How do I compare two Colorado Springs homes when one is cheaper but needs more work?

It's worth starting with your goals and the location, because commute and neighborhood matter more than either house's condition. Then compare the price difference with the realistic cost of the work, and make sure you'll have cash left for it after closing. If you're using a VA or FHA loan, the cheaper home still has to meet minimum property requirements for safety and livability. And be honest about whether you want to live through projects. If you don't enjoy that kind of work, there's your answer.

Start with your goals and the location

Before comparing the houses, I ask what you're trying to accomplish. Location is a huge part of that, and so is your commute. A home that needs work in the right spot can make more sense than a finished home in the wrong one, and the reverse is true too. You can update a kitchen; you can't move a house closer to work. See typical commute times in Colorado Springs.

If the two homes are similar in location, the decision comes down to how much you want to invest in the home, in money and in time.

Compare the real cost, not just the price

The cheaper home only stays cheaper if the work costs less than the price difference. A simple comparison helps:

It's worth getting real estimates during your inspection period rather than guessing. And with any home that needs work, plan on some surprises. See what to know about buying an older home.

Budget: you need money left after closing

A home that needs work only works if you have money to do the work. Paying the lower price and then running short on cash for repairs is the outcome to avoid. Before you choose, it's worth confirming how much you'll have left after your down payment and closing costs. See how much cash you need to buy a home.

If you're getting a loan

If you're using a VA or FHA loan, the home has to meet minimum property requirements for safety and livability, and the appraiser may call for certain repairs before closing. That's why a home with a VA or FHA loan usually has to be livable from day one, even if it needs updates. See how FHA, conventional, and VA loans compare.

If you want to finance the work itself, FHA's 203(k) program can combine the purchase and the repairs in one loan, with a limited version for smaller projects and a standard version for major work. Your lender can tell you whether it fits.

Will you enjoy the work?

This is the question that often decides it. Do you have the tolerance to live in a home while it's being worked on? Do you enjoy that kind of project, or would it wear on you? If you don't enjoy that kind of work, there's your answer.

If you might rent the home out later

If there's a chance you'll rent the home out, for example after a PCS, the comparison changes. In my opinion, a newer home is usually the easier rental, because newer systems tend to mean fewer things going wrong and fewer headaches. An older home with everything replaced may be just fine, but it's more of a gamble. That's my personal view, not a rule.

Either way, I recommend setting aside at least $15,000 for when you rent a home out, because something will come up. It's a matter of when, not if. See whether a Colorado Springs home makes a good long-term rental.

A simple way to decide

• If the cheaper home is in the better location and you have the cash and patience for the work, it may be the stronger long-term choice.
• If the cost of the work comes close to the price difference, the move-in-ready home usually wins.
• If your cash will be tight after closing, the move-in-ready home carries less risk.
• If you might rent the home out, weigh the age of the systems and keep a reserve either way.
• If you don't enjoy projects, the home you won't have to fix is the better fit.

What could change the answer

• Estimates for the work can change once contractors open walls or look closer.
• Your loan type may require repairs before closing, or limit which homes qualify.
• A change in your plans, such as a PCS or job move, can turn your home into a rental sooner than expected.
• Insurance on an older home with older systems may cost more or be harder to get.

When to talk with a professional

A home inspector and contractors can tell you what the work involves and what it will cost. Your lender can explain property requirements for your loan and options like renovation financing. If you might rent the home out, a property manager can help you think through what renting it will involve.

Sources

• U.S. Department of Housing and Urban Development, 203(k) Rehabilitation Mortgage Insurance Program Types