Author Topic: How much money to put into home improvements?  (Read 2299 times)

NeonPegasus

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How much money to put into home improvements?
« on: April 14, 2017, 07:25:08 AM »
In about 18 mo, DH and I and our 3 kids will be moving in with my father-in-law. He is widowed and lonely and has a 5 bedroom house on the river in the best public school district in the state. We will be shedding mortgage payments and private school tuition so you can imagine how financially beneficial this could be.

FIL's house was built in 1977. Given the size, location, and 7 acres of land it's on, it could be worth $2+mm. It's hard to tell as it doesn't even show up on Zillow's map. Most of the homes in the surrounding area are worth at least $1mm and those are on tiny lots in subdivisions. Anyway, the house hasn't been updated substantially since it was built. FIL already understands and agrees that renovations are needed and will pay for some but the major question is how much should we do?

Before we begin the discussion, it is important to understand that this house is slated to be the majority of our inheritance. FIL wants to ensure that his estate is split even among his 3 kids. If the house currently comprises 1/3 of the estate, increasing the value significantly with upgrades could throw off the balance, especially if FIL directs a lot of his own money into it. There is also concern about exceeding the estate tax threshold. And if we inherit a high value house and no cash, we could get hit with a large tax bill and then have to dip into our own money to pay it or have to sell the house and move. And if we use a lot of our own cash to renovate it, then we could be doubly shooting ourselves in the foot - our cash could increase the value, decreasing our portion of the inheritance and increasing our estate taxes.

That being said, I don't want to live in an ugly house that smells of mothballs and has 3 gal toilets and bathtubs various shades of the rainbow with carpet in the bathrooms (on top of asbestos lineoleum). I don't like beige linoleum floor in the kitchen and green cabinets and giving up the much used double oven I have in my current house. We will have up to $100k to invest in upgrading the house when we sell our current house but I struggle with the decision about how much work and money to put into the house.

I sure could use some thoughts.

Sibley

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Re: How much money to put into home improvements?
« Reply #1 on: April 14, 2017, 09:10:50 AM »
Well, first I'd recommend getting the inheritance nailed down better. Go read the thread about inheritance stories, from your brief explanation it sounds like you're headed for a nightmare later. Real estate seems to be massive issue in inheritances.

Replacing toilets, carpet, and painting kitchen cabinets isn't a huge amount of money. You can live with a single oven, plenty of people do. Repaint the interior, including ceilings - not hard to do and relatively cheap for huge impact. But I wouldn't do much more than that unless you get the inheritance figured out one way or another.

SKL-HOU

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Re: How much money to put into home improvements?
« Reply #2 on: April 14, 2017, 05:01:51 PM »
You will increase the value of the house but you will also be benefiting from living in the house.

Cassie

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Re: How much money to put into home improvements?
« Reply #3 on: April 14, 2017, 06:19:40 PM »
Are you paying rent or living for free? That makes a difference.

YttriumNitrate

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Re: How much money to put into home improvements?
« Reply #4 on: April 14, 2017, 06:53:02 PM »
Another thing to consider regarding the eventual inheritance is that you may be signing up to eventually provide in-home nursing care to your father in law. The value of that should not be underrated.

Spork

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Re: How much money to put into home improvements?
« Reply #5 on: April 14, 2017, 07:40:44 PM »
Another thing to consider regarding the eventual inheritance is that you may be signing up to eventually provide in-home nursing care to your father in law. The value of that should not be underrated.

A couple of things to consider:
* this might be the best thing in the world for your FIL.  Might be.  (It's debatable.)
* this will NOT be fun and will be an enormous amount of work
* the work provided will be valued at $0 by other siblings.  Seriously.  Fully functional, logical siblings will think "yeah, well that's what you do for your loved one" and ignore that a 24x7 private nurse will cost them $200k a year and a nursing home would be $80k a year.

NeonPegasus

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Re: How much money to put into home improvements?
« Reply #6 on: April 15, 2017, 08:20:22 AM »
Thanks for the input.

FIL spoke with his attorney yesterday. Attorney advised we could not put our own money into a house we don't own lest it be considered a gift and taxed thusly. Attorney said that instead, any money we put into the house should be considered to be purchasing a portion of it. That takes that portion of the house out of his estate and reduces the valuation of his house.

Regarding the care, thankfully FIL has plenty of money for in home nursing and had made it clear that he expects to pay for that when/if the time comes. Right now, at 80, he is in extraordinarily good health. His main issues have to do with loneliness and depression. He already spends at least two nights a week with us.

He will also be paying all housing, utility, insurance and tax costs and even plans to hire a maid so my cleaning burden  won't be increased. I'll continue to cook for everyone but cooking for 6 is no different than for 5 (though this is why I want a double oven - I cook a lot!).

I guess one possibility down the line is that if he needs nursing care and uses up a lot of cash, the house will represent more than 1/3 of the estate and we would need to sell and give cash to siblings to be fair. We are prepared for that. If we protect our equity with partial ownership of the house, we will have plenty to buy another more modest house if it comes to that.


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gooki

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Re: How much money to put into home improvements?
« Reply #7 on: April 17, 2017, 01:05:23 AM »
First, understand what you/your father want in a renovation.

Then understand what the market wants for houses in that area. Is all the value in the land? Would a new buyer simply tear down the existing dwelling? Or are homes being accepted for what the are, and maintained by their new owners. 

If what you want aligns with what the market wants, the go for it, just avoid personal renovation quirks if you intend to sell in the future.

If what you want doesn't align with the market, spend as little as possible to make it acceptable. Overspending pheromones is simple a sunk cost.

zolotiyeruki

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Re: How much money to put into home improvements?
« Reply #8 on: April 17, 2017, 07:50:37 AM »
I don't have any advice to share, but I'm curious--in this situation, how would FIL go about giving partial ownership of the home to OP as payment for performing renovations?

badassprof

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Re: How much money to put into home improvements?
« Reply #9 on: April 17, 2017, 04:22:43 PM »
Just wanted to first commend you for moving in with your father in law and mitigating his loneliness--wish more families could/were in a position to do this.

Second, i think I'd probably pay for some of the remodeling myself if I wasn't paying rent or mortgage. You could consider it the cost of living there, and then just split any profit when the house sells three ways with the siblings.  I'd probably restrict that remodeling to what would make the house livable, etc. That is, I wouldn't necessarily spend time updating the house in terms of style, etc. That could be for the next homeowner.

NeonPegasus

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Re: How much money to put into home improvements?
« Reply #10 on: April 18, 2017, 10:41:08 AM »
I don't have any advice to share, but I'm curious--in this situation, how would FIL go about giving partial ownership of the home to OP as payment for performing renovations?

It's the opposite. We would be purchasing a portion of his house that corresponds with the money we're putting into it. So, if we put $100k into the house, we will be purchasing a share of the house. Then when he passes, that share of the house will not be in his estate. As for the actual hows, that's something that his attorney will set up.

Just wanted to first commend you for moving in with your father in law and mitigating his loneliness--wish more families could/were in a position to do this.
Thank you. I love him and he has tried so hard not to sink into depression. He has cultivated friendships with people he meets through traveling and travels with them and arranges visits back and forth. We get along with him very well and feel it's our duty to help.

Second, i think I'd probably pay for some of the remodeling myself if I wasn't paying rent or mortgage. You could consider it the cost of living there, and then just split any profit when the house sells three ways with the siblings.  I'd probably restrict that remodeling to what would make the house livable, etc. That is, I wouldn't necessarily spend time updating the house in terms of style, etc. That could be for the next homeowner.
If we were talking about a few thousand, I wouldn't care about splitting the profits but we're looking at up to $100k - 15 years of equity from our own house.

While living there, we will be doing plenty of work ourselves but we wanted to get the messy, inconvenient stuff done before we add another 5 people in the house.

The minimum time we would be in that house would be 12 years. I don't want my kids to change schools after 6th grade (BTDT as a kid and it sucks) so with the oldest entering 6th in 2018 and the youngest entering kindy, that has us there for the long haul. So I would like to actually enjoy our time there.

BUT, I think we are going to see what we can do to integrate our style with the house so we won't have to do so much drastic work. Hopefully, that will keep costs reasonable.

zolotiyeruki

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Re: How much money to put into home improvements?
« Reply #11 on: April 18, 2017, 11:01:36 AM »
I don't have any advice to share, but I'm curious--in this situation, how would FIL go about giving partial ownership of the home to OP as payment for performing renovations?

It's the opposite. We would be purchasing a portion of his house that corresponds with the money we're putting into it. So, if we put $100k into the house, we will be purchasing a share of the house. Then when he passes, that share of the house will not be in his estate. As for the actual hows, that's something that his attorney will set up.
Ah, so it'd be done via the will, gotcha.  Thanks!

frugaliknowit

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Re: How much money to put into home improvements?
« Reply #12 on: April 18, 2017, 11:34:02 AM »
My $.02:  What makes you think that by moving in with him, you will relieve his lonliness, depression and other mental health issues?  If you are already seeing him twice per week, and he has friends and has the means to hire help if/when he needs it, then why are you compelled to move in with him?  Other relatives may perceive this as your trying to squeeze out a bigger ineritance or otherwise control him.

I would not move in and offer to help in any way other than moving in (until and unless it is necessary, which it should not be).  You may, in fact, make things WORSE by moving in.  No, I would not get involved with any improvements.

NeonPegasus

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Re: How much money to put into home improvements?
« Reply #13 on: April 18, 2017, 04:07:15 PM »
My $.02:  What makes you think that by moving in with him, you will relieve his lonliness, depression and other mental health issues?  If you are already seeing him twice per week, and he has friends and has the means to hire help if/when he needs it, then why are you compelled to move in with him?  Other relatives may perceive this as your trying to squeeze out a bigger ineritance or otherwise control him.

I would not move in and offer to help in any way other than moving in (until and unless it is necessary, which it should not be).  You may, in fact, make things WORSE by moving in.  No, I would not get involved with any improvements.

I reread my posts and realize I didn't make the circumstances very clear. He asked us to move in with him. It was his idea, not ours. When he is by himself, he suffers from physical issues that we all believe are tied to anxiety and depression, including bouts of gastro issues and high blood pressure. When he comes to stay with us or DH spends the night with him, his issues disappear.

DH's other two siblings don't want the house. One lives across the country and the other has only his wife, no kids, and no desire for a large house. Everyone has pretty much been pegging us as being the recipients of the house. I don't think anyone is concerned about us trying to get more than our share. And should the house come to comprise more than 1/3 of the estate, we would compensate/buy out DH's siblings accordingly to ensure fairness.