We are deciding between two houses.

Asked by Hb2011, 94506 Tue Mar 6, 2012

1. Old house hasn't been touched since 70's needs about 300k in renovation. But in a neighborhood where many houses have been leveled and rebuilt. 2. Brand new construction and gorgeous house exact same size as house 1, but it's in an older neighborhood where there haven't been any houses fully renovated yet. This is the only new construction.

By the time we renovated home 1 it would cost the same as home 2. What is the better option? We plaN to live there for 10 plus years but need to refinance in 2-3 and pulling some equity so we need to look at investment.

Should mention both houses in same school district.

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Caroline Bar…, Agent, Livermore, CA
Thu Mar 8, 2012
I am going to keep this simple and sweet... I am married to a custom home builder. Over the last 32 yrs of marriage I have lost count on how many times we have moved. What I have learned is that the longer you stay in your home in the end you will either pay off the mortgage and or have a heck of a lot more equity. I am a realtor and my advice would be to buy the worst house on the best street / location you can afford. You can change the home but not the neighborhood. House #1 give you exactly that, even if it takes you a bit longer to complete the entire remodel you will in the end have comparable homes that will keep your investment in tact and not lose value. Have fun, it may take a lot of time to plan, budget and do the job but you will feel proud of your accomplishments. Have fun! Need a builder to help out just give me a call.
Caroline Barnes
Agent / Pleasanton CA
1 vote
Karen and Pa…, Agent, Cameron Park, CA
Mon Aug 24, 2015
Personally I would go for house number 1 if the floor plan will. If you have the cash and ability you will make this home exactly the way you want it.

House number 2 although brand new may still need paint, flooring, appliances, shades, landscaping, ect upgrades. Will the quality of the interiors be the same? Brand new homes usually come with standard equipment and for the same price you can put in upgraded equipment in house #1.
0 votes
Deborah Garv…, Mortgage Broker Or Lender, San Diego, CA
Wed Mar 7, 2012

I have to join the majority and vote with custom designing the older home. @Steve's suggestion to involve an architect is very good advice. Yes, there is a cost involved; however, he/she will save you money and costly mistakes that probably will more than compensate for the fees.

Given the fact that you indicate you are going to need to refinance in a couple years, I assume you are thinking of paying for the remodel with savings? My question is: Why? Why deplete your savings? Why pay financing costs twice (first the purchase, then the refinance? Why risk losing the great rate you can get today on what will almost certainly be higher rates in a couple years? Lastly, why would you do the remodel yourself and live in the chaos (been there, done that....it is not a whole lot of fun)?

I specialize in the FHA 203K renovation loan...and, more than specialize, I am a HUGE advocate for the program. You can finance up to 110% of the after improved value (up to FHA loan limits). It is a all in one loan...no need for "take out" financing. You could be reimbursed for the cost of the architect (as long as you paid by check, not credit card). The sky is pretty much the limit....in other words, there are not many restrictions on your remodeling choices. Loan qualification is the same as traditional FHA loan products. You can finance up to six months of mortgage payments into the loan (no, you don't need to live in the debris).

There are a myriad of other reasons I recommend you consider doing a 203K. I would be happy to discuss the opportunity in detail. Most 203K loans can be closed in around 45 days. Another plus is you have an FHA consultant working on behalf to ensure you are getting fair costs and the project is meeting both quality and time constraints. Really, contact me....a 203K is way better than the "use it and recoup it" plan of spending all your savings and refinancing to try to get it back. There are a lot of people who are seriously compromised today because they went forward with financing options that they intended to refinance out of sometime down the road.
0 votes
Steven Ornel…, Agent, Fremont, CA
Wed Mar 7, 2012

This is a personal Déjà vu moment for me.

For all of the reasons mentioned below, and the fact the home was in a fantastic school attendance area, I went with option #1; remodeled as an owner-builder and added 1700sf. I have lived in the same house since 1988!

Assuming you eventually choose “Door #1” here’s a few tips from someone with the physical/mental scar tissue of the actual hands-on experience:

If you are going to remodel definitely use an architect! More detail = less Change Order$. I'm extremely pleased we didn't build what I had “cost-consciously” created on my home computer at the time. Also, start collecting your remodeling ideas (with pictures) so you can communicate exactly what you want to the Architect. Both you and the Architect will be pleased you did! Figure on at least a year to “perfect” your remodel on paper and the corresponding budget (the legwork takes time).

A $100K budget is not a lot of money. I would prioritize on the 1) Kitchen, 2) Baths, 3) Windows/Doors, and 4) Front/Rear landscaping. Obviously, the more you can handle by yourselves the greater your collective “bang for the buck”. If you need to find reliable contractors angieslist.com and yelp.com are sources as is the Realtor® you are using for the purchase.

Use LICENSED contractors when an item crosses over the “Do-it-yourself” comfort line of difficulty. https://www2.cslb.ca.gov/OnlineServices/CheckLicenseII/check…

Suzanne brings up a really good point about the FHA 203K program; I’m just not sure you have the time to pull together what’s needed for this option.
See: http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou…

Feel free to call me if you are looking to get feedback on your remodel process.

0 votes
Debbie Gibbs, , Danville, CA
Wed Mar 7, 2012
Dear Home Buyer,

It sounds like house #1 would be the way to go for a few reasons:

1. It sounds like the neighborhood you prefer to live in and raise your family
2. You are planning to stay long term so you will see an increase in value as the house is in it's current condition, plus a return on your renovation investment
3. Home #2 sounds like the best house in the neighborhood and you would be buying it because it's turnkey, which is okay if that's what you want, but it sounds like you would not be happy in that neighborhood long term and would want to move to a different neighborhood after a few years.

It's all about location, location, location and from an investment perspective you want to buy the worst house in the best neighborhood for the biggest gain. As long as house one can be made liveable and you can work on less important renovation projects over the years and when you have the money, my vote is to go for house #1 :)

Debbie Gibbs
J.Rockcliff Realtors
DRE #01729828
0 votes
Suzanne Look…, Agent, Lafayette, CA
Wed Mar 7, 2012
Here's another alternative if you haven't yet considered it...I know of a lender that will build a renovation loan into your primary loan so that you can do as much work as you require right after you close escrow. The appraiser will appraise it as if the work had been completed. You can get more details from my lender but it may be a good alternative to get much of the work done at a low interest rate and still have only one mortgage payment. This product is available without you having to do a FHA 203k loan.

Ask your realtor about it, unless you don't have one, then give us a call!

Web Reference:  http://www.suzannelooker.com
0 votes
Sally Blaze, Agent, Pleasanton, CA
Wed Mar 7, 2012

Even though it may be a long time to get your "dream home", I would go with home #1. Of course, this assumes you can do enough updating with $100,000 that the home is in good enough condition to live in. Homeownership is often a series of small updating, done gradually over time. I would come up with the "master plan", prioritize the work, and then get going. Good idea to avoid any further debt...just do the work as you save the money.

And enjoy the process!

Sally Blaze
Alain Pinel Realtors
Web Reference:  http://www.apr.com/sblaze
0 votes
Hb2011, Home Buyer, 94506
Wed Mar 7, 2012
Thanks all for your comments. The issue s we have only 100k for renovations so the 200k remaining would happen in pieces whenever money was available. So that's the challenge .... Immediate satisfaction or a long process that could sue 5 or so years to complete.
0 votes
Bernard Gibb…, Agent, Danville, CA
Wed Mar 7, 2012
DEfinitely #1. Not only are you buying at a discounted price because it needs a lot of improvement, but you also have the major benefit that you can make it into the house that is exactly what YOU want. You are not paying for somebody else's taste.

It sounds like you may be talking about west-side Danville. A great place to buy a home, particularly one such as you describe.

Bernard Gibbons

Bernard Gibbons, J. Rockcliff Realtors
DRE License # 01331583
Phone (925) 997-1585 - bernard@bernardgibbons.com

0 votes
Brendan Robe…, , Danville, CA
Tue Mar 6, 2012
House #1! Go big ,go green ,go new!! Reap the tax breaks and incentives that go along with such a bold choice.
0 votes
Suzanne Look…, Agent, Lafayette, CA
Tue Mar 6, 2012
What a nice position to be in... deciding between two great choices! The adage about being the least expensive or smallest house on the block still holds true today. If you choose #1 you will be buying at a reduced price when comparing to the other homes in the neighborhood. You can then put your signature on the home and make it exactly the way you want. Buying the nicest home on the block is not the best investment. If you choose to sell or refinance the other homes may bring down your value.

Just make sure that you are prepared to live in the home while you do the renovations. It can be quite invasive.

Suzanne Looker
Web Reference:  http://www.suzannelooker.com
0 votes
Carolyn Zeig…, , Danville, CA
Tue Mar 6, 2012
Hi Hb20111,
You have quite a dilemma. In a perfect world, I would probably look to the older home which needs the renovation in the area where many homes have been leveled and rebuilt. If that is the case, you are probably buying Old House #1 at a reduced cost and more than likely, the worst house in the neighborhood. Your investment in the older home would probably net you more in the long run. However, you and your family would be living in a home which would be in the "renovation mode" for awhile unless you can afford to buy the older home, and then immediately fix it up while you are all living at a another home. Can you live in the house during the construction phase? Yes, but if you have never had this experience, it can be a little disconcerting living in chaos for many months.
Have your agent do an analysis on both neighborhoods to see what the current values are and then decide if you put $300,000 into House #1, will it then be the best house on the block or will it be on a par with all the other homes in the area?? In the renovation, be sure to not over-improve for the neighborhood. Hence, the need for a cost analysis and then don't get emotional about the improvements and stick to a strict budget.
Please let me know if I can be of assistance.
Carolyn Zeigler, CRS
Re/Max Accord
0 votes
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