Author Topic: Get out or keep fixing?  (Read 4338 times)

MrsStubble

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Get out or keep fixing?
« on: July 18, 2013, 11:27:57 PM »
Help!  prior to our mustachian conversion my husband and I were run of the mill consumer idiots and bought a fixer-upper for $200,000 in 2007 before the market crashed.  The house had good bones but needed new wiring, new heat pump, a complete bathroom gut, and some descent cosmetic changes among other things.  Dumb us figured we could do well in the home because renovated houses were in the $220k - $240k range.

 Well, once the market crashed we lost about $50,000 in home value in our neighborhood - somewhat due to foreclosures which has caused the neighborhood to sort of go downhill.   We kept plugging at the renovation to-do list during that time and we are now about $20k into home repairs/renovations (found some big issues last year).   The problem is the house values have only climbed back to about $170,000 and we still have to do a complete kitchen gut and install (it's bad, very bad) and probably another $5k in work to the house (new gutters, 2nd bath that needs help, some plumbing stuff, hard scraping fixes, etc).   We are doing all this work ourselves to save on costs but my question is, should we bother?  I don't think we'll see our house values around here get back to $200k, never mind near the $220k we'd need to start to recoup the money we put in. 

 We don't want to stay on this house (crummy neighborhood, terrible schools) for anymore then 5 yrs but at this point I don't know if we should just get out as is or put the money in to fix the big things and try to raise the value.  There's a bunch of houses for sale in this neighborhood now that have been in the market for months.  On top of this were have $170,000 left on mortgage so if we sell for much less we'll be paying back our mortgage while having to pay rent which will be tough.  Renting isn't an option in this development so we're stuck with sell or stay, fix it or forget it. What do we do?


fiveoclockshadow

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Re: Get out or keep fixing?
« Reply #1 on: July 19, 2013, 08:33:11 AM »
Dang, sorry to hear things not going as hoped for!

So there really is a risk in being the nicest house on the block - you don't want to be in that situation.  If you over improve you will get very little back for your effort.

It sounds like you are keeping up with what is happening price wise in the neighborhood.  You might want to attend open houses to see what the condition of the other homes are.  There may be little point in making yours nicer if most of the rest of the market is similarly distressed.  You could also learn about who the typical buyers are in the area - do they want "move in ready" homes or are fixer-uppers selling OK.

Best of luck!

Forcus

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Re: Get out or keep fixing?
« Reply #2 on: July 19, 2013, 10:07:52 AM »
I'd forget about making your money back and figuring out how to triage the situation and lose the least amount possible. Your options range from sell as-is to total makeover. Your best bet is probably spending enough to have a functional, acceptable house (that is, meets inspector approval, and is at least presentable to buyers) without going overboard. For example if the "second floor bath needs work" means it needs a remodel, not a gut job, a coat of paint and maybe some vinyl flooring will have to do. A missing kitchen would be unacceptable. However a complete kitchen with cheap materials or with recycled / reused materials (a la the recycle stores that Habitat for Humanity run) would be acceptable. Spending 20k on nice tile and appliances would be throwing money away. At your price level people respond to newness more than quality, so even a cheap new countertop for $100-200 will do. Another example, the windows in our house are varying ages, I replaced the three worst ones this year for only $129 each. It's a complete transformation, even though they are low end windows.

Mandatory: lights work, water works, HVAC works, no peeling paint, no noticable leaks, no smells, nothing that draws the eye.

I live in the same type of house as you, though we will not lose nearly as much. It is a mental and physical drain thinking about the chain around your ankle. Personally, my biggest issue is I have no desire to do things half-assed, yet to get everything done cheaply, that is the route I have to take. Good luck!

tryan

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Re: Get out or keep fixing?
« Reply #3 on: July 23, 2013, 08:02:21 AM »
Figure what ever you dump into this one will never come back.

That mindset will help scope the reno going forword .

SunshineGirl

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Re: Get out or keep fixing?
« Reply #4 on: July 23, 2013, 09:58:13 AM »
I'm not sure if I'm reading your post correctly, but did you say you are OK with staying there for five more years? If so, then I think you should...

1. Get the house to a condition where it is comfortable to live. I lived with a crappy kitchen and second bath for longer than I needed to, and the difference in my feeling toward my house when they were updated was huge. If you'll be there five years, it's probably worth it.

2. A neighborhood, or at least a block or two, can be greatly improved if the people living there decide it, so I would look at ways to make your block/neighborhood as community-focused as it can be. Get to know your neighbors, help each other out, street-wide rummage sales, front-yard gardens, etc. Take walks and chat with the people you run into. Be proactive. Make it your HOME for the next five years instead of a house and neighborhood you're just putting up with.

Dicey

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Re: Get out or keep fixing?
« Reply #5 on: July 23, 2013, 11:19:26 PM »
Sunshine Girl - Your second point is fantastic! A great lesson for buyer, seller or renter.
 
I live in Northern CA, in a very HCOLA. The market is absolutely on fire here. A year ago, nobody saw this coming. Today, I happened on a random episode of HGTV Property Intervention. It profiled a home in the next town over from mine. It was all "Woe is me, I can't get a good price" blah, blah, blah. I noticed that the show first aired right before this year's market upswing. I'm sure the woman is kicking herself for selling when she did. If she'd waited six months, it would be a completely different story.

My point, Mrs. S, is that it's hard to know how far your area is from a similar upswing. It may not happen next month, but it may not take five years, either. One indicator to watch is the number of homes sold vs. the number of homes available for sale. Not foolproof, but helpful.

Come to think of it, SunshineGirl's other point is pretty damn great as well. I try to renovate my homes when I move in, so I can enjoy the property while I live there and then I can use words like "Updated Colors" and "Newer Flooring", etc. come selling time. Seems a shame to wait to the end to renovate and not enjoy the fruits of your labor.

FYI SunshineGirl, you rock!

SunshineGirl

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Re: Get out or keep fixing?
« Reply #6 on: July 24, 2013, 03:40:04 PM »

FYI SunshineGirl, you rock!

Thanks, DianeC! I just got called stupid in another message thread, so your kind comment comes at a good time.

Dicey

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Re: Get out or keep fixing?
« Reply #7 on: July 25, 2013, 01:01:14 PM »
You're welcome, Sunshine Girl!
I think there are two types of commenters in the blogosphere. Those who reply because they care and those who have nothing better to do with their lives than snark at other people and/or insert their political views into every.single.comment.
You clearly belong in the former group, as do the majority of commenters at MMM. That said, you can't please all the people all the time. Don't let one "stupid" keep you from spreading the sunshine...

SunshineGirl

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Re: Get out or keep fixing?
« Reply #8 on: July 25, 2013, 03:05:06 PM »
:)

MrsStubble

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Re: Get out or keep fixing?
« Reply #9 on: August 05, 2013, 05:27:49 PM »
Thank you everyone for the suggestions!!

Just to see if i was freaking out needlessly I spoke to a local realtor who specializes in renovation homes and flips - just to get a better idea of what's happening. She gave me comps and some suggestions (on the kitchen project especially) on what to fix without going crazy. Good news is the comps for the neighborhood (including the foreclosures/short sales) value us to a point where we're not underwater on the mortgage (whoo!) if we wanted to sell right now as is.    If we do go forward with a slimmed down list of projects (kitchen, bath, fixing up back patio) we are comparable to houses at $215k which is saying something about our neighborhood values.   

We're going to tough it out for a few more years... but not too much longer.  We still want out, going down hill was a nice way of saying i live next to a shoot you in daylight ghetto (which is how they set up parts of delaware - 2 streets nice neighborhood, 2 streets ghetto).  At least i will keep the eye on the prize of sensible renovations/repairs, not crazy make it perfect overachievement.

Another Reader

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Re: Get out or keep fixing?
« Reply #10 on: August 05, 2013, 06:22:05 PM »
In your shoes, unless the neighborhood is clearly gentrifying because of the location, I would quickly do the minimum necessary to get this house on the market and get out of the neighborhood ASAP.  Right now, with low interest rates and the smell of appreciation in the air, you should have first time buyers and investors that will compete to buy your property.  If/when interest rates go up, a lot of first time buyers will be forced out of the market, values in your neighborhood will stagnate or drop, and investors will lose interest.  Gamble on this location for a few more years?  I wouldn't.

Numbers Man

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Re: Get out or keep fixing?
« Reply #11 on: August 06, 2013, 12:11:28 PM »
Why would you want to stay in a crummy neighborhood and terrible schools? I would sell ASAP and move to a better location. Crummy neighborhoods and terrible schools will not bring more appreciation.

MrsStubble

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Re: Get out or keep fixing?
« Reply #12 on: August 09, 2013, 08:09:40 PM »
That's true...  To clarify we don't have kids yet... but we're planning so we figured at very worst case it would be 5 years or less.  Realistically we're likely looking at next 6 mos to 1 year.  We still have a bit more work to tackle her (i'm not 100% confident in her estimate and we can't (yet) afford to get out negative unless the bank will agree to a short sale.  We don't want to miss the market it the area with the good schools/neighborhood... just gotta finish getting our stuff straight.  Good news though is that we've managed to pay off all our face-punch debts in the last 6 months and are now in savings mode... want to make sure we have a little saved even if we have to rent for a while just in case.

 If you think it's that bad should we do a immediate makeover (fix the kitchen, garage, back room) so we can pass inspection and run for the hills? we could rent closer to work for $800-1000 a month which will help us save even faster. 


Another Reader

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Re: Get out or keep fixing?
« Reply #13 on: August 09, 2013, 08:24:49 PM »
If you think it's that bad should we do a immediate makeover (fix the kitchen, garage, back room) so we can pass inspection and run for the hills? we could rent closer to work for $800-1000 a month which will help us save even faster. 

This is exactly what I would do.  This neighborhood will stagnate or increase slowly while the better neighborhoods will increase in value faster.  Get out while investors and first time homebuyers are still interested.  Rent cheaply and when it's time, buy in a better location with good schools and convenient access.