The Ugly House Might Be the Better Deal

There are two houses for sale.

Same neighborhood.

Similar square footage.

Similar lot.

Same school district.

One has white-oak floors, a remodeled kitchen, new bathrooms, perfect landscaping

and professional photos taken at sunset.

The other looks like someone stopped caring about it around 1997.

Which one gets everybody's attention?

Obviously, the remodeled house.

And that's exactly the problem.

You're Not the Only Person Who Likes the

Pretty House

Real estate buyers aren't particularly mysterious.

Most people walk into the remodeled property and immediately think:

“I could live here.”

They walk into the dated property and think:

“This needs $100,000 worth of work.”

Maybe.

But they're asking the wrong question.

The question shouldn't simply be:

Which house looks better today?

The better question is:

What will each house cost me after I own it?

Those can produce VERY different answers.

And in today's housing market, where affordability remains challenging, buyers need to

understand the difference.

Housing demand has remained surprisingly resilient even with elevated borrowing

costs, although recent purchase application data softened as rates moved higher. That

means desirable, turnkey properties can still attract plenty of attention even in a slower

market.

That creates an interesting opportunity:

Stop competing where everyone else is competing.

You're Paying for Someone Else's Renovation

Think about what happens when an investor buys an outdated property.

They buy it.

Renovate it.

Carry it for several months.

Pay contractors.

Pay insurance.

Pay financing costs.

Take risk.

Then sell it.

Are they selling it for exactly what they spent?

Of course not.

They're trying to make money.

There's nothing wrong with that.

But as the next buyer, you're paying for the house plus the renovation plus the

convenience plus somebody else's profit margin.

That's why I think buyers should at least run the numbers on properties that need work.

Not because every fixer is a deal.

They're absolutely not.

But because the ugly house and the bad house are not necessarily the same thing.

Ugly Is Fixable

This distinction matters.

An ugly kitchen?

Fixable.

Old flooring?

Fixable.

Dated bathrooms?

Fixable.

Bad paint?

Very fixable.

A bizarre 1980s wet bar?

Please fixable.

But there are other things buyers can't easily change.

Location.

Lot.

Street.

School district.

Commute.

Neighborhood.

Those are the things I'd be paying attention to first.

If I can buy the right location with the wrong kitchen, that's worth investigating.

“But Mike, I Don't Have Another $150,000”

This is where the financing conversation gets interesting.

Most buyers assume renovating means:

1. Buy the property.

2. Close escrow

3. Drain savings.

4. Open credit cards.

5. Take out another loan.

6. Start construction.

That isn't necessarily the only strategy.

There are renovation financing programs designed to combine an eligible property

purchase with eligible renovation costs.

One well-known example is the FHA 203(k), although other renovation products may be

available depending on the borrower, property and scope of work.

Stop Shopping Only by Today's Condition

Imagine you're approved around $900,000.

You could potentially look exclusively at homes around $900,000 that are already finished.

Fine.

But what if there's an $800,000 property in the neighborhood you actually want that

needs substantial updating?

Now we have something worth analyzing.

Could you purchase it?

Could eligible improvements be incorporated into the financing?

What might the property be worth when completed?

What's the resulting monthly payment?

How much cash would you need?

What renovations are eligible?

Does the project make economic sense?

I am not saying the fixer automatically wins.

I'm saying we finally have enough information to compare them intelligently.

That's mortgage planning.

The Cheapest House Can Also Be the Most

Expensive

Here's the other side.

Do not hear “Mike likes ugly houses” and go buy a disaster. 😂

A fixer can absolutely become a money pit.

Foundation problems.

Major structural issues.

Unpermitted additions.

Serious water intrusion.

Huge electrical problems.

Contractor surprises.

Appraisal problems.

Projects that don't fit a particular loan program.

Renovation financing does not magically turn every bad property into a good

investment.

You still need inspections.

You still need appropriate contractors.

You still need realistic budgets.

You still need contingencies.

And you need the financing strategy reviewed before writing the offer whenever

possible.

Why Sellers and Agents Should Understand

This Too

This isn't just a buyer strategy.

Listing agents should understand renovation financing because some properties are

difficult to market precisely because buyers can't visualize what's possible.

If the house has:

• an obsolete kitchen

• unfinished improvements,

• significant deferred maintenance,

• dated interiors,

• or obvious renovation needs,

the natural buyer pool shrinks.

Everyone says:

“Too much work.”

But what if the buyer knew before touring the property that financing options might exist to address some of that work?

That's a completely different conversation.

Instead of:

“We don't have the cash to renovate this.”

It becomes:

“Let's determine whether the purchase and eligible improvements can be structured together.”

That doesn't solve every transaction.

But it potentially creates another buyer for a property everybody else dismissed.

The “Messy House” Principle

There are houses near me undergoing major renovations right now.

My kids basically look at one of them as the messy house.

And they're right.

Construction IS messy.

Dirt everywhere.

Things torn apart.

Materials stacked outside.

It looks worse before it looks better.

But that's the point.

A buyer needs the ability to see the finished property instead of only the current

property.

That's difficult.

And because it's difficult, fewer buyers do it.

That can create opportunity.

Five Questions I'd Ask Before Passing on a

Fixer

1. Do I love the location?

You can remodel almost anything.

You can't remodel where the house sits.

2. What does the property actually need?

There's a massive difference between dated and structurally problematic.

3. What will the renovations realistically cost?

Not HGTV cost.

Real contractor cost.

4. What could the home be worth after improvements?

You're looking for context, not fantasy.

5. Can the financing be structured around the project?

This is the conversation most buyers never have.

Have it before eliminating the property.

Can Renovations Be Included in a Mortgage?

Potentially, yes.

Certain renovation loan programs can finance eligible improvements alongside the

acquisition or refinance of a property.

The exact rules depend on the loan program, borrower, property, contractor, appraisal

and proposed work.

Can I Use a Renovation Loan for a Kitchen?

Potentially.

Kitchen and bathroom renovations are common improvement projects, but allowable

improvements and procedures vary by program.

Can I Finance an Addition?

Some programs may permit larger improvements, but additions and structural work

require significantly more planning and documentation.

Get the project reviewed before assuming it's eligible.

Are Renovation Loans Harder?

They're more involved.

That's different from impossible.

You're financing a property and a construction project, so there are naturally

additional moving parts.

The contractor, bids, appraisal and project all matter.

That's why starting early is important.

Should First-Time Buyers Consider Fixers?

Absolutely worth considering.

Not automatically buying.

Considering.

First-time buyers often compete hardest for turnkey entry-level homes because that's

where everybody feels comfortable.

Expanding the search to properties needing improvement may create opportunities—

but only after understanding the numbers and risks.

The Bigger Lesson

The internet has trained buyers to shop for houses visually.

Swipe.

Swipe.

Swipe.

Ugly kitchen?

Gone.

Old bathroom?

Gone.

Bad carpet?

Gone.

Terrible photos?

Gone.

But real estate isn't Instagram.

Sometimes the property everybody skips is exactly the one worth investigating.

The goal isn't to buy an ugly house.

The goal is to recognize potential value that other buyers aren't willing to create

themselves.

Because the gorgeous remodeled house?

Everybody already sees the value.

The ugly one requires imagination.

And sometimes that's where the opportunity lives.

Ugly is temporary.

Location isn't.