I was nervous about a house that needed work, but buying a fixer-upper ended up being the smartest thing I've ever done with my money

Kelly Burch

Sep 26, 2019, 23:07 IST

I was nervous about a house that needed work, but buying a fixer-upper ended up being the smartest thing I've ever done with my money

Paul Bradbury/Getty Images

I prioritized buying a house that was a good investment.
The house was structurally sound and in a good location, but needed tons of cosmetic work.
After three years, the home was worth more than double what we paid. Now, we rent the house out for a monthly profit.
Visit Business Insider's homepage for more stories.

When my husband and I were shopping for our first home four years ago, we were determined to make a savvy financial decision. Sure, we wanted a great yard, a fireplace, and a large master bathroom. Who doesn't? But what we needed was a home that would help us get ahead financially.

We found that in a 900-square-foot-home on a corner lot in a charming neighborhood. The house had briefly been on the market for $75,000 (still a bargain in our mid-sized New Hampshire city). However, it was late October, which is when home sales typically come to a screeching halt before the harsh New Hampshire winter. The owner was clearly motivated to sell before the snow flew, because he dropped the price by $15,000.

After walking through the house for the first time, I was firm: It was too small. However, my husband knew we had found our gem. He pointed out that the three-bedroom house had enough space for us, our 18-month-old, and my home office. It had a newer roof and siding, and although the inside was in desperate need of cosmetic work, it was nothing we couldn't handle.

The strongest part of his argument was financial. If we bought this house our mortgage would be half of what we were paying in rent at the time. That would let us pay down debt and funnel money into the home to grow our equity and help us build financial security. I was sold.

Our extra cash was eaten up quickly

We closed on the house in January for a final sale price of $55,000. That put our monthly mortgage payment at $619, a huge savings from the $1,250 we had been paying in rent.

Although those numbers were nice, we certainly were not swimming in money, since we had been struggling to make ends meet before the purchase. After closing we had about $7,000 to spend on immediate projects. We hired my brother (who owns an interior painting company) to fix the drywall and paint the house at a family bargain price. At the same time, my husband (who has a plumbing background) and his friend gutted the bathroom, replacing it with a basic but modern setup. That quickly ate through the money we had to invest in the house initially.

We couldn't fix everything at once

While my brother painted and my husband gutted the bathroom, I ripped up the carpets. We learned from neighbors that the woman who lived there before had been a hoarder, and the dingy, stained carpets were proof. Underneath the carpet were unfinished hardwood floors. I needed the carpets gone, but since we didn't have the funds to refinish the floors we lived in the house with bare, unfinished wood floors for nine months until we could afford new flooring (with the help of a Black Friday sale).

The floors were our most obvious exercise in patience. When we had guests I would be slightly embarrassed that our house was so obviously unfinished. However, I reminded myself that my husband and I were working slowly and responsibly toward our goal of building equity in our house, and that was worth ugly flooring.

We lived there longer than we'd planned

When we bought the house, we planned to be there for two years. I hoped that by the time we had a second child we could have a bigger home. Yet, each time we were tempted to move we again chose the low cost of living in our house.

Two and a half years after we moved in, I had another baby. Because I work full-time from home I still needed office space, so my daughter's crib was set up alongside by desk. By day the room was my office, and by night it was her nursery. It wasn't ideal (I would often put her down for a nap only to realize paperwork I needed was in the office), but it was manageable.

We ended up staying in the house for three and a half years. The whole time we were slowly plugging along at updates and repairs. We gutted the bathroom, put in a new kitchen, updated almost all of the electrical and replaced all the doors and windows. My husband doesn't work in the trades but he is incredibly handy, so our only cost was for materials and his time. Overall, we spent about $20,000 (and countless hours) on updating the home.

Now, the house is a rental property

A year after our youngest was born we knew it was time to move. Our oldest was starting kindergarten, and we wanted her in a better school district. We withdrew $35,000 in a home equity loan to cover moving costs and a down payment on a much larger, nicer house in a better district. We could have sold our first house for a profit of about $60,000, but instead we chose to rent it out. Now, we have a small monthly profit from the rental, and still own an appreciating asset, while living in a space that is much more comfortable for our family.

When we bought a fixer-upper, we put aside our immediate comfort in terms of long-term financial stability. Before we owned our home we were struggling to make ends meet. Having a lower monthly payment and equity in the house allowed us to get ahead, and we're now much more comfortably financially. Looking back, our first house was exactly what we wanted: a financial stepping stone.