The first property I bought was in desperate need of some TLC in the downstairs unit. I ripped up all the flooring, entirely replaced the bathroom and painted nearly every surface in the whole place. In that instance it was all well worth it. The upstairs unit was covering the mortgage and thankfully the repairs did not end up being that extensive (or expensive). In many cases though, folks get too excited about some (likely false) fantasy of a fixer-upper they see on some reality TV show and are more than disappointed at the end-result. Let's take a look at some history in the "needs some TLC" world and see if we can come up with a more solid strategy.

Porch.com did a study of over 1,000 homeowners and the data below comes from their findings. Most of us think that buying a home that needs some work is going to pay off in some way. Otherwise, why would we do it? The majority of respondents purchased their fixer-uppers because they thought they could save money, the next most popular reasons were they liked the home, they liked the neighborhood and they liked the idea of being able to personalize the home.

That last reason resonates with me. When looking at homes to purchase for investment, I'm always putting myself in the shoes of the tenant. What modifications could I make that would both make the property more attractive to renters as well as more convenient for me to rent. When you are looking at a home through those lenses, it makes it easier (usually) to be objective and pragmatic. Of course we can all still "fall in love" with a home, but knowing someone else is going to be living there (for the most part) helps us maintain our emotional distance.

"One of the areas in which I tend to caution buyers, particularly first time homebuyers, is underestimating repair costs," notes Badger Peabody & Smith Realty (formerly Badger Realty) agent, Karla Badger. "Most of the time, the television shows focus on the huge gains the "flippers" made when they sell. But all it takes is a moderately sized HVAC or plumbing issue to watch all of those gains go away," she continued.

Of those who responded to the survey, over 40% finished the project over budget. In addition to what Karla mentioned above, appliances, bathrooms, basements and roofs represented the biggest items that pushed the budget over the edge. And those budget busters were not small. Of those who went over, the average was nearly 40% over the amount planned. A paltry 5% finished under budget. To those folks: hat's off!

When it comes down to actual dollars and cents, the results are actually somewhat amusing. On average respondents who bought a move-in ready home spent about $250,000 while the fixer-upper crowd's purchase price was closer to $200,000. If they stayed on budget, the fixer-uppers essentially matched the move-in crowd's purchase price at $250,000. For those who went over budget, they averaged around $275,000 total. If that delta is not too much to swallow, the huge benefit on that end is you get to customize the home to your liking with that extra money. For my fellow fixers and I, that's worth the cost of admission.

I'm still a huge fan of buying homes that need some TLC. In fact 86% of homebuyers spent about as much as they thought they would and 73% said they spent less. Most of the people surveyed would buy the same house and do it all over again. It seems that with all the risks and potential hits to the wallet, the payoff is still worth it. I would toss in one caveat with that statement though. It is similar to people who say they would go skydiving again. If you are someone who would take the plunge in the first place, like myself on both counts, chances are you are comfortable with a bit of risk.

Another interesting note on the survey was longevity in the home. I assumed that "flippers" would be in and out in a much shorter timeframe than the "move-in ready" crowd. It turns out both parties stay in their homes around 8 years even though nearly everyone intends to live in their home for a media of 15 years. Apparently we all have good intentions, but reality has other ideas for us. If you are considering getting into the real estate market either for yourself of as an investment, consider a fixer-upper. You might find you love the whole process!