Author Topic: Home buying... stretch it.... renovation or one completely done?  (Read 4005 times)

BFive55

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Home buying... stretch it.... renovation or one completely done?
« on: December 15, 2019, 07:40:02 AM »
Edit: Arg, I put it in the wrong forum. Sorry.

So my current predicament, sort of:

I relocated for work and took a pay cut. I work for the government (state government so switched states) and the ending salary is about the same. So I'll eventually make as much.

Current financial situation:
I have about $125,000 in retirement accounts (taxable and Roth) and then about $75,000 in a 457 account.
I have $80,000 in my savings for a down payment/emergency fund/renovation budget for a new place.
Since it's a government job I can expect a pension of 50%-70% depending on how many years I work (I have at least 20 more to go).

Salary is about $60-62,000 (it's a range due to being eligible for overtime).

I do not have a car payment. I have the usual bills like Netflix, Prime, TV cable, etc. I spend a bit too much on food but could easily push that back with just some better meal planning and not being lazy, lol.

I'm looking at a home for around $320,000. It's all done. No work needs to be done. The home originally sold for something like $130,000. I seriously doubt they put in ~$200,000 into a renovation and they're probably making a pretty good profit. I'm considering waiting until April/May to buy (renting an apartment). I'm just not sure if I should try to wait until there is a reno property available and then pay to have renovations done or just do the "ease of mind" and pay the extra where it's already done. I'd be able to stop by the job site a few days a week if it was a renovation and help out a bit. It would be cheaper in the long term, even with having to go month-to-month at my apartment complex.

I'm a bit wary of a full renovation because a family member got scammed out of like $200,000 during a new construction build (they were living like 500 miles away so they couldn't visit the job site regularly). I figure that is just one of those "horror stories" and while it is a more personal one, maybe I need a face punch or something to tell me it doesn't happen that often, and that a renovation on a cheaper house is better long term financially and to stop worrying?

Would something like $300,000-$320,000 total be pushing it? I only feel comfortable asking because of the large nest egg I already have saved. I had bought a place previously and felt I cheaped out on it, and ended up spending about $20,000 more to have stuff done or do it myself, which took a lot of hours that I'll never get back. My current career path has me maxing my state salary out at $105,000, but it'll take a while to get there. It's a big decision but the big benefit as we all know is that the price of ownership is constant unlike living in an apartment and you build equity. I want this to be a long-term home. Maybe not a forever home but like a 10-20 year home.

Edit: The market is a good, stable market. It's a desirable area with low unemployment and decent salaries. The 320 home is remodeled top to bottom based on some old pictures I could find. Pretty much new everything and top-of-the-line stuff.
« Last Edit: December 15, 2019, 08:31:09 AM by BFive55 »

AccidentialMustache

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #1 on: December 15, 2019, 08:25:31 AM »
With no details about the house or market, nobody is going to give a thought out opinion about the price of the house.

Was it actually a 250k home that had a bad roof and had rotted out all the interior drywall? Sold for 130, fixed up for 150 and then relisted for 320? If so that's a profit but its not crazy, especially after commission.

Or is it really a 130k home and all they did was update the carpet/cabinets/baths and call it a 320k home?


What I can tell you I wasn't buying a 320k home back when my income was 62k. We stretched on my ~44k starting to buy our first place at half the price you're looking at. That stretch wasn't a big risk though because we could make it on my salary alone (we'd have be eating rice, beans, and cheap ramen) and we expected DW to bring in some income even if her dept didn't have a TAship for her.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #2 on: December 15, 2019, 08:33:56 AM »
With no details about the house or market, nobody is going to give a thought out opinion about the price of the house.

Was it actually a 250k home that had a bad roof and had rotted out all the interior drywall? Sold for 130, fixed up for 150 and then relisted for 320? If so that's a profit but its not crazy, especially after commission.

Or is it really a 130k home and all they did was update the carpet/cabinets/baths and call it a 320k home?


What I can tell you I wasn't buying a 320k home back when my income was 62k. We stretched on my ~44k starting to buy our first place at half the price you're looking at. That stretch wasn't a big risk though because we could make it on my salary alone (we'd have be eating rice, beans, and cheap ramen) and we expected DW to bring in some income even if her dept didn't have a TAship for her.

Good point.

The housing market is really good here. Unemployment is low. Good jobs available with good salaries.

It's completely redone top to bottom. New everything. Really nice stuff in there. The *only* reasons I'm even considering stretching it like this is because of the money I've already saved up, the future pension, and I'd have to spend $0 renovating anything. When I bought my first place I was making the same and the place was $60,000 cheaper about 5 years ago.

And the amount of money is one reason I'm considering waiting until the spring to maybe get a similar house that needs $100,000 in renovation work or so. I'd prefer to spend $280-290,000 or less... I'd love to get a gut job house like this one and then put in the money and save since I wouldn't be buying a flip. If I had to guess I'd say the company flipping this house has got to be making at least a $40,000 profit based on the area, if not >$50,000.
« Last Edit: December 15, 2019, 08:36:34 AM by BFive55 »

pbkmaine

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #3 on: December 15, 2019, 08:41:15 AM »
With no details about the house or market, nobody is going to give a thought out opinion about the price of the house.

Was it actually a 250k home that had a bad roof and had rotted out all the interior drywall? Sold for 130, fixed up for 150 and then relisted for 320? If so that's a profit but its not crazy, especially after commission.

Or is it really a 130k home and all they did was update the carpet/cabinets/baths and call it a 320k home?


What I can tell you I wasn't buying a 320k home back when my income was 62k. We stretched on my ~44k starting to buy our first place at half the price you're looking at. That stretch wasn't a big risk though because we could make it on my salary alone (we'd have be eating rice, beans, and cheap ramen) and we expected DW to bring in some income even if her dept didn't have a TAship for her.

Good point.

The housing market is really good here. Unemployment is low. Good jobs available with good salaries.

It's completely redone top to bottom. New everything. Really nice stuff in there. The *only* reasons I'm even considering stretching it like this is because of the money I've already saved up, the future pension, and I'd have to spend $0 renovating anything. When I bought my first place I was making the same and the place was $60,000 cheaper about 5 years ago.

And the amount of money is one reason I'm considering waiting until the spring to maybe get a similar house that needs $100,000 in renovation work or so. I'd prefer to spend $280-290,000 or less... I'd love to get a gut job house like this one and then put in the money and save since I wouldn't be buying a flip. If I had to guess I'd say the company flipping this house has got to be making at least a $40,000 profit based on the area, if not >$50,000.

Is this your forever house (stay there 30 years) in a location you absolutely love? Is your job completely secure? If so, then maybe. If any one of these things is not true, hard pass. Our house in NJ (HCOL) cost less than that, and we were both making six figures at the time.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #4 on: December 15, 2019, 08:48:50 AM »


Is this your forever house (stay there 30 years) in a location you absolutely love? Is your job completely secure? If so, then maybe. If any one of these things is not true, hard pass. Our house in NJ (HCOL) cost less than that, and we were both making six figures at the time.

Not sure about forever home. It would be long term (10, 20 years... maybe forever, but would depend on future family plans... but even if I got married and had kids in the next few years, I'd say it'd be good for 10 years more).

Definitely a home I like. Location is amazing and it's walkable to a a really nice, medium sized downtown area with lots of shops, restaurants, and activities. The town puts on a lot of festivals when it's nice out. It's walkable to a college for sports. It's a short drive to the gym, a nice mall, chain restaurants, and grocery stores. Commute is only about 20 minutes to work.

Job is secure and pension is actually well-funded (shocker for a gov agency! lol).

Goldielocks

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #5 on: December 15, 2019, 09:02:31 AM »

 I had bought a place previously and felt I cheaped out on it, and ended up spending about $20,000 more to have stuff done or do it myself, which took a lot of hours that I'll never get back. My current career path has me maxing my state salary out at $105,000, but it'll take a while to get there. It's a big decision but the big benefit as we all know is that the price of ownership is constant unlike living in an apartment and you build equity. I want this to be a long-term home. Maybe not a forever home but like a 10-20 year home.

Edit: The market is a good, stable market. It's a desirable area with low unemployment and decent salaries. The 320 home is remodeled top to bottom based on some old pictures I could find. Pretty much new everything and top-of-the-line stuff.
The bolded part above is the primary reason you should continue to rent.   A home you own, especially in the first 5 years, will ALWAYS have those extra expenses and time compared to a rental.   You buy curtains, and repair the poorly done bathroom, you put in shelving and buy trash cans... maybe a new sofa.   After 5 years you end up transitioning into things like a new roof or repairing the driveway (or foundation drains, or restore the yard after raccoons dig it up, or a new hot water tank,  or...?.)

What is the cost to rent a place that you like right now compared to the cost to own if you put down 80%? 
Now add in  to the buy price, a 6%/yr opportunity (investment) loss that you don't get on your downpayment. 
Add in that $6k+ per year for maintenance on a home.

On Equity -- over time, homes will keep pace with overall inflation, and not gain much once the maintenance and updates are subtracted.   Homes have spiked in value in the past decade, partly due to low interest rates.  There is not a lot of room for interest rates to continue to fall, so growth will stay low.

When rent becomes 20% more than your mortgage payment for a similar place... or you can't find ANYTHING that is reasonable for you to rent to live in. that is the time to look at buying.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #6 on: December 15, 2019, 10:22:45 AM »

The bolded part above is the primary reason you should continue to rent.   A home you own, especially in the first 5 years, will ALWAYS have those extra expenses and time compared to a rental.   You buy curtains, and repair the poorly done bathroom, you put in shelving and buy trash cans... maybe a new sofa.   After 5 years you end up transitioning into things like a new roof or repairing the driveway (or foundation drains, or restore the yard after raccoons dig it up, or a new hot water tank,  or...?.)

That stuff wasn't just normal expenses. I was talking about having to do renovations. The place I bought was a fixer. If I had spent more money on a place that was "done" I wouldn't have had to spend the $20,000 and all my time... the time was the big thing. With the amount of time I put into it I'd probably say I "spent" another $5,000-$10,000. I ended up having to replace the flooring on the main and upper level, replacing the basement carpet, all new paint, redid the bathrooms, doing the kitchen, redoing the trim, replacing the old ceiling fans, replacing all the windows (they were sooo old, lol), my fence fell over in a storm and had to be replaced, gutters, and had to landscape.

I'd only want to spend this amount of money $300,000+ for something that is totally done... as in, I wouldn't need a new roof for 20 years or a new water heater or anything like that... that it would all be fixed, repaired, or replaced already.

I might have had to spend another $25-$30,000 on a place that was all "done" but I think it would have been worth it for resell and for peace of mind. When I was looking my price was $250,000 max, but from what I remember if I'd spent closer to $280,000 I could have gotten quite a bit more or gotten something the same size just much nicer.

Quote
What is the cost to rent a place that you like right now compared to the cost to own if you put down 80%? 
Now add in  to the buy price, a 6%/yr opportunity (investment) loss that you don't get on your downpayment. 
Add in that $6k+ per year for maintenance on a home.

Apartment is $1,650 a month excluding utility costs. With a 20% downpayment, local property taxes, it comes out to about $1,500-$1,550.

I seriously doubt maintenance would cost anywhere near $6,000 a year. I'd have an inspector make sure everything is done well for the price. Yard is tiny and can be down with a push mower... I can't see any more typical maintenance costs than yard work and a power washing every 2 years for the foreseeable future as the listing claims everything is new and replaced (windows, roof, HVAC, etc.).

Quote
On Equity -- over time, homes will keep pace with overall inflation, and not gain much once the maintenance and updates are subtracted.   Homes have spiked in value in the past decade, partly due to low interest rates.  There is not a lot of room for interest rates to continue to fall, so growth will stay low.

When rent becomes 20% more than your mortgage payment for a similar place... or you can't find ANYTHING that is reasonable for you to rent to live in. that is the time to look at buying.

The apartment building I am in already raised their rates. My place will cost about $150 more when my lease is renewed next year.

$320,000 might be a bit too much.... I would be much more comfortable with a price $30,000 to $40,000 less. Or buying a fixer for $130-150,000 and putting $100,000 into it.
« Last Edit: December 15, 2019, 10:25:41 AM by BFive55 »

Goldielocks

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #7 on: December 15, 2019, 11:05:34 AM »
The $6k per year is the budget -- I do think it is reasonable that one would need to spend $100k over 20 years, when you add in the furnace, plumbing, roof, perimeter drains, flooring, painting, fencing, driveway cracks, foundations settling or other things that need to be done.

It would not be $6k/yr immediately.

I have always found that homes you own cost a lot more money per year than ones you rent.. outside of the mortgage / rent payment.  Some of that is self -directed. 
New homes don't come with curtains, closet organizers, hose hangers, or have fairly cheap finishes for carpeting, lighting, appliances or plumbing that need to be replaced in 4 years.  Then there is the excitement of a new place and all those empty rooms to fill.

Homes that don't need a lot of renovations do take time to call for the on-going repairs.  I have a gas fireplace that needs a $100 part... but it is going to cost another $150 for labour and a few hours a day over 3 days to arrange for a professional to come and quote it, and then be there while it gets done.

Rental homes -- my attitude is different.  I call the landlord if it is serious or needed (fireplace heating, appliance doesn't work, or the handrail fell off)... but I just ignore it otherwise (large cracks at floorboards and the baseboard?  Not my problem as long as pests are under control).   I found that I did not spend more than a bare token amount "improving" my rental.   I put down mac tac on the very old kitchen shelves instead of cutting new boards, for example.

-------------------
The other reason -- you mention 10 years in the home.   But it seems like you do not have a long term relationship / fiance right now, but think marriage may be in your future?   It is not common for a new partner to accept and move into someone else's established place...  especially as you start to have kids, there may be 100 reasons why a slightly different set up would work better for the new family situation.  Very hard to determine if this is your long term place without a partner's input.

If there is any possible way for you to rent a place within 20% of your mortgage and taxes cost,  and be happy in it for 3 more years, I would start there, financially it is highly likely to be your best bet.
« Last Edit: December 16, 2019, 01:55:22 PM by Goldielocks »

ysette9

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #8 on: December 15, 2019, 02:13:39 PM »
A $300k home on your salary is way too much. How much of a down payment were you thinking house would do? Are you a single person? How big is this house? Are you planning on having roommates?

It feels to me like your thinking is too narrow: it is only this too-expensive house or a much cheaper fixer-upper. How about a smaller place that is less money but still doesnít need a bunch of work? How about a condo? How about renting for a few years to see how you like the area and the job?

Others may feel otherwise but my personal risk tolerance and the philosophy of this forum is not to stretch and spend as much as you possibly can on a consumption item like a house, but spend as little as you reasonably can while checking off the boxes of what features are important to you.

Papa bear

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #9 on: December 15, 2019, 05:03:04 PM »
I wouldnít buy a ďflippedĒ house.  Itís all lipstick.  I much prefer to gut and rehab to make sure itís done safely, efficiently, and up to current code. 

Iíve seen too many shit rehabs to trust someone else doing it.


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wellactually

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #10 on: December 16, 2019, 07:19:23 AM »
Second everything @ysette9 said.

It's like you think you're on House Hunters and your three options are $320k refinished home, much cheaper home with huge renovations needed, or $1600/month apartment. It sounds like your single. Do you have pets?

I rarely think it's a good idea to buy immediately upon moving to a new city. You just can't know yet what you really want to be tied to. Right now it may seem like walking distance to festivals is awesome, but after living there 6 months or a year, you may realize the late night noise or parking traffic during events is not something you want to deal with for 10-20 years.

I think it's too much to spend and especially since you don't seem to need the space right now. I also would look for a cheaper apartment. The mortgage or rent would each be over 1/3 of your monthly net, right?

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #11 on: December 21, 2019, 02:29:42 PM »
Unfortunately the area I'm in is k ind of expensive.

I just got a letter for prices for renewing my lease next year. It'll go up like $200/month. Insane. There are a few cheaper apartments around here. If I can wait until Spring and get a renovation project, the month-to-month jumps my rent up by $400/month which is more insane.

I don't want to be like a cliche "House Hunter" person looking for an expensive house or a big renovation project. The renovation project is just something I think would be nice to get stuff how I want it without people jacking the price up another 20% or something to make a profit on their reno flip.

The problem with real estate here when it comes to single family homes is that it's either in a good area or not. There's very little in between. Town homes in the area offer the in between but I'm much more in the market for a SFH, especially since a lot of the town homes I've looked at online require HOA dues of around $100-150/month (and doesn't cover repairs to the town home exterior) so that could just be put into a more expensive home rather than a cheaper town home + HOA dues.

The first place I bought I could have just paid a about $75/month more and when combined with my HOA dues could have afforded a SFH of a decent quality.

The housing market here is good, but again, expensive. It's just there is little in the way of "transitional" neighborhoods and it's either good or not good.

« Last Edit: December 21, 2019, 02:31:34 PM by BFive55 »

FatFI2025

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #12 on: December 22, 2019, 08:06:49 AM »
You face the regular, universal risks that everyone has buying a house. My opinion is that there's less risk buying a completed flip than buying a fixer and contracting the work yourself. With the flip, there will probably be quality issues, but if they're bad enough you might be able to go after the flippers.

For instance, I bought a gut reno flipped Washington DC TH in 2014. They disclosed the roof was less than 5 y/o, which I specifically looked for at closing since the roof was so high the inspector didn't go up there. After purchase, potential renter reported a mold smell in the upstairs BR after a rain storm. Turns out it was the original tin roof ~114 y/o. The flipper used the same company for multiple properties, so I got their lawyer to pay 100% of the costs for the new roof. If they had used a separate company for that property, I'd be out-of-luck.

In the same property, they had a mismatched evaporator coil that caused weak A/C. It was ~$1.5K to fix and I didn't try to get any money from the flipper on that one since it wasn't a blatant lie on a disclosure. Also I don't think they put in decent insulation, but I haven't had to deal with it.

I'm looking to sell the property and will still make some money, but there was just a little added cost and a** pain due to the flip.

zygote

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #13 on: December 22, 2019, 09:28:06 AM »
I just got a letter for prices for renewing my lease next year. It'll go up like $200/month. Insane. There are a few cheaper apartments around here. If I can wait until Spring and get a renovation project, the month-to-month jumps my rent up by $400/month which is more insane.

Is the new monthly price really the rent they could get on the market if they find a new tenant? They're counting on people being too lazy to move. The first thing I would do is call the landlord and try to negotiate the increase to $50 or $100/month. They might take you up on it to save the hassle of finding a new, reliable renter. You don't really have anything to lose if you're considering moving to a house or a cheaper apartment anyway.

As a perpetual renter, not much advice on the purchase, but my gut says it is too expensive for your salary.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #14 on: December 27, 2019, 02:11:13 PM »
I just got a letter for prices for renewing my lease next year. It'll go up like $200/month. Insane. There are a few cheaper apartments around here. If I can wait until Spring and get a renovation project, the month-to-month jumps my rent up by $400/month which is more insane.

Is the new monthly price really the rent they could get on the market if they find a new tenant? They're counting on people being too lazy to move. The first thing I would do is call the landlord and try to negotiate the increase to $50 or $100/month. They might take you up on it to save the hassle of finding a new, reliable renter. You don't really have anything to lose if you're considering moving to a house or a cheaper apartment anyway.

As a perpetual renter, not much advice on the purchase, but my gut says it is too expensive for your salary.

Most likely they can push it up $200/month without really losing a lot of people. The area is good and it's an easy drive to a lot of stuff, or a really cheap Uber ride if you're drink at the bars. I talked to a few people when I moved in and they said the new owners of the property really improved the quality of the apartments. A lot were renovated... never had issues with pests or noise, etc.

I'm only even considering the house (which I saw is still on the market) because of all the money I have saved in my retirement accounts, which makes it more palatable.... I'm kind of hoping that if the house doesn't sell in the next month I could potentially lowball at maybe $20,000 less or more.  It's a stretch and it'd make me a little nervous.... I'm thinking something else might pop up in the mean time which is a better price.
You face the regular, universal risks that everyone has buying a house. My opinion is that there's less risk buying a completed flip than buying a fixer and contracting the work yourself. With the flip, there will probably be quality issues, but if they're bad enough you might be able to go after the flippers.

For instance, I bought a gut reno flipped Washington DC TH in 2014. They disclosed the roof was less than 5 y/o, which I specifically looked for at closing since the roof was so high the inspector didn't go up there. After purchase, potential renter reported a mold smell in the upstairs BR after a rain storm. Turns out it was the original tin roof ~114 y/o. The flipper used the same company for multiple properties, so I got their lawyer to pay 100% of the costs for the new roof. If they had used a separate company for that property, I'd be out-of-luck.

In the same property, they had a mismatched evaporator coil that caused weak A/C. It was ~$1.5K to fix and I didn't try to get any money from the flipper on that one since it wasn't a blatant lie on a disclosure. Also I don't think they put in decent insulation, but I haven't had to deal with it.

I'm looking to sell the property and will still make some money, but there was just a little added cost and a** pain due to the flip.

That's always the problem. I know a few people who are pretty knowledgeable on home building and would be willing to do a double check. I'd make sure the inspector does a very good inspection.... but yeah, I see your concern. It'd be cheaper to buy a gut job and even if something was messed up on it'd be cheaper to redo it then pay for a completely flipped home with the premium put on to make a profit.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #15 on: January 04, 2020, 09:21:07 AM »
Hm, the house I was talking about just did a $13,000 price drop. So far it's gone through 35,000 in price drops (three, I think). If they're dropping the price three times I'm kind of wondering if I could negotiate another $7,000 or so off. It's getting more doable on the budget. It'd end up being "cheaper" per month than my current apartment by $200 right now, almost $300-350 cheaper when I have to renew my lease. With everything "done" I could hopefully build up a littl contingency fund for home repairs when they start to pop up in a few years.

There's that premium of paying for a fully renovated house v doing it on your own...

frugaldrummer

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #16 on: January 07, 2020, 05:34:36 PM »
Quote
It's completely redone top to bottom. New everything.

Nope. Not new everything I bet. What about the electrical wiring? The plumbing? The sewer line?

Flips usually do the cosmetic and the minimum of the structural because that's how you make a profit. 

How old is the home? That's a big factor in figuring out whether things light electrical and plumbing could become a problem. Don't forget to include money for repairs AND property taxes into your estimates. And do you have a family, or will you be renting to roommates? That makes a big difference to the bottom line and the advisability of taking on this much house.

My last house purchase was a 19 year old house bought post-divorce. I liked the price and the floorplan was ideal for multigenerational living (my elderly mom and eventually two of my 20-something kids). I replaced some expensive windows, the carpet, and repainted the interior when I moved in.  It wasn't that old a house and all was good.

Now ten years later, though, I wish I had bought a new house at the time. (Problem was, most didn't have a downstairs bed and bath for my mom). My now almost 30 year old house needs repainting (tall 2 stories so must be done by professionals - I'd do it myself if it was 1 story). Things in the kitchen are starting to break down and it really needs a kitchen remodel - an expensive proposition. One electrical outlet in the kitchen burnt out, and fixing it will require either going through the drywall on the other side of the wall or removing the glass tile backsplash, so I'm waiting until I can afford the kitchen remodel to deal with it. Various other items need work so as I plan my retirement in a few years, I need to budget perhaps $100k for house maintenance long term.

I don't regret buying the house - it's been good in many ways - but I will definitely need to put quite a bit of money into it to keep it in good enough shape to retire in. I've thought of selling it and buying a brand new house to retire into but my property taxes would increase considerably and I still need the four bedrooms for now. If I had it to do again I would have looked harder for a one story home which would have made many maintenance tasks cheaper or more DIY doable.

ysette9

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #17 on: January 07, 2020, 05:52:42 PM »
The concept of buying a new house is weird to me. I suppose it is because I am in a developed area. You can have a new house a few ways: buy an existing one and tear it down, or commute from the far-flung suburbs a good 1-2 hours away. Houses need maintenance and that is just part of the cost of home ownership. Budget for it.

Freedom2016

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #18 on: January 08, 2020, 06:34:41 AM »
You're contemplating a purchase that is approaching 5x your income.

I mean, in VHCOL places those ratios do get kind of crazy, but I'm not under the impression you live in a VHCOL?

What do taxes look like in your location? Insurance? Remember your monthly nut will include those items...

The first place DH and I bought, 10 years ago, in a HCOL location, was in the ballpark of the house you're considering. Thing is, we had 3 times the income you do so the ratio was <2x. And the home we bought 6 months ago, again in HCOL, is 2.5x our income. I would feel very stressed with a 5x ratio.

Have you considered roommates?

Goldielocks

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #19 on: January 08, 2020, 09:54:59 AM »
Hm, the house I was talking about just did a $13,000 price drop. So far it's gone through 35,000 in price drops (three, I think). If they're dropping the price three times I'm kind of wondering if I could negotiate another $7,000 or so off. It's getting more doable on the budget. It'd end up being "cheaper" per month than my current apartment by $200 right now, almost $300-350 cheaper when I have to renew my lease. With everything "done" I could hopefully build up a littl contingency fund for home repairs when they start to pop up in a few years.

There's that premium of paying for a fully renovated house v doing it on your own...

The apartment you have now -- is it a shorter commute?  Do you have access to / use any of the common spaces, like a pool or fitness equipment? Will your utilities increase?  If you would incur more commute costs or pay for otheritems that you get free for now, you need to consider that, too.

What is the cost of a nice apartment at a similar distance to the home you are looking at?  How does that one compare in $$'s

The difference is approx $250 x 12 = $3000/yr   out of pocket, which is not a lot to cover maintenance, trash, water, etc on a larger place.  That's only $30,000 over 10 years... the cost of a roof and air conditioner replacement, for example.

soccerluvof4

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #20 on: January 09, 2020, 08:10:28 AM »
I would buy something you can afford easily that needs renovations overtime. So finding a home with good bones like solid foundation, roof, preferably good windows and a floor plan you can work with. Something you can move into right away and do a room a year or more if money allows it.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #21 on: January 19, 2020, 08:59:37 AM »
You're contemplating a purchase that is approaching 5x your income.

I mean, in VHCOL places those ratios do get kind of crazy, but I'm not under the impression you live in a VHCOL?

What do taxes look like in your location? Insurance? Remember your monthly nut will include those items...

The first place DH and I bought, 10 years ago, in a HCOL location, was in the ballpark of the house you're considering. Thing is, we had 3 times the income you do so the ratio was <2x. And the home we bought 6 months ago, again in HCOL, is 2.5x our income (without major renovation). I would feel very stressed with a 5x ratio.

Have you considered roommates?

Unfortunately I am in a high cost of living area. Even in the last job before I took a pay cut my place was 4.5x my salary. I felt comfortable buying it. There is literally nothing here that is livable at 2.5 times salary. That's the disadvantage of being in a east coast major metropolitan area.

No roommates. I can actually do contract work from home to supplement my income without issues. (Since I enjoy the work it's kind of not really work.)

I'd love to find a house or town home only like 3x income but it's just not possible. I've been looking at Redfin/Realtor/Zillow and even going back 2 year for past sales looking to just get an idea. Unless I moved to an area that I have been explicitly told to avoid, it's just not doable. It kinda sucks.



The apartment you have now -- is it a shorter commute?  Do you have access to / use any of the common spaces, like a pool or fitness equipment? Will your utilities increase?  If you would incur more commute costs or pay for otheritems that you get free for now, you need to consider that, too.

What is the cost of a nice apartment at a similar distance to the home you are looking at?  How does that one compare in $$'s

The difference is approx $250 x 12 = $3000/yr   out of pocket, which is not a lot to cover maintenance, trash, water, etc on a larger place.  That's only $30,000 over 10 years... the cost of a roof and air conditioner replacement, for example.

They're a mile apart. I get compensated for gas. I pay a trash fee at my apartment and all utilities are individually metered.

$3,000/year on maintenance is insane, IMO. Minus some catastrophic repair I can't imagine spending that. The yard on this place is so tiny I could use an electric weed wacker and two batteries to cut it and anything like powerwashing I can do myself. I never spent anywhere close to $3,000 for maintenance at my last place (which I do not count renovation expenses as).

Roof and siding are in good shape. I went into the attic and looked around.. pretty bone dry on wet day. HVAC, etc. all new.

The listing had everything new they put in and i's pretty extensive.

They actually did another price drop on the house by like 7,000 I think.
« Last Edit: January 19, 2020, 09:05:30 AM by BFive55 »

MayDay

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #22 on: January 19, 2020, 02:16:41 PM »
You're contemplating a purchase that is approaching 5x your income.

I mean, in VHCOL places those ratios do get kind of crazy, but I'm not under the impression you live in a VHCOL?

What do taxes look like in your location? Insurance? Remember your monthly nut will include those items...

The first place DH and I bought, 10 years ago, in a HCOL location, was in the ballpark of the house you're considering. Thing is, we had 3 times the income you do so the ratio was <2x. And the home we bought 6 months ago, again in HCOL, is 2.5x our income (without major renovation). I would feel very stressed with a 5x ratio.

Have you considered roommates?

Unfortunately I am in a high cost of living area. Even in the last job before I took a pay cut my place was 4.5x my salary. I felt comfortable buying it. There is literally nothing here that is livable at 2.5 times salary. That's the disadvantage of being in a east coast major metropolitan area.

No roommates. I can actually do contract work from home to supplement my income without issues. (Since I enjoy the work it's kind of not really work.)

I'd love to find a house or town home only like 3x income but it's just not possible. I've been looking at Redfin/Realtor/Zillow and even going back 2 year for past sales looking to just get an idea. Unless I moved to an area that I have been explicitly told to avoid, it's just not doable. It kinda sucks.



The apartment you have now -- is it a shorter commute?  Do you have access to / use any of the common spaces, like a pool or fitness equipment? Will your utilities increase?  If you would incur more commute costs or pay for otheritems that you get free for now, you need to consider that, too.

What is the cost of a nice apartment at a similar distance to the home you are looking at?  How does that one compare in $$'s

The difference is approx $250 x 12 = $3000/yr   out of pocket, which is not a lot to cover maintenance, trash, water, etc on a larger place.  That's only $30,000 over 10 years... the cost of a roof and air conditioner replacement, for example.

They're a mile apart. I get compensated for gas. I pay a trash fee at my apartment and all utilities are individually metered.

$3,000/year on maintenance is insane, IMO. Minus some catastrophic repair I can't imagine spending that. The yard on this place is so tiny I could use an electric weed wacker and two batteries to cut it and anything like powerwashing I can do myself. I never spent anywhere close to $3,000 for maintenance at my last place (which I do not count renovation expenses as).

Roof and siding are in good shape. I went into the attic and looked around.. pretty bone dry on wet day. HVAC, etc. all new.

The listing had everything new they put in and i's pretty extensive.

They actually did another price drop on the house by like 7,000 I think.

Have you ever owned a house before?

You can't imagine a 3000$ expense?

Hahahahaha.

Hahahahahahaha.

Oh honey.

robartsd

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #23 on: January 21, 2020, 09:38:35 AM »
Have you ever owned a house before?

You can't imagine a 3000$ expense?

Hahahahaha.

Hahahahahahaha.

Oh honey.
Having a $3000 expense is not the same thing as maintenance costing $3000/yr. There are several maintenance expenses that cost more than $3000 when they come up (primarily replacing roofs and mechanical systems), but they each last a decade or more so it is very reasonable to not expect to have such an expense every year.

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #24 on: January 21, 2020, 10:42:35 AM »

Have you ever owned a house before?

You can't imagine a 3000$ expense?

Hahahahaha.

Hahahahahahaha.

Oh honey.

Yes, I have. Have you? Because you're confusing a $3,000 expense to replace something with yearly maintenance. 

A replacement (water heater, HVAC) can be covered or partially covered with savings and a contingency fund that I've already posted about had you read my first post rather than skipping around to insult me. (and then realizing that all that big stuff was new and under warranty.)

Want to troll again?
Have you ever owned a house before?

You can't imagine a 3000$ expense?

Hahahahaha.

Hahahahahahaha.

Oh honey.
Having a $3000 expense is not the same thing as maintenance costing $3000/yr. There are several maintenance expenses that cost more than $3000 when they come up (primarily replacing roofs and mechanical systems), but they each last a decade or more so it is very reasonable to not expect to have such an expense every year.

Indeed. Thank you. The big ticket items like the HVAC, appliance, water heater, etc.... brand new. The roof and siding are both in good shape and could last another ten or more years, easy. At the price point, while a stretch for salary, still affords a $10,000 or so, contingency fund should something major happen.

I'd love to find a nice place at only 2-3 times salary but... this isn't Texas where you can get mansion for $200,000. Unfortunately, lol. It really is a massive difference between a $200,000 place and a $300,000 place here. It sucks but that's east coast living near a major city. Now I could go 45 minutes south or west, increase my commute time by that much, and find a very nice place for around $250,000... but then spend an extra 1.5 hours in my car each day and stressed over traffic, bad weather, etc. (and we only get compensated for X number of miles anyway... my car is older with 140k miles and I want to keep it for like 3-5 more years...)
« Last Edit: January 21, 2020, 10:46:37 AM by BFive55 »

StacheDash

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #25 on: January 21, 2020, 07:30:50 PM »
Iím not sure which option you should chose without knowing more details about the location. The fact that the flipped house keeps dropping itís price tells me it is over priced. I would also be very careful assuming that something being new means it wonít break.

MayDay

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #26 on: January 21, 2020, 07:52:09 PM »
Look, I misread, but I'll stand behind my statement. A couple really big things (roof, etc) and a billion small things sprinkled in really adds up.

EvenSteven

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #27 on: January 22, 2020, 10:01:33 AM »
Usually when people talk about yearly maintenance, the cost of big ticket replacements are included as an annualized figure. So if a 30k roof needs to be replaced every 30 years, then 1k is added to the yearly maintenance cost. Same for furnace, fence and deck replacement, water heater, etc.

That is why the yearly maintenance estimates may be more than you are expecting.

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #28 on: January 25, 2020, 03:41:13 AM »
Usually when people talk about yearly maintenance, the cost of big ticket replacements are included as an annualized figure. So if a 30k roof needs to be replaced every 30 years, then 1k is added to the yearly maintenance cost. Same for furnace, fence and deck replacement, water heater, etc.

That is why the yearly maintenance estimates may be more than you are expecting.



This is a good point and why I have 600$ a month in my Home Maintenance Budget.

dhc

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #29 on: January 25, 2020, 07:33:37 AM »
Usually when people talk about yearly maintenance, the cost of big ticket replacements are included as an annualized figure. So if a 30k roof needs to be replaced every 30 years, then 1k is added to the yearly maintenance cost. Same for furnace, fence and deck replacement, water heater, etc.

That is why the yearly maintenance estimates may be more than you are expecting.



This is a good point and why I have 600$ a month in my Home Maintenance Budget.


The general rule-of-thumb I've heard (and which rings true so far for me) is 1-2% of the purchase price yearly for maintenance (including saving up for big replacements). For the house you're talking about, that's $3000-$6000.


Still haven't heard a property tax figure. I'll chime in with everyone else who's saying this is a bad idea and you can't afford it. With just you, there's no reason to own a huge house, let alone a fancy pants one 5x your salary.

Goldielocks

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #30 on: January 25, 2020, 12:45:29 PM »
Have you ever owned a house before?

You can't imagine a 3000$ expense?

Hahahahaha.

Hahahahahahaha.

Oh honey.
Having a $3000 expense is not the same thing as maintenance costing $3000/yr. There are several maintenance expenses that cost more than $3000 when they come up (primarily replacing roofs and mechanical systems), but they each last a decade or more so it is very reasonable to not expect to have such an expense every year.

But exceptionally reasonable to have $30k of expenses and maintenance over 10 years,  especially if you include minor costs incurred when selling, (paint, replacing a chipped counter or broken window seal, etc.) and on-going landscaping.

New places (builder new) may not have as many systems "failures", in 10 years, but in my experience, the first two years of putting in closet shelving, curtains, landscaping and basic livable upgrades make up for it.

And, yes, you did have a contingency listed early on for major costs, but the majority of this thread has been a "buy versus rent" discussion.   Just because you have a fund for repairs doesn't mean that they don't cost anything to you or the "buy" side of the equation. Many of us are pointing out that when you include the repairs contingency budget, it skews the end results farther than you are realizing.

There are two excellent reasons to buy:
1)  The cost to rent far exceeds the monthly and annualized costs to buy.  This cycles and it does occur.   1998 was a great year to buy versus rent.   My monthly costs to buy were $250 per month lower than the costs to rent.  That paid for a lot of upgrades, repairs, etc.   I don't think your numbers are in this range.

2)  You can not find an acceptable place to rent in your budget, but you can find an acceptable place to buy.  This has also happened to me.   The rental market was tight, very, very few places and mostly run-down and disgusting, or located over a nightclub, that sort of thing. Zero townhouses or houses with a yard for rent.   It was a resource boom-town during a boom.  We were deciding if we would buy or rent an RV to live in for year because we could not find a rental and we opened up our budget range quite a bit.   We could afford buying a place on our incomes, and planned to stay for at least 4 years, so that is what we chose.
« Last Edit: January 25, 2020, 12:56:43 PM by Goldielocks »

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #31 on: February 06, 2020, 02:24:20 PM »
So I found a nice, older home that was redone (new stuff) with a mortgage of $1275. It's a bit further from the town I wanted to live in, but just a 10 minute hop to a city that has a lot of fun things to do. So no walking distance, but close enough for a cheap Uber ride if drinking, lol.

It's about the same distance to work as my apartment and might actually be faster to get to work due to the highways nearby.

I was surprised I found this home. Toured it within a few days of it going on market and made an offer.

When I mentioned the area to some people I got mixed reactions. It's pretty much divided north/south by a major road, with the southern bit being the better half. One guy at work said he'd lived in the northern half and for 10 years never had an issue. Another guy said it's a great starter home area and a few others noted that while there are problems on both sides of the major road, the southern side is better, and there is some good potential there. I did some reasearch and the area is revitalizing, with luxury townhome/condos/apartments being built and grants being issued by the local government to fix up older homes and improve curb appeal. The neighborhood does have transient people in some parts, but much of the neighborhood is filled with streets lined with big old trees and single family homes that are relatively well cared for (but not professionally manicured lawns). It's a working class and middle-middle class neighborhood.

Now the home inspection... if there's knob and tube wiring that's gonna be a deal breaker. I have a little sneaking feeling there might be but just on a superficial inspection I'm cautiously optimistic there is not.


Still haven't heard a property tax figure. I'll chime in with everyone else who's saying this is a bad idea and you can't afford it. With just you, there's no reason to own a huge house, let alone a fancy pants one 5x your salary.


In the midwest, sure. On the East Coast where this is there is a huge difference between a $200,000 home and a $300,000 home. With the former not existing. A 5x salary home is not a 'fancy pants' home by any stretch of the imagination here and is in the "starter home" category. Not everyone in the world has an opportunity to buy a 2,000 square foot McMansion in Subdivision 12342532 for $150,000 like in the midwest.....

While the homes are more pricey here there's the chance for higher home price increases to make up for it in the long term. Maybe. But really... I just don't understand this mindset here of only spending like 2x your salary on a home. That just doesn't exist in major metropolitan areas... especially along the coasts.
« Last Edit: February 06, 2020, 02:29:35 PM by BFive55 »

Papa bear

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #32 on: February 06, 2020, 02:38:26 PM »
Why would some knob and tube be a deal breaker?

1) itís relatively easy to switch out
2) if itís not overloaded or messed with previously, itís relatively safe.  They are two separate, clothe insulated runs of wires, run on and through porcelain (a pretty good insulator, and also happens to not be flammable) tubes and knobs.  Realistically, given how far away the wires are from each other, there is little chance of arcing in wall.
3) you can run a gfci outlet on knob and tube, making them relatively safer.

Houses have been using this method for more than 100 years, and are still working.  Itís not some crazy scary thing here.

IF the wires have been tapped into, messed with, re run, etc, then that is typically something that needs to be addressed.  And even with that, itís just channeling out some drywall and running some romex.  ďIt ainít rocket surgery.Ē




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robartsd

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #33 on: February 06, 2020, 03:04:34 PM »
And even with that, itís just channeling out some drywall and running some romex.  ďIt ainít rocket surgery.Ē
Except there probably wouldn't be drywall. The walls of a house that has knob and tube wiring is more likely to have lathe and plaster walls which makes the renovation more tricky.

Papa bear

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #34 on: February 06, 2020, 04:23:54 PM »
And even with that, itís just channeling out some drywall and running some romex.  ďIt ainít rocket surgery.Ē
Except there probably wouldn't be drywall. The walls of a house that has knob and tube wiring is more likely to have lathe and plaster walls which makes the renovation more tricky.

Could be even easier! A circular saw with a garbage blade is your friend. Chalk a line, cut out the plaster, pull out a couple of strips of lathe, run your wire, replace, re mud.  Done this a lot. 


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robartsd

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #35 on: February 06, 2020, 05:00:44 PM »
Could be even easier! A circular saw with a garbage blade is your friend. Chalk a line, cut out the plaster, pull out a couple of strips of lathe, run your wire, replace, re mud.  Done this a lot. 
Maybe I need to learn some of your techniques. I'm not sure if my house does have any knob and tube, but it certainly does have lathe and plaster and more outlets would be very useful (the dining room and hallway have none, only one side of the kitchen counter has power, bedrooms only have power on one wall each).

BFive55

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #36 on: February 12, 2020, 05:48:08 PM »
Why would some knob and tube be a deal breaker?

1) itís relatively easy to switch out
2) if itís not overloaded or messed with previously, itís relatively safe.  They are two separate, clothe insulated runs of wires, run on and through porcelain (a pretty good insulator, and also happens to not be flammable) tubes and knobs.  Realistically, given how far away the wires are from each other, there is little chance of arcing in wall.
3) you can run a gfci outlet on knob and tube, making them relatively safer.

Houses have been using this method for more than 100 years, and are still working.  Itís not some crazy scary thing here.

IF the wires have been tapped into, messed with, re run, etc, then that is typically something that needs to be addressed.  And even with that, itís just channeling out some drywall and running some romex.  ďIt ainít rocket surgery.Ē




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Thankfully it was all replaced during a previous renovation years ago but there were remnants of the knobs there.

It'd be a deal breaker because insurance in the state I'm in makes it very expensive to insure (if they even will). It's also an expensive fix, to the point where any savings I would get by buying a home below 300,000 is eaten up by the costs of replacements, making it kind of pointless that I found this house.

I can do basic electrical work (switching out plugs, lights, installing fans, etc.) but not a complete rewire.

partgypsy

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Re: Home buying... stretch it.... renovation or one completely done?
« Reply #37 on: February 13, 2020, 10:54:08 AM »
BFive55, how long have you lived in this new town? I think the question is not getting a house that has been renovated, or a house that has not and needs that, but other things.
What is your overall and top budget for a house? And within that what IS reasonable to get in this town?
What are you willing to pay in property taxes every year.
Where in this town/city etc do you WANT to live (proximity, neighborhoods, walkability)?
 
These will all narrow your options, and from those options you can look what is available and see where prices fall. 
The renovate vs not renovate is not really the most important question.

You are young, you have time on your hands to work on a house over time. Obviously, avoid houses with big issues (roof, foundation, horrible layout etc). But if it's a matter of renovating a decent solid home to get what you want, basically get the house that ticks your boxes (price, location, basic features of house) and get the one that fits that, regardless of whether it needs renovation or not. I also think the amount you are thinking of paying sounds a lot. But I don't know where you live and what are average prices, etc. It's very location dependent.  The only think you can't change about a house is it's location. Our house is plaster and lathe and was knob and tube and we had to replace all wiring when we purchased the house to get insurance. Basically you can fix anything. You just have to decide if the cost/hassle is outweighed by something else (quality or features of house, affordability, neighborhood, etc). 
« Last Edit: February 13, 2020, 10:57:44 AM by partgypsy »