So, a friend has presented me with an opportunity. they're basically offering to sell me thier grandparents 270K house for 235k. (appraisal set the 270 value) There are a few minor stipulations, mainly they can keep a room or two worth of the estate's stuff there for up to 90 days so they can deal with it... doesn't bother me. Other advantages: closer to work, (1 mile closer) has a huge lot, 2 floors (one unfinished) is much larger, has alot of upgrades done, such as new insulation, wiring, windows, roof and heating system. It needs some updating... but nothing needing fixed now. A mustachian approach to updates could see a solid 100K added to the value of the house, based on the sales of other homes in the area even in this just-starting-to-recover market. Interest rate is lower, so PMI results in only a 20 dollar increase in monthly payments... for six months. see below.
The problem is, it doesn't have a shop, and the style of the outside of the house isn't my favorite. It's that really wide fir-shingle type siding. I could replace it with hardie plank I suppose, in the future.
Now, my current house was purchased at the bottom of the market, and I have about 20K in equity in it. I really like my house... it has a large shop, remodeled 3 years ago, (by previous owner) and is easy to maintain. The problem is, it's next door to some appartments (admittedly, they're decent neighbors and I've become friends with some of the people that live there) and has been re-zoned for high-density housing, and is on a small lot. It's near a future station for the Portland area MAX system, and it's the stated goal of the city to increase population densities around those stations... not sure what that means for the future.
So, my plan for buying this house is as follows:
-Finance on a 7/1 arm to get in the house. I'm forced paying some PMI since I'm only bringing 7% down to the deal (the bank only uses sale price to calc this). I plan to re-fi at six months into a 30 year, at which point I can use the appraised value. I'd be well under 80% LTV at that point, especially if I do some of the easy upgrades to the house. I risk some up-ticks in interest rates, but I'm thinking it won't be much in six months. I'll let the houses equity pay re-fi costs, if I can do so without exceeding 80% LTV.
What it really comes down to... is do I give up a house I really love, for an instant 35K increase in non-liquid net worth, and a house that may consume some of the 35K to make the way I want it? It seems like, if I look at it one way, I'm just buying a liability, since i would put some money in it over time. On the other hand, I'm buying a house at 13% off in an appreciating market, and I'd still sink 15K into my existing house building a 2nd bathroom anyway. Either way, those invested dollars would pay off, but those invested dollars are pretty non-diversified!
Does anyone have any thoughts?
