Buying a fixer-upper: Costs, risks and finance

Key takeaways:

• A fixer-upper may have a lower purchase price, but renovation costs, repairs and delays can outweigh the initial savings.

• Calculate the total cost before buying. Include renovations, stamp duty, loan fees, holding costs and a contingency for unexpected expenses.

• Get building and pest inspections before committing. Specialist inspections may also be needed to identify structural damage, asbestos or other costly defects.

• Financing a fixer-upper depends on the property's condition. Some lenders may restrict borrowing or decline finance for properties considered unliveable.

• Compare costs with renovated homes nearby. This can help you assess value for money and reduce the risk of overcapitalising.

Buying a fixer-upper could help you enter your preferred suburb at a lower purchase price, but renovation costs can quickly outweigh the savings. Before buying, consider the property's condition, potential repair costs, renovation delays and financing options.

It's also worth comparing the total purchase and renovation costs with similar renovated properties nearby.

This guide covers the costs, risks, property inspections and home loan considerations to help you decide whether buying a fixer-upper is right for you.

What is a fixer-upper?

A fixer-upper, sometimes called a 'renovator' is a property that needs repairs or renovations. These homes may cost less than comparable renovated properties, but the work required can range from minor updates to major structural repairs.

Renovations fall into two categories:

• Cosmetic renovations: Minor improvements such as painting, replacing flooring, updating cabinetry or refreshing fixtures and finishes.

• Major renovations: More extensive work such as structural repairs, roof replacement, electrical rewiring or plumbing upgrades.

Some fixer-uppers are liveable during renovations, while others may need significant repairs before they're safe to occupy.

Before buying, consider getting a professional building and pest inspection to identify potential issues, including hidden damage or ageing infrastructure.

Understanding the scope and cost of repairs can help you assess whether the property is worth the investment.

What are the pros and cons of buying a fixer-upper?

Buying a fixer-upper could mean a lower purchase price and the opportunity to renovate to suit your needs. However, hidden defects, unexpected costs and financing restrictions can make it a riskier purchase than a move-in-ready home.

Before buying a fixer-upper, compare the purchase price and estimated renovation costs with similar renovated homes nearby.

Does a fixer-upper stack up?

A cheaper purchase price doesn't always mean a better deal. Before buying a fixer-upper, calculate the total cost of purchasing and renovating the property, including a contingency for unexpected expenses.

Factor in renovation quotes, stamp duty, legal and loan fees, and holding costs such as rent or temporary accommodation. Here's an example of how the costs could add up:

Illustrative example only. Actual costs depend on the property, renovation scope and location.

If comparable renovated homes are selling for $800,000, this fixer-upper could cost $12,000 more before stamp duty, legal fees and loan costs.

There's also a risk of overcapitalising; spending more on renovations than they add to the property's market value. Even well-planned improvements may not deliver an equivalent increase in value. Before committing, compare your total estimated costs with recent sales of similar renovated properties nearby.

You might also be interested in: Renovate, build or buy? Costs and what to consider

What should I ask before buying a fixer-upper?

Before buying a fixer-upper, check whether the property's condition, renovation costs and required work fit your budget and circumstances.

Here are eight questions to ask before making an offer:

• What repairs are needed? Arrange a building and pest inspection to help identify cosmetic, structural and other potential issues.

• Is the property liveable? Check essential facilities such as plumbing, electricity, the kitchen and bathroom. Unliveable properties may be harder to finance.

• Can I afford the purchase and renovations? Factor in your borrowing capacity, renovation quotes and a contingency for unexpected costs.

• Will I need temporary accommodation? Consider whether you can live in the property during renovations or need to budget for rent elsewhere.

• Can I manage the renovation? Allow time to coordinate trades, make decisions and handle potential delays.

• Are there planning restrictions? Check for heritage protections, flood or bushfire overlays and other restrictions that may affect your plans.

• What approvals are required? Confirm any council approvals, planning permissions or building permits needed for the proposed work.

• Have I checked the contract? Ask a qualified conveyancer or solicitor to review the contract of sale and relevant property documents before signing.

Not sure what you can afford? Use Aussie's Borrowing Power Calculator for an initial estimate, or Contract Analyser to help identify key contract terms.

You might also be interested in: Top 10 renovations that add the most value to your home

Which inspections should you get before buying a fixer-upper?

A building and pest inspection is a good starting point when buying a fixer-upper, but it may not identify every problem. Depending on the property's age and condition, specialist inspections can help uncover potential repair costs before you commit.

What about asbestos in older homes?

According to the Asbestos and Silica Safety and Eradication Agency, Australian homes built or renovated before 1990 are likely to contain asbestos in materials such as roofing, wall sheeting and flooring.

You can't reliably identify asbestos by sight alone. Professional testing may be needed, and any removal must meet applicable state or territory safety and licensing requirements.

The inspections you need will depend on the property's condition and your renovation plans. A qualified building inspector can help identify issues that need further investigation, giving you a clearer picture of potential costs before buying.

Why do renovation budgets blow out?

Renovation costs can exceed initial quotes due to hidden defects, changes to building plans or construction delays. Common causes of budget blowouts include:

• Unexpected repairs: Structural damage, termites or water damage discovered during renovations can add high costs.

• Scope changes: Design changes or additional work can increase labour and material expenses.

• Compliance upgrades: Older homes may need electrical, plumbing or structural upgrades to meet applicable building standards.

• Rising costs: Changes in material prices and trade availability can affect your renovation budget.

• Construction delays: Supply shortages, contractor availability or unexpected repairs can extend timelines and increase holding costs.

• Financing costs: Interest charges can accumulate as renovation funds are drawn, while variable rate changes may affect repayments.

Interest rate movements are another consideration. On 3 November 2026, the Reserve Bank of Australia raised the cash rate target to 4.85%, effective 4 November 2026. While the cash rate differs from home loan interest rates, it can influence borrowing costs.

How much contingency should you allow for renovations?

A renovation contingency is money set aside for unexpected repairs, additional work or costs not covered by your builder's quote.

For example, setting aside 20% of your renovation quote can be a good starting point. For a $100,000 renovation, that's an additional $20,000. However, the amount you need will depend on the property's condition, renovation scope and potential risks.

Before setting your budget, ask your builder to identify likely cost risks and recommend an appropriate contingency. You can also explore home-building costs to understand other expenses to consider.

How do you finance a fixer-upper?

Financing a fixer-upper depends on the property's condition, renovation plans and lender requirements. Homes needing major repairs or considered unlivable may be harder to finance than move-in-ready ones.

Will a lender finance a run-down home?

Some lenders may finance a fixer-upper, but they'll assess its condition and value before approving a home loan. Properties without a functional kitchen, bathroom or essential services may not meet lender requirements.

This could limit how much you can borrow or affect loan approval. Even with home loan pre-approval, final approval depends on the lender's property valuation and assessment.

What are your renovation finance options?

There are several ways to finance home renovations, depending on your financial circumstances, the property and lender criteria.

• Construction loan: Often used for major renovations, with funds released in stages as work progresses. Lenders may require approved plans and a fixed-price building contract. Interest is generally charged on funds drawn during construction, subject to loan terms.

• Using home equity: Existing homeowners may be able to access equity to fund renovations. The amount available depends on the property's value, outstanding debt, borrowing capacity and lender approval.

• Line of credit: Provides access to funds up to an approved limit, with interest generally charged on the amount owing. Flexibility can make overspending easier.

• 'As if complete' valuation: Some lenders may assess a property's estimated value after renovations using plans, quotes and supporting documents. This is a valuation method, not a separate loan product.

Each option has different costs, eligibility requirements and repayment conditions. Learn more about financing home renovations or using your home equity.

You might also be interested in: Property appraisals vs valuations: What's the difference?

What insurance do you need when buying a fixer-upper?

Insurance is another cost to consider when buying a fixer-upper. Insurance responsibility before settlement varies by state, territory and contract. Confirm when risk passes to you and whether your policy covers the property while vacant or under renovation.

Before renovations begin, check:

• Building insurance: Whether your policy covers the property during renovations or while vacant, including any exclusions.

• Renovation cover: Whether major building works require additional insurance or changes to your existing policy.

• Builder's insurance: Whether domestic building insurance, home warranty insurance or equivalent cover is required under your state or territory's rules.

Insurance requirements vary by location, renovation scope and contract value. Check with your insurer and builder before work starts, and explore your home and contents insurance options.

Can you live in a fixer-upper during renovations?

Living in a fixer-upper during renovations could save on temporary accommodation costs, but it may not always be safe or practical. Major structural repairs, asbestos removal or hazardous building work may require you to move out temporarily.

If you plan to stay during renovations, consider the following:

• Keep essential facilities working: Schedule renovations around access to a functional kitchen, bathroom, running water and electricity where possible.

• Prepare for disruption: Noise, dust and restricted access can make daily activities difficult, particularly during major renovations.

• Prioritise safety: Keep children and pets away from construction areas and follow your builder's advice on site access and hazardous work.

• Plan alternative accommodation: Have a backup option if the property becomes unsafe or unsuitable to live in.

If you need to move out, temporary accommodation costs could overlap with your mortgage repayments. Use Aussie's Mortgage Repayments Calculator to estimate your repayments and factor these additional expenses into your renovation budget.

When should you walk away from a fixer-upper?

Not every fixer-upper is worth renovating. If repair costs are uncertain, financing is difficult, or restrictions limit your plans, you may be better off reconsidering the purchase.

Warning signs to watch for include:

• Uncertain repair costs: Major structural problems that can't be properly assessed or quoted before purchase could lead to significant expenses.

• Limited renovation budget: Essential repairs may use up your available funds and contingency, leaving little room for unexpected costs.

• Planning or compliance issues: Unapproved building work, heritage restrictions or planning requirements could limit or prevent renovations.

• Extensive property damage: Serious structural deterioration, fire or flood damage, or widespread asbestos may require costly repairs or remediation.

• Financing or insurance barriers: Difficulty securing suitable home loan finance or building insurance could make the purchase financially risky.

• Poor value for money: If the total purchase and renovation costs exceed those of comparable renovated homes nearby, the project may not stack up financially.

Before committing, make sure you understand the property's condition, likely repair costs and any restrictions.

How can you keep your fixer-upper renovation on track?

Managing a fixer-upper renovation takes careful planning, reliable tradespeople and a clear budget. These practical tips can help reduce unexpected costs and delays:

• Compare written quotes: Get multiple detailed quotes from qualified tradespeople, checking what's included, excluded and charged separately.

• Use a clear building contract: Confirm the scope of work, payment schedule, timelines and process for approving additional costs. Consider a fixed-price contract where suitable.

• Check licences and insurance: Verify that builders and tradespeople hold the required licences and appropriate insurance before hiring them.

• Secure necessary approvals: Check that council approvals and building permits are in place before work begins. Requirements vary by location and renovation scope.

• Order materials early: Confirm availability and delivery times for items such as windows, cabinetry and appliances to help avoid delays.

• Track your spending: Record invoices, payments and approved changes against your renovation budget to identify potential cost overruns.

• Know your DIY limits: Leave regulated work, including electrical and most plumbing work, to appropriately licensed tradespeople. Requirements vary by state and territory.

• Reuse existing features: Retaining suitable floorboards, doors or fixtures could help reduce replacement costs.

Even with careful planning, unexpected issues can arise. Keep communication open with your builder, monitor spending and address changes early to help keep your renovation on track.

Is buying a fixer-upper worth it?

Buying a fixer-upper could be worthwhile if the total costs are manageable, the renovations are feasible, and you can secure suitable finance. However, a lower purchase price doesn't guarantee better value than a move-in-ready home. Before committing, weigh up the estimated purchase and renovation costs, the property's condition and necessary repairs, and your borrowing options.

An Aussie Broker can help you understand your borrowing capacity, check relevant lender requirements and compare suitable finance options across Aussie's available lender panel. You can also work with an Aussie buyer's agent to research properties, compare recent sales and assess local market conditions.

Frequently asked questions about buying a fixer-upper