This ‘Fixer Upper’ Home’s Price Tag Will Make You Question All Reality

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How much of a markup can you charge for a house made famous on “Fixer Upper”? We’re about to find out: A Waco, TX, shotgun house that Chip and Joanna Gaines renovated in Season 3 has hit the market. Homeowners Cameron and Jessica Bell paid merely $28,000 for the 1,050-square-foot, one-bedroom property; however, they’re asking for much, much more than that: $950,000, to be exact.

Whoa. Talk about shooting for the stars! Or, by aiming so high, are these sellers shooting themselves in the foot?

Even with the considerable Gaines cachet, this price seems to be a stretch, considering that homes in Waco, TX, typically sell for $99 per square foot. This place, however, comes in at an astronomical $905 per square foot.

Yet some say the sellers might actually fetch this price, or something close to it. Could it be permanently transformed into a short-term rental, pitched directly to the hordes of “Fixer Upper” fans?

The shotgun house featured in “Fixer Upper.”

realtor.com/Carol Embry/Picture It Sold

Tapping into the ‘Fixer Upper’ experience

Indeed, the property’s location—which is within walking distance to the Magnolia Market shopping and entertainment complex—might make this the ultimate crash pad for the show’s devotees craving a full “Fixer Upper” experience.

Is this tiny house truly worth nearly a million bucks?

realtor.com/Carol Embry/Picture It Sold

“The home is priced with the thinking that this will be used as an investment property,” the listing agent, Jennifer Roberts with Briggs Freeman Sotheby’s International Realty, told realtor.com®. “It can be a great opportunity for the right buyer.”

In fact, the Bells have been using the place exclusively as a rental property since their episode aired, charging $325 a night through Airbnb. “The property stays rented at over a 90% occupancy rate,” Robert adds.

The truth is, the Gaines prefer that their clients live in the homes they renovate, rather than turning them into cash cows.

“That’s the true intent of our show, and we want to ensure that does not get lost in this new vacation rental trend,” Brock Murphy, a spokesman for Magnolia, the Gaines’ company, said in a statement.

Would you sleep here for $325 a night?

realtor.com/Carol Embry/Picture It Sold

So how much is a ‘Fixer Upper’ rental worth?

Even if this shotgun house is an investment property, is it truly worth that much? Let’s crunch some numbers, starting with the Airbnb rental rate.

“At $325 per night with a 90% occupancy rate, that equals an annual gross income of $106,763,” says Gregor Watson, co-founder and chairman of Roofstock. This sounds pretty sweet, but you need to factor in some reality: Rental properties cost money to maintain, and those expenses are particularly high with short-term rentals. You need to shell out for frequent housecleaning and heavier wear and tear. As a result, Watson estimates that 50% of those returns would get eaten up, resulting in net profits hovering around $53,381.

Then, of course, you have to pay the mortgage on top of that—which, if this house goes for full asking at $950,000, totals $3,628 a month, presuming a 20% down payment and a modest 4% interest rate (taxes and insurance not included).

“The resulting return on investment for this property is only about 2.5%,” Watson says. This is measly, “about a third of what you’d normally get on a single-family rental property.”

In other words, this place is a hardly a guaranteed profit generator.

“There are over 16 million rental homes in the U.S. with significantly higher return rates,” contends Watson.

Chip and Joanna Gaines gave this shotgun house 20-foot high ceilings.

realtor.com/Carol Embry/Picture It Sold

So what price would make sense for this as an investment property? “If the home is purchased for $500,000, it would have a resulting return of 5%, which is in line and could make for an interesting investment,” says Watson.

Will it be discounted that much? Well, here’s one thing for sure: The place has already netted tons of free marketing.

“The sellers and their agent are brilliant,” Texas Realtor® Wendy Flynn says with a laugh, “because now they have everyone talking about this house!”

The appraisal problem

Even if buyers buy into the hype, most lenders won’t be so easily star-struck.

“If your bank orders an appraisal, and they usually do, there’s likely no amount of TV time that will justify that valuation,” says Cedric Stewart, a residential and commercial sales consultant at Keller Williams, in Washington, DC. “Even with its novelty, there is no reason this home in this area should sell for a penny above $500,000, and that’s generous for a one-bedroom, one-bath home.

“I expect to see many price reductions here, a move to sell at auction, or even a withdrawal from the market altogether.” Stay tuned, “Fixer Upper” aficionados!

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