Author Topic: Fixer Home  (Read 1257 times)

ktammaro

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Fixer Home
« on: January 03, 2020, 09:14:49 AM »
I am brand new to the FIRE movement. I will have my Debt Emergency taken care of by Feb 1st. I would really appreciate some advice on what my next steps should be. I bought a 2 bed/2 bath fixer home in a resort town 10 years ago for 165K. I have not fixed it at all. It needs new floors, new windows, and the 2 bathrooms and kitchen need an overhaul. I also need to paint the deck and outside. I have 100K in equity in the home. My question is how to finance the repairs. Also, the house next door to me (2 bed/1 bath) was bought and fixed up recently and is now an Airbnb. The occupancy rate averages 20 days per month at $150 per night minus the 10% property management fee for a gain of $2700. My house is exactly the same as theirs except mine has a much better lake view and there are no stairs required to enter the house (a big deal in the mountains). I have a bonus large room (almost the size of the houses footprint) and bathroom downstairs that is accessed from a different entrance that I could use as a living space while my house was being rented out. I have a very stable job in a school district for $77,000 and have 30K in student loan debt.  My car is paid off. Thank you for your advice in advance!

trollwithamustache

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Re: Fixer Home
« Reply #1 on: January 03, 2020, 09:21:12 AM »
Its time to cowboy up with some YouTube videos and do the work yourself!

ktammaro

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Re: Fixer Home
« Reply #2 on: January 03, 2020, 09:35:46 AM »
Thank you for your advice! Iíll start looking at You Tube videos.

socaso

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Re: Fixer Home
« Reply #3 on: January 03, 2020, 09:39:41 AM »
Your house sounds ideal for an AirBnB. I wonder why you would bother paying a property management fee if you would only have the one listing and you would be onsite to handle the cleaning in between guests?

Also, plus one on checking out some YouTube tutorials to do the work yourself. This year alone I have saved myself several thousand dollars by doing some small home projects myself. I also learned which projects I didn't want to tackle by watching those videos! It really helped me feel more comfortable allocating my money to the work that I felt was beyond my abilities and saving money on things I realized I could easily do.

Dicey

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Re: Fixer Home
« Reply #4 on: January 03, 2020, 09:49:15 AM »
Volunteering with Habitat for Humanity is a classic way to learn DIY skills. Alternatively, some Junior Colleges have construction/building classes. Finally, the big box stores used to offer classes. Not sure if they still do that, but worth checking into.

We are experienced DIYers. DH uses YT a lot, but says there's a lot of misinformation out there, so be careful. Besides YT, the internet can be helpful for learning about building codes. Always check your local codes as well, because things vary from place to place.

Be sure you do everything to code and pull the necessary permits. Since you plan to rent the place out, the liability risk if you don't could be huge.

ktammaro

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Re: Fixer Home
« Reply #5 on: January 03, 2020, 09:52:48 AM »
Thank you so much for your advice! It makes sense to research each project, so that I know what I can do myself vs what is best handled by someone else. Youíre also right about the property management. I can do that myself.

ktammaro

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Re: Fixer Home
« Reply #6 on: January 03, 2020, 09:56:10 AM »
Habitat for Humanity would be a wonderful way to get DIY experience! I also appreciate your advice regarding building to code and making sure that I am getting correct advice online.

ChpBstrd

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Re: Fixer Home
« Reply #7 on: January 05, 2020, 08:13:43 AM »
Its time to cowboy up with some YouTube videos and do the work yourself!

I tried this once. 5 years later, I had a fixed up house, my receipts only amounted to about $25k in materials.... but I had collected zero rents and burned about 2-3 whole weekends a month that entire time. I had spent enough time and energy doing something I had little experience in (and therefore did slowly) that I could have otherwise earned a graduate degree, started a few businesses, worked part time on the weekends and earned maybe $50k, or any other number of things with a higher payoff.

The kicker is that my amateur workmanship gave potential buyers the creeps, and I did not get top dollar when I sold.

TL;DR - I found out why flippers borrow money, hire professionals, and knock a house out in 3 mos.

NaN

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Re: Fixer Home
« Reply #8 on: January 05, 2020, 08:24:49 AM »
Its time to cowboy up with some YouTube videos and do the work yourself!

I tried this once. 5 years later, I had a fixed up house, my receipts only amounted to about $25k in materials.... but I had collected zero rents and burned about 2-3 whole weekends a month that entire time. I had spent enough time and energy doing something I had little experience in (and therefore did slowly) that I could have otherwise earned a graduate degree, started a few businesses, worked part time on the weekends and earned maybe $50k, or any other number of things with a higher payoff.

The kicker is that my amateur workmanship gave potential buyers the creeps, and I did not get top dollar when I sold.

TL;DR - I found out why flippers borrow money, hire professionals, and knock a house out in 3 mos.

This. @ChpBstrd hourly rate and return on investment was probably worse than driving an Uber for the same time period. . Yes, skills are learned but if that is not helping your earning potential (e.g. you are in construction already) then expect spending way more time than you ever thought you would on it as a hobby.

Also, think about if you are renting it out the liability you have if one of your DIY projects you were supposed to have inspected by a municipality injures a tenant.

mistymoney

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Re: Fixer Home
« Reply #9 on: January 05, 2020, 09:36:17 AM »
Its time to cowboy up with some YouTube videos and do the work yourself!

I tried this once. 5 years later, I had a fixed up house, my receipts only amounted to about $25k in materials.... but I had collected zero rents and burned about 2-3 whole weekends a month that entire time. I had spent enough time and energy doing something I had little experience in (and therefore did slowly) that I could have otherwise earned a graduate degree, started a few businesses, worked part time on the weekends and earned maybe $50k, or any other number of things with a higher payoff.

The kicker is that my amateur workmanship gave potential buyers the creeps, and I did not get top dollar when I sold.

TL;DR - I found out why flippers borrow money, hire professionals, and knock a house out in 3 mos.

I was on the side of this once. A beautiful house I would have been very interested in buying - except for the fixups the current owner had done.

I'm sure yours were not as bad as this! There were Kitchen cabinet drawers that couldn't open (because of obstacles on the way out, not just stuck), they put a hot tub next to the kitchen in a fairly small house - likely took out a small powder room and part of the original kitchen footprint or a hallway into the kitchen.

It just looked really weird, and while I did love the house otherwise - that certainly frightened me about what was underneath! Electrical, etc.

Bernard

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Re: Fixer Home
« Reply #10 on: January 05, 2020, 12:17:06 PM »
My wife and I are fixing up our current house right now, started 2-1/2 years ago. We bough it with good bones but outdated, and it has a huge appreciation potential. It will be an ongoing project for several years, and my wife and I'm doing as much as we can during the weekends. But we live in the house, don't have any loss in rent, and we save ten thousands of dollars in labor doing it.
Could I make more money if I had a contractor doing this work, at $60 to $90 per hour?

Probably, but not much more. But do I really want to work 7 days a week, doing the same stuff in my office, or do I want to do something totally different on the weekends, breathing some fresh air?
For me, doing home projects, despite it's being work, provides a nice balance to the daily rat race. You may see that differently.

ysette9

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Re: Fixer Home
« Reply #11 on: January 05, 2020, 02:33:38 PM »
My parents bought a big fixer upper when I was a kid and worked on that sucker my entire childhood. The good thing is that I took away the sense that if you donít like something, you can change it. They also have a lot of good handy skills they have learned over the years.

But oh my, the time and money and arguments! And living in a construction zone. It felt like it was almost literally one project after another for twenty years.
I donít want to buy a fixer upper. My marriage and sanity canít handle it. More power to those who can.

trollwithamustache

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Re: Fixer Home
« Reply #12 on: January 05, 2020, 07:18:36 PM »
Holy smokes guys, OP's house sat for 10 years! I don't know how much he cares how long it takes...

NaN

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Re: Fixer Home
« Reply #13 on: January 06, 2020, 06:31:46 AM »
Holy smokes guys, OP's house sat for 10 years! I don't know how much he cares how long it takes...

Ummm, it sat for 10 years, and he still has $30k in student loan debt and only $100k equity in a $165k house bought 10 years ago? He is asking us how to finance the updates. I am not sure he knows what he is committing to other than seeing his neighbor's AirBNB and thinking his would be better. It sounds like a bad financial decision. Pay off the student loans with any money he would put in his updates. Pay off the house. Then with several years of no debt, consider figuring out how to turn the house into a rental to support his FIRE life. But he is years away from that.

ChpBstrd

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Re: Fixer Home
« Reply #14 on: January 06, 2020, 08:06:15 AM »

Get some quotes on the full remod. Also figure out the prices it would bring in fixed and not-fixed condition.

Do the math on whether it is worth fixing. By that, I mean either youíll get at least a 20% ROI on the repairs when you sell, OR monthly rent (not AirBnB projections) would equal or exceed 1% of your total investment in the building. If neither condition will be met, consider selling it now as a ďgem in the roughĒ, pay off other debts with the proceeds, and look for another opportunity.


If the math supports fixing it up, look into a cash-out refinance. This is your cheapest source of funding. If the house appreciated zero in 10 years, you could extract ((165*0.8)-100) $32k this way. More likely, you could extract enough to remod the house and pay off your student loans.

Note:
If you choose to fix up the house, consider gutting the rooms yourself. Get a dumpster and strip the walls and the floors down to the studs and rip out any carpeting or old tile. Wear a dust mask. This will lower your quotes quite a bit. It is unskilled labor that requires only rudimentary hand tools, a shop vac, and perhaps a reciprocating saw, but your contractor will still charge you $60/h for the time. Do this AFTER arranging financing.

Rosy

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Re: Fixer Home
« Reply #15 on: January 06, 2020, 12:45:06 PM »
Its time to cowboy up with some YouTube videos and do the work yourself!

I tried this once. 5 years later, I had a fixed up house, my receipts only amounted to about $25k in materials.... but I had collected zero rents and burned about 2-3 whole weekends a month that entire time. I had spent enough time and energy doing something I had little experience in (and therefore did slowly) that I could have otherwise earned a graduate degree, started a few businesses, worked part time on the weekends and earned maybe $50k, or any other number of things with a higher payoff.

The kicker is that my amateur workmanship gave potential buyers the creeps, and I did not get top dollar when I sold.

TL;DR - I found out why flippers borrow money, hire professionals, and knock a house out in 3 mos.

1. I totally agree with this - truly, a fixer-upper is not for everyone.

2. There are other strategies and ways to keep the costs down without dedicating your life to your house so someone else can enjoy it and hopefully not destroy it during their B&B stay.

You could start with replacing the windows, that's relatively easy as jobs go and you have the immediate benefit of noise reduction and between 10-15% energy savings.
Inquire about code and/or permits. Some permits are only good for a limited time so keep that in mind.
Determine if you have standard size windows - anything standard is generally cheaper and easier to come by.
If you have large glass fronts facing the lake think about if you want to keep it all exactly the same way or if there are smarter options you'd like to consider. Different configurations are available (instead of one sheet of glass that cannot be opened, you can use a large stationary glass in the center and two side windows that may be opened - which will still look like they are one connected window front).
For instance, this is also your chance to widen your window opening if there is one window in the house that is awkward or too small or possibly even too big.
Spend smart - do you know someone in trade or do you have a contractor friend who might be able to recommend someone who is reasonable and reliable?
Are there manufacturers in your area who sell to the public?
See if your local Habitat for Humanity store happens to have new windows in your size - ya never know, even if you only buy one window at rock bottom price that just boosted your budget for something else.
Sometimes the installer or a manufacturer is stuck with canceled orders and you can get a great deal on all of your window sizes. Always ask, not just for discounts but maybe they have a window or two that would work great for you on one side of the house instead of replacing six identical windows all around the house.
This is one time when Craig's List and Facebook groups come in handy!

Mr. R. has cousins in the various trades but even if you don't, start by asking questions, get quotes and be open to options. Some companies and installers will work with DIY people so you can save money on prep and demo as long as the window sizes and access are suitable for DIY.
It isn't possible to install a large window even on ground level by yourself, that's only asking for trouble and injury.

3. I question whether you are a DIY person since most DIYers of my acquaintance incl. I would have found ways and means to do a project here and there - regardless of the money aspect.
Trade skills - trade time with friends who work on their own projects - get your friends together and throw a weekend reno party - let someone stay rent-free while they re-do your outdated plumbing - electricity - just to name a few things that I've done that cost practically nothing.
That plumbing project involved a three-story house with a full basement that needed new plumbing from top to bottom starting from the street. I even got the copper pipes for free because my connection got free pipes from a job he was on where they kept changing the plans and the pipes were already paid for but not used.

To add to the fun we found one major problem along the way, there was an undetected leak from my bathroom to the cellar below. Thank goodness that the water dripped into the old coal bin directly beneath the floor into the basement. Turns out one of the pipes had not been soldered at all only connected by a DIY guy who put in the bath and overcharged my mother to boot.
The kicker was my professional plumber was leaving on vacation for a month - so I was without a bath, because well, everything had to dry out first anyway. Good thing it was a hot summer and the bathroom had a window to the garden.
Fun times when you don't have the money to just call in someone else - I was only paying cash as I went, no debt for me.
Took me over five years all in all. 

Just saying that DIY is practically a lifestyle, I was very much involved and remember trudging through a house filled with construction dust trying to get ready for work - white dust on a dark blue suit - just lovely:). While it can be fun, entertaining and educational not to mention save you lots of money - if you go about it the wrong way it will cost you more money in the long run and you are not just dedicating a good chunk of your time, you'll be tired going to work and coming home to more work...:).

Just think how many years you could have already enjoyed the finished job - the material does not get any cheaper either, codes change, things become more difficult.
So yeah, just watching youtube isn't quite the answer, there is a bit more to it.

I chose some custom features and more expensive tile because I was living in one of the apartments in the house and I planned to stay (life intervened of course). I was lucky I chose well and my renovations were an excellent selling point. I was aware that a bathroom/kitchen reno adds value, along with updated plumbing, electricity, roof, flooring but everything else is just fancy, custom amenities that may or may not be attractive or important to a buyer.

So no, my special Italian tiles and fancy built-ins were great features but gave no real return on the dollar.
However, they were essential to my happiness, the reward for all the hard work I put in and all the shenanigans I went through to get it all done on a dime. No regrets.

Now we live in a small bungalow and I still don't do the bland, cookie-cutter things because I'm not in real estate and I intend to please myself first and enjoy my home and property as I wish.
... alas, I've put off the hopefully last bathroom reno of my life for too long. Time to start looking for those tiles before I get any older:)...

Quote
Get some quotes on the full remod. Also figure out the prices it would bring in fixed and not-fixed condition.

I'm with ChpBstrd - analyze the true cost first and consider all the options he mentioned. Good luck with whatever you decide to do!

SweatingInAZ

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Re: Fixer Home
« Reply #16 on: January 07, 2020, 01:18:13 PM »
By all means get estimates now, but before spending a dime you should try renting it out in its current condition. Or perhaps the bare minimum of just painting the walls.

You might find out that you hate having airbnb renters in your own home!
Or you may find out that it rents for the same rate as an improved property.

Fishindude

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Re: Fixer Home
« Reply #17 on: January 07, 2020, 02:11:38 PM »
When we were young on first couple houses, we typically remodeled one room at a time, pay as you go, doing most of the work ourselves.

Dicey

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Re: Fixer Home
« Reply #18 on: January 08, 2020, 03:49:11 AM »
Note:
If you choose to fix up the house, consider gutting the rooms yourself. Get a dumpster and strip the walls and the floors down to the studs and rip out any carpeting or old tile. Wear a dust mask. This will lower your quotes quite a bit. It is unskilled labor that requires only rudimentary hand tools, a shop vac, and perhaps a reciprocating saw, but your contractor will still charge you $60/h for the time. Do this AFTER arranging financing.
OMG -NO! Do NOT do this! For one thing, you put on a respirator, not a damn dust mask. And you wear a Tyvek suit. And you test for lead and asbestos before you touch anything. If you have enough asbestos (hint: not very much), you will be required to hire a certified hazardous materials abatement firm. You must know how to determine if a wall is load bearing before you attempt to remove it. You must learn what work requires permits and what doesn't. You have to do your research. In my fine state, if you demo a property for a remodel, you must register with a "green" company that monitors what you dispose of and how you do it.

Here are a just a few other things to have in order: good health insurance, disability insurance, homeowner's insurance, a current tetanus shot, sturdy boots, preferably steel toed...the list goes on and on. If you don't know what you're doing, accidents can and do happen. Make sure if you have one, it doesn't destroy you financially.

soccerluvof4

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Re: Fixer Home
« Reply #19 on: January 08, 2020, 04:26:18 AM »
I am brand new to the FIRE movement. I will have my Debt Emergency taken care of by Feb 1st. I would really appreciate some advice on what my next steps should be. I bought a 2 bed/2 bath fixer home in a resort town 10 years ago for 165K. I have not fixed it at all. It needs new floors, new windows, and the 2 bathrooms and kitchen need an overhaul. I also need to paint the deck and outside. I have 100K in equity in the home. My question is how to finance the repairs. Also, the house next door to me (2 bed/1 bath) was bought and fixed up recently and is now an Airbnb. The occupancy rate averages 20 days per month at $150 per night minus the 10% property management fee for a gain of $2700. My house is exactly the same as theirs except mine has a much better lake view and there are no stairs required to enter the house (a big deal in the mountains). I have a bonus large room (almost the size of the houses footprint) and bathroom downstairs that is accessed from a different entrance that I could use as a living space while my house was being rented out. I have a very stable job in a school district for $77,000 and have 30K in student loan debt.  My car is paid off. Thank you for your advice in advance!



To answer your question you should be able to get a Home Equity loan depending on what you own on your home I would start there and see how much you can borrow and only pay interest on what you loan.

In the interim as others have suggested figure out a Plan ideally of what you would like to accomplish and then you can whittle  it down by what you want to do , what needs to be done and what you want a contractor to do. I would suggest doing the minimum to start but set yourself up so overtime to can meet your end goal. Again as others have mentioned you might find you dont like doing the Airbnb.

Once you get a plan stop in at your local town hall building and find out what items you would need a permit for and others not. Every community /State etc.. is different. In my state if you own the home most things if you do the work yourself and are not changing the positioning of things then you dont need a permit but again every state/county is different.

It might sound overwhelming but its not. You can knock most of all I mentioned out in a few days BUT have a plan and dont tear down any walls until you can have a structurial engineer or some one certified to tell you its ok plus knowing whats inside the wall can be as important as knowing if its structural. Alot of thing you need to weigh out.

Good luck to ya!


dollarchaser

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Re: Fixer Home
« Reply #20 on: January 08, 2020, 05:44:19 AM »
Her is another way to move forward.

Convert the basement to an independent living quarter. That gives the air b nb choice for the least amount of money and is a powerful feature for resale.
If it becomes a good income, than the main floor renovation could be cash flowed or saved up for.

PS don't run the b n b while in construction mode.