Menu

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)

  • Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 687
    Joined: 03/09/2017

    I will briefly share my story. Bought our 7000 sq ft home almost 3 years ago. It is in one of the best school districts in the state, amazing 30 mile views abutting national forest, on a private road, built in the mid 80s. Original owners had not done anything to it since they built it. It is surrounded by 2-3 mil dollar homes. House was listed for 1.1, then down to 999,999, eventually got 2 offers but buyers pulled out. We offered 840k thinking (perhaps hoping) they’d laugh at us and block our phone number. Winter was coming so they actually accepted the offer. We then became paranoid, hired a structural engineer to go through the house and the land looking for anything we were missing. Nothing got picked up and we ended up buying. We hired a great general contractor to go through the house and he estimated it would take 400k over the following 4-5 years to update it. This does not include major structural changes since the floor plan is very open or hidden disasters, which we have not run into. By the time we’ll be done we’ll be 500k into the renovation but we decided to add a sun room with an indoor endless pool and a few other luxuries. We are cash flowing the reno. Keep in mind we live in a MCOL area with low property taxes and the house was 1.1x household income. I know you say you don’t care for fancy stuff, but in a house like this you gotta put nice things or the sale down the road will be a liability. You gotta pay to play. So finding a great deal is hard but not impossible, just understand with your income, the mortgage, and the renovations, you will be extremely tight on money. I personally like the process and my wife does not mind it either.

    #190970 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2916
    Joined: 01/14/2017
    7000 sq ft home

    Click to expand…

    Did it come with one of these?  I can’t even fathom what 7000 sq ft would be like, but you’re right about the pay to play.

    #190974 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 1822
    Joined: 09/18/2018

    @fasteddie,
    Over a period of time, allocations make a difference.
    The is no “correct” asset allocation, actually one can get fabulously wealthy with extreme concentration. Not likely, usually diversification has better probability.

    Income (actually spending) allocation follows the same principles. Survival is the goal. HCOL normally requires a substantially larger percentage for housing so something has to give. It’s not wrong, but income allocation will greatly impact lifestyle in some form.

    #190999 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 619
    Joined: 02/11/2019
    7000 sq ft home 

    Click to expand…

    Did it come with one of these?  I can’t even fathom what 7000 sq ft would be like, but you’re right about the pay to play.

    Click to expand…

    How did you get a picture of my foyer?

    “Never let your sense of morals prevent you from doing what is right.”

    #191002 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 687
    Joined: 03/09/2017

    7000 sq ft home

    Click to expand…

    Did it come with one of these?  I can’t even fathom what 7000 sq ft would be like, but you’re right about the pay to play.

    Click to expand…

    Haha, they actually put a lot of gold and brass accents everywhere, every time I take one off I feel rejuvenated! We are more into metal, glass, and rustic wood.

    My parents live with us and it was my wife’s condition that we had a place big enough that she wouldn’t know whether they are home or not. And it’s actually one of the smaller ones in the neighborhood. Neighborhood ranges from 6000 to 21000 sq ft….

    #191004 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2916
    Joined: 01/14/2017
    21000 sq ft

    Click to expand…

    !!!!

    For in-laws you really never want to see.

    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 397
    Joined: 06/23/2018
    add a sun room with an indoor endless pool

    Click to expand…

    Do you love it? Use it often? Can you do other strokes, like butterfly?

    I’d love one!

    Sounds like you have ~$1.34M into the house… any idea what it is worth now?

     

    #191022 Reply
    Avatar Sigrid 
    Participant
    Status: Resident
    Posts: 10
    Joined: 04/01/2018

    I know OP’s mind seems to be made up against the purchase by this point already, but I’d like to emphasize again that you can’t get away with not doing the “luxury” renovations if you want to capture that promised equity.

    Anecdotes are not data, of course, but our story: 13 years ago we bought a house built in 1991 for $310k. It looked like a house built in 1991. We didn’t care. We didn’t care the entire time we lived in it, because we don’t care about those kinds of things. We kept it very well maintained (which included replacing about one major appliance a year because they were all reaching the end of their lifespans when we bought it, with solidly mid-range appliances), but we never did any renovations because why would we spend money on something we don’t care about? The time came to sell it, and our realtor priced it at $360k, because that’s what houses in the area that were comparable in square footage, # of bedrooms, and acreage were going for. What she — and we — didn’t factor into that price was that all of those houses looked NICE on the inside. Wood floors, recently remodeled kitchens, etc. Our house had none of that. It still looked like a (well maintained) house that was built in 1991, only now it was 2018. We ended up selling for $280k after seven months on the market, while the similar homes we were comparing ourselves sold within a month for at or above their asking price. One of them asked for $370k and sold for $410k. The new owner of our house is planning on putting at least $100k into it right away. Four months of remodeling planned before he even moves in.

    We thought, while we were living there, that keeping it well maintained was enough to maintain its price. We were wrong. We thought most buyers didn’t care about the fancy trappings. We were wrong. So don’t ever think that because you don’t care about an aspect of real estate, that aspect won’t end up having a real cash value at the end of the day.

    (We’re also not planning on buying again in the foreseeable future, or possibly ever, because owning a home was an exhausting, miserable, painfully expensive experience all around, but I appreciate that most people disagree with us.)

    #191026 Reply
    Liked by Dreamgiver, Tim
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 1822
    Joined: 09/18/2018

    Once lived in a house:
    5 car garage , chauffeurs quarters 3 rooms not accessible to the house, 3 maids room with separate stairs from family quarters, we moved in and a 12”x24” safe was built into a closet behind a secret panel.
    Actually had a safe combination in an envelope taped to it. YEP, Dad’s idea of remodeling was a couple of crowbars to remove walls as necessary. 5 kids sort of DIY if you want a bedroom.

    #191029 Reply
    Liked by Dreamgiver
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 687
    Joined: 03/09/2017
    add a sun room with an indoor endless pool 

    Click to expand…

    Do you love it? Use it often? Can you do other strokes, like butterfly?

    I’d love one!

    Sounds like you have ~$1.34M into the house… any idea what it is worth now?

     

    Click to expand…

    We are less than half way into the remodel so far (we finished windows, and all exterior walls, stucco, gutters, basement/inlaw apartment, master bedroom, 2 guest rooms, garage and most of the HVAC system). We have master bathroom and decks on tap for the spring along with 2 fireplaces. Pool room is for next year. Zillow says house value is 1.125mil but that price is based off of sale price 3 years ago plus regional price changes. I will be trying Arctic Spas as they have several models with hot tub seating on one end. I figured this ought to appeal to non-swimmers for future house sale. I like the fact that the pumps are placed under the pool as the collateral heat generated from pumping is not wasted but it warms the water and they have the salt water option. Basic thing to figure out is if you like jets vs a propeller system to create the current. That is where I am at the moment.

    #191034 Reply
    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 397
    Joined: 06/23/2018
    I like the fact that the pumps are placed under the pool as the collateral heat generated from pumping is not wasted but it warms the water and they have the salt water option. Basic thing to figure out is if you like jets vs a propeller system to create the current. That is where I am at the moment.

    Click to expand…

    Interesting… I have not looked into it seriously, as I live in a snowy area and would need to build it in a sunroom also… not something we’ll likely do… but swimming is my favorite! I try to get in our cool Alpine lake at least 3x/week between end of June until early Sept… usually can get an hour in before racing to hospital for shower and rounds. My dog loves it! She’ll swim 2500-3000 yards with me! 🙂

     

    #191036 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 687
    Joined: 03/09/2017

    I like the fact that the pumps are placed under the pool as the collateral heat generated from pumping is not wasted but it warms the water and they have the salt water option. Basic thing to figure out is if you like jets vs a propeller system to create the current. That is where I am at the moment.

    Click to expand…

    Interesting… I have not looked into it seriously, as I live in a snowy area and would need to build it in a sunroom also… not something we’ll likely do… but swimming is my favorite! I try to get in our cool Alpine lake at least 3x/week between end of June until early Sept… usually can get an hour in before racing to hospital for shower and rounds. My dog loves it! She’ll swim 2500-3000 yards with me! ?

     

    Click to expand…

    Same thing for us. Outdoor pool season is 3.5 months at the most if you heat the water so it makes much more sense to build indoor. The sunroom will have floor to ceiling accordion style windows so in the summer time we can open everything up and feel like we are outdoor, but it is otherwise a fully winterized room with its own HVAC system, connected to the rest of the house but sealed off. I pick up extra shifts to pay for it.

    #191038 Reply
    Liked by SLC OB
    IlliniGopher IlliniGopher 
    Participant
    Status: Physician
    Posts: 75
    Joined: 05/03/2017
    Earnest refinancing bonus

    I may have missed if this is a redundant point, but I cannot emphasize it enough.  DO NOT UNDERESTIMATE THE COST OF KIDS.  That is all.

    P.S. Congrats!  It’s the best.

    "Comparison is the thief of joy." - Teddy Roosevelt

    #191060 Reply
    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 397
    Joined: 06/23/2018
    DO NOT UNDERESTIMATE THE COST OF KIDS.  That is all.

    Click to expand…

    I think it was PoF who states that they cost nearly $500K between 0-18, so not including college!!!! I have three of them… my net worth could be ~$1M more if I didn’t have them! And I would sleep more, have relaxing along time…. and miss out on the best parts of life.

    So, with that said, it is well worth every penny, tear, sweat, grey hair, lost sleep…. I could go on, but you get it!

    #191084 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 1822
    Joined: 09/18/2018

    @SLCOB,
    “ I have three of them… my net worth could be ~$1M more if I didn’t have them!”
    No, no, no! It’s follows the rule of relative need and consumption. When you set the table for a Thanksgiving dinner, as best you try to cook plenty for everyone. If you add two more families of 5 and couple sets of grandparents, what are the two critical constraints? It’s not FOOD.

    A place to sit and paper plates. Whether eating on shifts or couches, breakfast tables or ottomans, all of the food will be gone. Need adjusts to the supply.

    So, two kids or five are perfectly capable of consuming all available funds. Once it’s on the table, gone.

    #191112 Reply

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

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear