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The Value of Home Equity (another "Should I buy this house?" post)

Home Mortgages and Home Buying The Value of Home Equity (another "Should I buy this house?" post)

  • portlandia portlandia 
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    I think the reason it was not bought by any flippers was essentially poor advertising. They are an older real estate agent and older seller that were not very motivated and made multiple errors on the listing (wrong number of bedrooms, bathrooms).

    Click to expand…

    Hmmm. Professional house flippers were not smart enough to see ~1M in instant equity because of incorrect listing of bedrooms and bathrooms? Color me skeptical.

     

     

    #190594 Reply
    Liked by octopus85, ENT Doc
    Dreamgiver Dreamgiver 
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    Average price of a nice master bathroom reno is 50k without going crazy with marble and such, average kitchen 80k with Subzero and Wolf or the like again without going crazy. If you buy a nice house you can’t renovate it on the cheap or it will be a liability come selling time. Whatever you think a reno costs, double it in money and time. Don’t ask me how I know…

    #190595 Reply
    Liked by hatton1, ENT Doc
    Avatar SPlum 
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    Congrats on the baby!

    It is exciting but stressful having a baby. Do y’all really want the stress of moving, and renovating, and sleep deprivation?

    If you are renovating an older home, considerations such as asbestos mitigation or lead mitigation may need to be considered for safe renovations. Adds to the price to do it right.

     

    #190629 Reply
    Avatar NWMD 
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    For everyone thinking this looks like a scam, I understand and was skeptical as well. I found the property by driving through the neighborhood and seeing a For Sale sign and inquiring. The seller is somewhat non traditional which i think is why flippers didn’t know about the place.

    I am quite conflicted about the house. It was listed for $1 mill and we negotiated down to 900K. I have the inspection next week and can walk away if I’m appalled by our discoveries. It definitely fits the rule of “buy the worst house in the nicest neighborhood” as it is surrounded by multimillion dollar homes.

    We don’t have fine tastes. The renovation would
    be to make the house livable, not make an HGTV dream home. Don’t care about wolf kitchen (not sure what that is) or marble floors. I’m fine doing minor things (paint, landscaping). I figured we could work on one room at a time while we grown into the house.

    I understand the LCOL people balking at the price. It’s crazy to think that I am buying a million dollar fixer upper, but that appears to be the market here. I love this city and can’t imagine moving.

    I really appreciate all the tips and advice here. WCI has been a godsend for me and helped me take control of my financial future so far.

    #190650 Reply
    CordMcNally CordMcNally 
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    For everyone thinking this looks like a scam,

    Click to expand…

    I don’t think anybody thinks it’s a scam. I think most people think it’s probably valued at what it’s worth (or even too high) and house flippers will find properties that they can make money on and it appears they’ve all passed on this one (no matter what you say about listing problems).

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #190651 Reply
    Avatar Dont_know_mind 
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    What is the land value. If land value is above 1M then it may well be underpriced. Unlikely it would be on the market very long though.
    I have seen properties that were underpriced, usually inherited estates, where the property goes on the market and nobody really cares if it is under quoted because the sellers are 3 adult children/the deceased estate.
    If the pricing is more than 30% it doesn’t usually last long. I saw a place for 1M that I thought was worth at least 1.3M. I signed the contract that morning attached a cheque for 10% and told them my offer was valid that day only, but it still went into a competitive bid later that afternoon. I have never seen a place more than 30% underpriced in normal conditions (non severe meltdown – like currently) that was still on the market more than 3 days later. It’s possible, but unlikely.
    Maybe you just struck mega gold or maybe a mega craphole.
    Flipping I would do for the right return but I think Reno’s are generally BS. Are you a builder or a tradie ?

    #190656 Reply
    Avatar ZZZ 
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    “Don’t care about wolf kitchen (not sure what that is) or marble floors. I’m fine doing minor things (paint, landscaping). I figured we could work on one room at a time while we grown into the house.”

    If you don’t know what Wolf appliances are and you think bathroom marble is only for floors, your estimates for reno costs are undoubtedly far too low as others have suggested.

    “We don’t have fine tastes. The renovation would
    be to make the house livable”.

    Well, then don’t bank on the elusive ‘free equity’ that has been dangled with this deal. The likely reason neighboring homes are worth mutimillions is because they’re more than just ‘livable’ and they probably have lots of high end finishes like marble and Wolf appliances.

    Obviously you’ve already made up your mind and think you’re getting a smoking deal. Odds are you’re not. Let us know how it works out for you.

    #190658 Reply
    Avatar fasteddie911 
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    OP, as long as you do your due diligence and check everything, the house, property, it’s history, etc., potential red flags, talk to neighbors, etc. I think you’ll be fine.  The issue of renovations, paying for it, livability of the house, etc. is another thing I’d be concerned about figuring out.  While many here are skeptical and make assumptions, understandably, I can also imagine the situation you may be in, I’ve seen it myself.  900k plus renovations on your salary while not ideal, is do-able.  The rent vs buy discussion though is a while different issue.  Also, you mentioned that you guys were planning on buying a few years down the road, what type of house were you thinking you’d buy then?  If it’s this type of house and area, and this opportunity allows you to get there earlier and potentially cheaper, that’s one thing, but if this is a bit of FOMO or too good a deal to pass up type of thing and not the type of place you were planning on years from now, I’d be very wary and think things thru a bit more, making sure it’s not an emotional decision.

    #190667 Reply
    Avatar Dont_know_mind 
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    I think the reason it was not bought by any flippers was essentially poor advertising. They are an older real estate agent and older seller that were not very motivated and made multiple errors on the listing (wrong number of bedrooms, bathrooms).

    Click to expand…

    I think most people can use the internet nowadays. A discrepancy in bedrooms or bathrooms would not yield a discrepancy of 500k valuation. But maybe everyone has overlooked it, for weeks it seems.

    When I was an intern, I rang the eye fellow and she got angry with me for coming in for a red eye problem. She said it’s obviously Gonococcal conjunctivitis. And I said “but the patient told me she was a virgin!”. And the eye fellow said “you’re a moron, she’s a hooker”. And you know what, she was ! 

    If you don’t know who the patsy is….

    #190669 Reply
    Avatar NWMD 
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    I certainly have not made up my mind. We have an inspection set up next week to get a real idea what is wrong with the property. I’m actually leaning more towards walking away than buying the place. I know I can “win the game” if I continue saving money, living frugally, and work the schedule and amount I want.

    To answer the other questions, this house is similar to the type of house we were planning on buying in a few years in size. The main difference is that it is in a much better neighborhood than we thought we could afford. It also has some things nice things that weren’t on our wish list (larger back yard, multiple fireplaces, basement, an ocean view, near a great running trail).

    #190763 Reply
    Avatar Peds 
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    This is literally impossible in the bay area right now. Something is wrong.

    #190767 Reply
    Liked by octopus85
    Avatar hightower 
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    All that said, WCIs rules about incomes vs mortgages (2-3x) simply don’t apply to HCOL / vHCOL areas…I think going to 3-4x income in HCOL areas can be done while still minimizing risk.

    Click to expand…

    I fully disagree with this and it is becoming one of my biggest pet peeves.  Why do people think they get a “pass” on real estate debt simply because they choose to live in a HCOL area?  Regardless of where you live or what you make, if you go into massive levels of housing debt (3-4X annual income is definitely MASSIVE), then you are making yourself house poor.  You are signing up for debt that will take you a long time to pay off and/or rob you of the opportunity to save more for retirement in your critical early working years. This will likely result in delayed FI and delayed retirement.  That doesn’t change just because you’re in an expensive zip code.

    As I said above, I feel for those who live in these areas and want to own a home, because it basically means you have to choose: save more for retirement or sign up for massive housing debt.  Now, if you love your job and you want to work until you’re 70.  Fine, it probably doesn’t matter if you’re house poor.  But if you want the option to retire at 55-65, signing up for 2 million dollars of housing debt on a 500k salary is going to make that more difficult.  Especially when you consider that everything is more expensive in those areas, not just the housing.

    #190770 Reply
    ENT Doc ENT Doc 
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    This is literally impossible in the bay area right now. Something is wrong.

    Click to expand…

    I don’t think it’s the bay area.  NWMD = northwest = OR or WA in my mind.

    Regardless, something is up.  To think that others aren’t driving around or haven’t seen this “deal” in the best school district area with an ocean view and near running trails near an awesome city seems a bit ridiculous.

    Anne cited the most important consideration IMO – doing all these updates with a newborn involved.  No way.  I also agree that OP’s costs are underestimated.  But heck, if it works out and the OP can hit all retirement goals then virtual high five.

    OP, please keep us informed how this turns out.

    #190771 Reply
    Avatar hightower 
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    I certainly have not made up my mind. We have an inspection set up next week to get a real idea what is wrong with the property. I’m actually leaning more towards walking away than buying the place. I know I can “win the game” if I continue saving money, living frugally, and work the schedule and amount I want.

    To answer the other questions, this house is similar to the type of house we were planning on buying in a few years in size. The main difference is that it is in a much better neighborhood than we thought we could afford. It also has some things nice things that weren’t on our wish list (larger back yard, multiple fireplaces, basement, an ocean view, near a great running trail).

    Click to expand…

    I don’t want to sound too harsh.  I get why you guys would want to do this.  You just have to fully understand and be okay with the financial consequences of this much house.  It is ultimately a personal choice.  Happiness is not just about financial success.  If you guys will truly be happy there (sounds like good quality of life), then maybe the financial implications aren’t that serious to you.  No one can argue that.  However, if you are feeling uncomfortable (and thus posting here), that might be a red flag.  You want to be able to sleep well at night and not worry about money.

    #190772 Reply
    Liked by radnater, Tim, Peds
    Zaphod Zaphod 
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    I think the reason it was not bought by any flippers was essentially poor advertising. They are an older real estate agent and older seller that were not very motivated and made multiple errors on the listing (wrong number of bedrooms, bathrooms).

    Click to expand…

    I think most people can use the internet nowadays. A discrepancy in bedrooms or bathrooms would not yield a discrepancy of 500k valuation. But maybe everyone has overlooked it, for weeks it seems.

    When I was an intern, I rang the eye fellow and she got angry with me for coming in for a red eye problem. She said it’s obviously Gonococcal conjunctivitis. And I said “but the patient told me she was a virgin!”. And the eye fellow said “you’re a moron, she’s a hooker”. And you know what, she was ! 

    If you don’t know who the patsy is….

    Click to expand…

    Lol, great story.

    #190784 Reply

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