Fixer upper home... maybe flip after 5 years?

[goosefraba1]

Hey guys,
First time home buyer here. We live in southern ohio and we can't find a home at the price that we want for as nice/our style. So, instead of looking for the perfect house, we are going to try to find the perfect fixer upper.

We found a home and had realtor show it to us yesterday. House is in Wheelersburg, OH. Affluent town for the area with great school district. House is going for 225k for 4 bedroom 2 story home with half basement/2 car garage. Has natural gas/electric heat. Has cable internet (some areas around here don't). House has been sitting on the market for 6 months. Was previously a rental. Needs lots of attention to kitchen and 2.5 bathrooms. I would like to get the home for 180-185k and put no more than 20k into it. Similar homes in the area go for 250-300k. So, say we get this home for that price and have 205k into it total. Maybe we could sell it for say 250k later... maybe (depending on the market, just assume the market is doing well... we would keep the home until then to live in).

Does anybody see any downside to this? In the meantime, we would get a 30 year loan at 4%, but probably pay larger payments to begin with. We have 20-25k to put down on the house. I would rather be maxing out the 401k and starting an IRA than throwing tons of money at a home.

Thanks guys,
Newb.

[ShoulderThingThatGoesUp]

How are you going to redo a kitchen and 2.5 bathrooms for $20k?

[goosefraba1]

Sorry, the kitchen doesnt need a full makeover. New appliances in places. Cabinets are still fine. At most, maybe put new doors on the cabinets. I would probably lay concrete contertops and a new backsplash. The half bath needs no work. So, really we are left with replacing the sinks in one bathroom and remodeling 1 bathroom with new shower.

Feasibly, we could do this with 20-25k. My uncle is a contractor that has built homes most of his life. Between he, my dad, and myself... we could do most of tbis work. So, that knocks out about half of the cost usually associated with remodel.

[Papa bear]

How are you going to redo a kitchen and 2.5 bathrooms for $20k?

Are you planning to DIY or pay contractors to fix up?   Depending on your finishes, materials per bathroom should be 2-5k each for a complete gut job.  The kitchen is totally dependent on if you need floors, counters, cabinets, and or appliances and the sizes of the kitchen. Those are your big 4 expenses that can be wildly variable and could run anywhere from 10k to 100k.

Your plan is perfectly reasonable given your assumptions, if they all end up true!  We can't comment on the rest of the financial picture, but if you can DIY equity into a house you're living in, I see that as a net positive.


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[goosefraba1]

How are you going to redo a kitchen and 2.5 bathrooms for $20k?

Are you planning to DIY or pay contractors to fix up?   Depending on your finishes, materials per bathroom should be 2-5k each for a complete gut job.  The kitchen is totally dependent on if you need floors, counters, cabinets, and or appliances and the sizes of the kitchen. Those are your big 4 expenses that can be wildly variable and could run anywhere from 10k to 100k.

Your plan is perfectly reasonable given your assumptions, if they all end up true!  We can't comment on the rest of the financial picture, but if you can DIY equity into a house you're living in, I see that as a net positive.


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We would actually be doing this DIY. However, my uncle is a retired contractor and my dad/I have laid floors and other oddend jobs before. My uncle would be doing plumbing/electric obviously. We would be doing more of the grunt work. Also, my cousin is an electrician if we need any more help on the cheap :)

[Papa bear]

How are you going to redo a kitchen and 2.5 bathrooms for $20k?

Are you planning to DIY or pay contractors to fix up?   Depending on your finishes, materials per bathroom should be 2-5k each for a complete gut job.  The kitchen is totally dependent on if you need floors, counters, cabinets, and or appliances and the sizes of the kitchen. Those are your big 4 expenses that can be wildly variable and could run anywhere from 10k to 100k.

Your plan is perfectly reasonable given your assumptions, if they all end up true!  We can't comment on the rest of the financial picture, but if you can DIY equity into a house you're living in, I see that as a net positive.


Sent from my iPhone using Tapatalk

We would actually be doing this DIY. However, my uncle is a retired contractor and my dad/I have laid floors and other oddend jobs before. My uncle would be doing plumbing/electric obviously. We would be doing more of the grunt work. Also, my cousin is an electrician if we need any more help on the cheap :)

Then I say go jump right in!!!  Learn some valuable skills and build some equity in a home that you will enjoy living in.  Plus in all likelihood, you'll have tax free cap gains on the sale of your property when you do decide to move on.


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[zephyr911]

If you're planning on paying extra, why not take a 15-year loan to reduce your APR?

[goosefraba1]

If you're planning on paying extra, why not take a 15-year loan to reduce your APR?

We've thought about doing this actually, and most likely will. I actually will be beginning a new position in 3 months at my hospital. We are trying to figure out how to best allocate our income in order to reduce our taxable income. I am a physician assistant currently in occupational medicine. My salary this year was 89k plus 15k bonus. My new contract for surgery will be 119k with up to 20% in bonus the first year. Following that, I will be on a performance based bonus. The current PAs there make between 40 and 60k in bonuses on top of the base salary of 119. Also, my wife makes about 55k per year. We will file married, but separate this year.

However, my student loans will be forgiven in 8 years. I am currently on IBR because of this. My current payments are at 385 per month. They will likely jump to $1100 per month beginning in June based off of what I made this past year. So, I need to balance buying a fixer-upper, spending money to fix it up, while throwing as much as possible into 401k/IRA to reduce my taxable income. Complicated, right?

[zephyr911]

If you're planning on paying extra, why not take a 15-year loan to reduce your APR?

We've thought about doing this actually, and most likely will. I actually will be beginning a new position in 3 months at my hospital. We are trying to figure out how to best allocate our income in order to reduce our taxable income. I am a physician assistant currently in occupational medicine. My salary this year was 89k plus 15k bonus. My new contract for surgery will be 119k with up to 20% in bonus the first year. Following that, I will be on a performance based bonus. The current PAs there make between 40 and 60k in bonuses on top of the base salary of 119. Also, my wife makes about 55k per year. We will file married, but separate this year.

However, my student loans will be forgiven in 8 years. I am currently on IBR because of this. My current payments are at 385 per month. They will likely jump to $1100 per month beginning in June based off of what I made this past year. So, I need to balance buying a fixer-upper, spending money to fix it up, while throwing as much as possible into 401k/IRA to reduce my taxable income. Complicated, right?

Well, in that case, it may be worth the extra interest paid to keep your cash-flow margins wider while you watch how those effects play out. It sounds like there is bigger money at stake - I'd be crunching the numbers every way possible to figure out which variables have the biggest effects.