Author Topic: Buy a fixer upper vs. move-in ready home  (Read 1495 times)

ThirtiesLearner

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Buy a fixer upper vs. move-in ready home
« on: August 29, 2017, 06:40:52 PM »
Currently, I live in a ranch home with 1200 sq/ft finished living space on the main level, and 700 sq/ft of partially finished living space in basement. The home was built in 1950, and needs significant updating. That being the case, we were able to purchase it below market value. We like the home, but with a family of 4, and even after purging "stuff" (selling stuff, rather), it still feels tight.

The town we live in is amazing, the neighborhood is perfect, and we would only consider moving if it were to a bigger home in the neighborhood (bigger, but not huge). Which brings me to my dilemma. A larger home has come on the market. This home is move-in ready, and has all the things we want in a home, but it's valued at about 100K more than my home is currently. For this home, this is actually a good deal, as homes of comparable size and quality are bring sold for 75K more than it's current listing price.

My question is - would it be better to stay in my current home and spend the money / do the work to update it completely, or would it be better to try to purchase this other home that doesn't need any updating for 100K more than what I could likely sell my current home for?

In the end, it will likely cost between 60K - 80K to completely fixup the home (not including if I want to add a garage). Let's say the home cost 300K, and it currently valued at 340K. The market in the town is GREAT, so it's possible I could sell the home around 360K. However, I may not get back all the money I put into it.

Let's say the new home was purchased at 420K, but requires no work. It also has a private backyard (borders conversation land), a garage, and more up-to-date systems, more bathrooms (family of 4), etc.

Which is the more financially responsible decision? Do the work to a smaller home where I might not see a return on investment or put more money into a home that is a bit larger that doesn't require work, but has enough space for the family?

Alright, have at it!

 

bigalsmith101

  • Bristles
  • ***
  • Posts: 499
  • Age: 30
  • Location: Lake Stevens, WA
  • Yes, that's really my face.
    • No Jobs, No Responsibilities, No Better Time then Now
Re: Buy a fixer upper vs. move-in ready home
« Reply #1 on: August 29, 2017, 06:56:19 PM »
If you can avoid the $100k additional expense of buying the new home. I would avoid it.

Everyone has there own personal limits on what they believe to be comfortable living. You have a 1900 sqft home. I assume it's you, your spouse, and two children. That's plenty of room. More than enough.

Can you update your home and be happy?
I spent the first 6 years of "real" life in a self imposed semi retirement, to secure a lifetime of stories. Now it's time to secure the next lifetime through the badassity of FI.

"I achieved such a high level of badassity I just don't realize how normal people miss the whole process." --Le Barbu

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1109
Re: Buy a fixer upper vs. move-in ready home
« Reply #2 on: August 29, 2017, 07:15:56 PM »
Personally, I'd move into the ready home, after trying to negotiate the best deal possible.

I grew up in a home that was never done. Renovating while living in a house is worse than painful. Our 1 bathroom, for 7 people, never had lighting or tiles on the wall for showers. We used candles & did tub baths, because my parents could not or would not execute.


2Cent

  • Bristles
  • ***
  • Posts: 394
Re: Buy a fixer upper vs. move-in ready home
« Reply #3 on: August 30, 2017, 12:36:39 AM »
I would say it depends on your income and your DIY skills. If it means you'll be stretching it financially then find a cheaper way to create space. Else moving to a bigger house is not that bad. Mortgage rates are low and the house will also sell for more in your retirement. And more modern houses are usually more energy efficient, so the extra size may not cause larger utility bills.

If fixing up is your hobby go for that. For me I would not want to do all the work to fix up a house so I would move if I could afford it comfortably. On the other hand, you could look into cheaper space creation solutions. Just think what you need the space for and get creative.

matchewed

  • Magnum Stache
  • ******
  • Posts: 4060
  • Location: CT
Re: Buy a fixer upper vs. move-in ready home
« Reply #4 on: August 30, 2017, 07:20:56 AM »
So what is involved in your $60k-$80k to fix up the house?

1900 sqft isn't enough for four people?

rothwem

  • Bristles
  • ***
  • Posts: 319
  • Location: Raleigh, NC
Re: Buy a fixer upper vs. move-in ready home
« Reply #5 on: August 30, 2017, 08:11:45 AM »
1900 sqft isn't enough for four people?

I'm having the same question myself.  I'm thinking that its hedonic adaptation at play here.  As soon as they bump to the 2500 square foot house, they'll get more stuff and then they'll be back to square one. 

Novik

  • Bristles
  • ***
  • Posts: 305
  • Age: 23
  • Location: Ottawa, ON, Canada
Re: Buy a fixer upper vs. move-in ready home
« Reply #6 on: August 30, 2017, 08:19:40 AM »
1900 sqft isn't enough for four people?

I'm having the same question myself.  I'm thinking that its hedonic adaptation at play here.  As soon as they bump to the 2500 square foot house, they'll get more stuff and then they'll be back to square one. 

Is the 1900 sqft all finished living space or is some of it concrete floor/damp/open ceiling basement space?

Currently, I live in a ranch home with 1200 sq/ft finished living space on the main level, and 700 sq/ft of partially finished living space in basement.

It's not clear if 700 sqft in the basement is the size of the basement (of which some part is finished) or the size of the finished part of the basement (which is in total >700 sqft).

If the former, there could be 1400 sqft of currently furnished space, and the upgrades to the house might bring that to 1900 sqft (a big difference).  Not that it's impossible to live in 1400 sqft but it could feel tight depending on the house, and might feel more tight in coming years depending on the age/gender of the kids.
Over-thinking, over-planning and over-committing, aka my 2017 goals: Procrastinating my way to FIRE
If you're a dual American/Canadian citizen living in Canada and investing in index funds outside an RRSP, please PM me!

toganet

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Buy a fixer upper vs. move-in ready home
« Reply #7 on: August 30, 2017, 08:42:14 AM »
My wife and I were in a similar situation two years ago when we got pregnant with our second child.  We were in a 1400 sq ft home in a good-but-not-great neighborhood, but where we had been comfortable and were saving lots of $$.

We decided to "upgrade" and bought a 2100 sq ft house with a much larger lot in a "better" neighborhood (better schools, higher taxes, much worse walkability).  Now our FIRE date is farther out, and we have about 500 sq ft of space we rarely use ("formal" living room / dining room).  I also have tons of lawn to mow.

My advice would be to look at ways to improve or expand your current home, and/or come up with a clear statement of what the ideal upgrade would be, and search patiently.  Houses go up for sale all the time.  Being patient gives you the advantage.

Car Jack

  • Bristles
  • ***
  • Posts: 373
Re: Buy a fixer upper vs. move-in ready home
« Reply #8 on: August 30, 2017, 12:02:18 PM »
It's pretty much always cheaper to stay where you are and to live in a smaller home.  On top of that, when the kids leave, you might just stay in place rather than selling the "too big for two" house to downsize.

But it also sounds like you're weighing lifestyle choices.  In your house, you have to bring the kids to the park?  With the new, big one, the back yard and conservation land IS a park.  In your house, everyone has to wait for the one bathroom.  In the big house, there's extra bathrooms.  Better lifestyle costs money.

Something I'd also be sure about.  What's the story on this "conservation land"?  I ask because I once looked at a house in a new development where the lot I was considering was against "conservation land" on their map.  I asked and the agent at the model home got the manager who admitted that that land was owned by another developer who was putting in high density condos.  So much for "conservation land". 

Cranky

  • Pencil Stache
  • ****
  • Posts: 635
Re: Buy a fixer upper vs. move-in ready home
« Reply #9 on: August 30, 2017, 01:44:39 PM »
Define "needs updating". Are you talking dangerous wiring, or an ugly kitchen? You can live with an ugly kitchen, or improve things like that a bit at a time.


gardeningandgreen

  • Stubble
  • **
  • Posts: 217
  • Location: Minnesota
    • Gardening and Green
Re: Buy a fixer upper vs. move-in ready home
« Reply #10 on: August 30, 2017, 03:05:55 PM »
Im not sure how you came up with the 60-80k renovation budget. Have you looked at what actually needs to be updated and what can just stay how it is. We are renovating our 1100 sf house and added a 2 stall garage for around $25K. Yes that is doing it all ourselves and not picking all of the nicest finishes but we will add tons of value. We are also doing this over the course of 3 years. Looking at a longer time line can usually help. I honestly wouldnt move to the new house unless it will add a ton of value to your life.

ThirtiesLearner

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Buy a fixer upper vs. move-in ready home
« Reply #11 on: August 30, 2017, 03:58:15 PM »
If fixing up is your hobby go for that. For me I would not want to do all the work to fix up a house so I would move if I could afford it comfortably. On the other hand, you could look into cheaper space creation solutions. Just think what you need the space for and get creative.

I wouldn't say it's my hobby, but I am handy. Worked construction for a few years at one point and am capable in carpentry, drywall, painting, landscaping. When it comes to electric & plumbing, I leave that to the professionals, as I don't know what I'm doing.

Im not sure how you came up with the 60-80k renovation budget. Have you looked at what actually needs to be updated and what can just stay how it is. We are renovating our 1100 sf house and added a 2 stall garage for around $25K.

There are things I could do myself for sure. However, finding the time to do them is a different story. I realize some of the people on this forum are already "retired" and may have more time to learn these trades on their own, but I do still have a day-job (interesting work, but requires time) so free time comes on the evenings and weekends. I suppose I might just be making excuses, but I had a hard enough time writing this reply with my kids yelling at me to take them outside. Literally not kidding. With two small children, I'd be sacrificing time with them to make all the upgrades myself. Therefore, I do what I can do, and then have professionals do the rest.

Things we've already done:
- Stripped 60 year old wall paper and painted main level - 6K (took a crew of guys 1.5 weeks to do this. Worth every cent).
- Removed huge vinyl liner in-ground pool and leveled backyard (which is beautiful now, and safe for my children) - 10K

These are the things that need updating:

- Electric (complete rewire, all ungrounded outlets) - 10K
- Likely the furnace in the next few years - 3 - 5K
- Floors - 1 - 3k
- Bathroom (necessary) - 5 - 7K
- Kitchen (nice to have) - 10 - 20K
- Garage (current Garage is one car, and looks like it's about to fall down) - 15 - 25K (though I build garages in the past, won't have the time to build this myself in the near future)
- Finish basement (likely 1K cause I could do myself).
- Another bathroom (with 2 kids gonna grow up fast, one bathroom isn't likely to cut it). Not sure the cost of this, or even if there is room.

I see everyone's point about staying in the smaller home and coming up with creative ways to create space. Believe me, for the past few years I've complete been on the plan to financial independence (paid off all debt, saved emergency fund, maxed out retirement accounts, etc), but this feels like a good deal that could increase quality of life in the long-term. This home will go fast, I can guarantee it. This is why I'm torn.

matchewed

  • Magnum Stache
  • ******
  • Posts: 4060
  • Location: CT
Re: Buy a fixer upper vs. move-in ready home
« Reply #12 on: August 30, 2017, 10:44:13 PM »
If fixing up is your hobby go for that. For me I would not want to do all the work to fix up a house so I would move if I could afford it comfortably. On the other hand, you could look into cheaper space creation solutions. Just think what you need the space for and get creative.

I wouldn't say it's my hobby, but I am handy. Worked construction for a few years at one point and am capable in carpentry, drywall, painting, landscaping. When it comes to electric & plumbing, I leave that to the professionals, as I don't know what I'm doing.

Im not sure how you came up with the 60-80k renovation budget. Have you looked at what actually needs to be updated and what can just stay how it is. We are renovating our 1100 sf house and added a 2 stall garage for around $25K.

There are things I could do myself for sure. However, finding the time to do them is a different story. I realize some of the people on this forum are already "retired" and may have more time to learn these trades on their own, but I do still have a day-job (interesting work, but requires time) so free time comes on the evenings and weekends. I suppose I might just be making excuses, but I had a hard enough time writing this reply with my kids yelling at me to take them outside. Literally not kidding. With two small children, I'd be sacrificing time with them to make all the upgrades myself. Therefore, I do what I can do, and then have professionals do the rest.

Things we've already done:
- Stripped 60 year old wall paper and painted main level - 6K (took a crew of guys 1.5 weeks to do this. Worth every cent).
- Removed huge vinyl liner in-ground pool and leveled backyard (which is beautiful now, and safe for my children) - 10K

These are the things that need updating:

- Electric (complete rewire, all ungrounded outlets) - 10K
- Likely the furnace in the next few years - 3 - 5K
- Floors - 1 - 3k
- Bathroom (necessary) - 5 - 7K
- Kitchen (nice to have) - 10 - 20K
- Garage (current Garage is one car, and looks like it's about to fall down) - 15 - 25K (though I build garages in the past, won't have the time to build this myself in the near future)
- Finish basement (likely 1K cause I could do myself).
- Another bathroom (with 2 kids gonna grow up fast, one bathroom isn't likely to cut it). Not sure the cost of this, or even if there is room.

I see everyone's point about staying in the smaller home and coming up with creative ways to create space. Believe me, for the past few years I've complete been on the plan to financial independence (paid off all debt, saved emergency fund, maxed out retirement accounts, etc), but this feels like a good deal that could increase quality of life in the long-term. This home will go fast, I can guarantee it. This is why I'm torn.

I'm confused by some of your pricing estimates and past experiences. I'm stripping wallpaper and painting a three family house right now. Each floor is 1500 sqft. I'm probably spending a whole 2k on the entire project. That's 4500 sqft worth of work for 2k, while you did 1200 sqft worth of work for 6k?

Is the full 5-7k of the bathroom necessary?

I could keep going but you seem to be convincing yourself what you want to do. If that is the case what is the point in asking the question? You know what you want to do... so do.

ThirtiesLearner

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Buy a fixer upper vs. move-in ready home
« Reply #13 on: August 31, 2017, 06:57:51 AM »
I think I just need to be decisive and talk myself out of it. Unless I could swing a really good deal and talk the guy down 40K, I can't see it being worth it, regardless of what we're getting.

YttriumNitrate

  • Stubble
  • **
  • Posts: 121
  • Location: Northwest Indiana
Re: Buy a fixer upper vs. move-in ready home
« Reply #14 on: August 31, 2017, 08:48:09 AM »
These are the things that need updating:
- Another bathroom (with 2 kids gonna grow up fast, one bathroom isn't likely to cut it). Not sure the cost of this, or even if there is room.
There's only one bathroom in your 1900 square foot house? At the very least I'd put a half bath in the basement cause waiting for a teenager to get out of the bathroom so I can pee sounds like the seventh level of hell.

Krolik

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Age: 40
  • Location: S.Florida
Re: Buy a fixer upper vs. move-in ready home
« Reply #15 on: September 01, 2017, 02:16:22 PM »
Two years ago we bought ugly and outdated but functional fixer-upper in a great neighborhood. The layout and location of the house is perfect for us but it requires full remodel.  We are both working full time and have a young child. We made a detailed plan for the next 5-6 years of what projects need to be done with no more than 2 projects per year with long breaks in between. All of it is DYI. That way we don't need to live in a constant construction zone which would become source of stress very quickly, we save money and are able to cashflow everything (no more debt). We are in full control.
 
When we moved in, it was overwhelming what needed to be done. We divided it into smaller projects and gave ourselves enough time to complete everything. It is very doable and we are not stressing.

When you want to have everything done in a short period of time then it becomes much more stressful and difficult. Good plan / organization and time eliminates most of it.

I personally wound never buy 100K more expensive house if the current one had good layout and location. 100K is a lot of debt.
Born and raised in Poland. Living in US. Planning to retire somewhere.

dycker1978

  • Pencil Stache
  • ****
  • Posts: 699
  • Age: 39
  • Location: Regina, Saskatchewan, Canada
Re: Buy a fixer upper vs. move-in ready home
« Reply #16 on: September 01, 2017, 03:18:08 PM »
If fixing up is your hobby go for that. For me I would not want to do all the work to fix up a house so I would move if I could afford it comfortably. On the other hand, you could look into cheaper space creation solutions. Just think what you need the space for and get creative.

I wouldn't say it's my hobby, but I am handy. Worked construction for a few years at one point and am capable in carpentry, drywall, painting, landscaping. When it comes to electric & plumbing, I leave that to the professionals, as I don't know what I'm doing.

Im not sure how you came up with the 60-80k renovation budget. Have you looked at what actually needs to be updated and what can just stay how it is. We are renovating our 1100 sf house and added a 2 stall garage for around $25K.

There are things I could do myself for sure. However, finding the time to do them is a different story. I realize some of the people on this forum are already "retired" and may have more time to learn these trades on their own, but I do still have a day-job (interesting work, but requires time) so free time comes on the evenings and weekends. I suppose I might just be making excuses, but I had a hard enough time writing this reply with my kids yelling at me to take them outside. Literally not kidding. With two small children, I'd be sacrificing time with them to make all the upgrades myself. Therefore, I do what I can do, and then have professionals do the rest.

Things we've already done:
- Stripped 60 year old wall paper and painted main level - 6K (took a crew of guys 1.5 weeks to do this. Worth every cent).
- Removed huge vinyl liner in-ground pool and leveled backyard (which is beautiful now, and safe for my children) - 10K

These are the things that need updating:

- Electric (complete rewire, all ungrounded outlets) - 10K
- Likely the furnace in the next few years - 3 - 5K
- Floors - 1 - 3k
- Bathroom (necessary) - 5 - 7K
- Kitchen (nice to have) - 10 - 20K
- Garage (current Garage is one car, and looks like it's about to fall down) - 15 - 25K (though I build garages in the past, won't have the time to build this myself in the near future)
- Finish basement (likely 1K cause I could do myself).
- Another bathroom (with 2 kids gonna grow up fast, one bathroom isn't likely to cut it). Not sure the cost of this, or even if there is room.

I see everyone's point about staying in the smaller home and coming up with creative ways to create space. Believe me, for the past few years I've complete been on the plan to financial independence (paid off all debt, saved emergency fund, maxed out retirement accounts, etc), but this feels like a good deal that could increase quality of life in the long-term. This home will go fast, I can guarantee it. This is why I'm torn.

Well the bolded part may be true, you would be sacrificing more time with the kids in order to work 40 hrs a week to for x number of years to pay off the 80k worth of upgrades.

As far as 1900 sq feet not being enough???  I live with my family (four of us, the youngest being 14) in a 1050 sq foot place with one bathroom. 

It can be done. 

Kroaler

  • Pencil Stache
  • ****
  • Posts: 615
  • Age: 26
  • Location: Greenville, South Carolina
Re: Buy a fixer upper vs. move-in ready home
« Reply #17 on: September 16, 2017, 04:11:02 PM »
My thoughts,

1 Bathroom sucks if thats the case. 


Also it sounds like your convincing yourself you need the new house.     Honestly 80K of Reno is going to be INSANE to manage while you still live there.   At that price I expect Kitchens and Bathrooms to be gutted with a good amount of electrical and plumbing work that takes critical home systems out of service - depending on the Reno speed that could be miserable...


If it was me,  I would identify the pain points of the current house.  There has to be something in the 15k range that can drastically increase the functionality and satisfaction of the current space. 


Then sometime in the future (6 ish years)  I would treat myself to the larger turn key house, but not at this time.