is expensive, even when they tenant covers more than your PITI (principle, interest, taxes, insurance) every month. Buy rentals like every investment property you buy – at a discount, not full retail. Full retail is for houses you intend to live in only. Full retail is not investing. Thanks for asking and good luck to you!
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied over 2 years ago
    Great post, Larry. I don’t like to put more than $5000 worth of repairs into anything I’m planning to hold. If the repairs are $10,000 or more, I flip it to get my money back. I don’t want a lot tied up in the hold properties. Cash flow is the name of the game. No matter how much money you have, it’s never enough. And you don’t want to miss a great deal because all of your cash is tied up in holds. Keep that cash liquid and moving!