Gutting a house

hoffse · May 2014

Well as H and I are exploring our options, we've stumbled across a house that has been on the market since October. It's an excellent location - literally across the street from the children's park, surrounded by established neighborhoods, lots of sidewalks, restaurants, shops, etc. The houses around it have sold for $400K+ more than this one is currently listed at.

The problem? The inside of it is a "dumpster fire" (to use my H's phrase).

It's a very old house, and so it has some of those cool old house things still intact - big chandeliers, heavy crown molding, original hardwoods, etc. The exterior is also really cool - tons of curb appeal. But it would need to be fully gutted to be habitable. It's just nasty on the inside. And while you're gutting a house that old, you might as well bring it up to code and insulate it at the same time.

H and I have talked to a couple of contractors in town with great reputations who do guts on old houses like this. Nobody has walked through the house with us, but the ballpark figures of what these guts usually cost in this part of town are inline with our house budget. They all say that a full gut is significantly cheaper than updating a house piecemeal... since the walls are open and they can basically re-wire, re-plumb, etc. in a couple days, rather than having to do it slowly to keep the walls intact as they go.

What do you think? Worth pursuing? Or would I probably end up divorcing H over the experience....?

blondie42107 · May 2014

Depending on your area and codes, there will likely be things you will be required to bring up to code which can be very costly however as long as the house has great bones, definitely a great option. It is often cheaper than building new. I would just plan on finding the unexpected.

Our house was gutted at the beginning of the previous ownership.

maple2 · May 2014

Buying a house like that would take a huge toll on my relationship with DH. For whatever reason, we have a difficult time making decisions together. Gutting and remodeling a house would require hundreds (thousands?) of decisions and dealing with that on top of both working full time would be a disaster. I think that would have been true even before kids made our lives more complicated.

From watching other people go through a similar process, I do know that gutting a house can be incredibly time consuming even if you and DH don't suffer from the decision making issues DH and I do. I know people who love spending their spare time working on their houses and would relish the fun and challenge of gutting a house. If that is you and DH, this sounds like it would get a great opportunity. If dealing with contractors and/or doing the work yourself would be unpleasant, then it's probably not such a great opportunity.

In your situation, I would be trying to weigh the short term costs in terms of all the time and energy you will have to put into the house that could otherwise to used to enjoy your new life living with DH (unless you guys would love doing that house stuff together) and investing in your careers against the long term financial and lifestyle benefits of buying a house that will quickly grow in value in a desirable location with character that you like.

hoffse · May 2014

These are good thoughts. We've been looking at design websites, etc. together for months, and generally have similar aesthetics (thank goodness). That said, I know a project this big is taking it to a completely different level.

We would be able to continue renting while doing the gut. It would annoy me (no doubt), but it would be just fine.

My biggest concern is the inevitable problems we would find. We mentioned this to the contractors and they didn't seem worried about it - they said that most of the time, when you take a house down to the studs, all you find are studs. Some might need to be replaced, but for the most part a studded house always looks like a studded house, regardless of when it was built. They said the unexpected contingency pot actually needs to be larger (percentage-wise) when you are doing projects piecemeal, because typically those do NOT include things like electric and pipes (which often do need to be upgraded). They said the biggest point of concern on a full gut would be the foundation and roof - and apparently these folks would thoroughly inspect both as well as they could, before giving us an estimate. I get what they're saying, but it still makes me nervous!

Anyway it's certainly tempting. But we probably need to think about it more closely.

vlagrl29 · May 2014

this is one of those things DH would love to do and I would hate it. I bought my current house brand new because I liked the fact that I really didn't have to do much with it. DH has looked at buildings he would really need to rehab for a photo studio. He has the vision of seeing what it can be and all I see is how much work it would be. If you guys have the same thoughts about it that would be a good thing

vlagrl29 · May 2014

Is there a way you can have a contractor/architect take a look at the house to say it's doable/livable? And possibly let you know what all that would cost. You would probably need to factor that into the home loan I'm guessing.

mssm2012 · May 2014

Can you even get a mortgage loan and/or HELOC (or 2nd mortgage) to rehab the house? What about hazard insurance?

Many loans require the house to be in a livable condition, and to appraise at a certain value. Getting a loan will definitely be more complicated. If it's in that rough of shape, you may have difficulty getting homeowners insurance until it's rehabbed.

Make sure you can afford much higher property taxes, based on the home's value AFTER the work is complete. In my area, just the $400k "undervalued" amount (difference between what you would buy it for and what the rehab would add to the value of the home) would equate to over $500/mo extra in property taxes, plus whatever you would already be paying on the purchase price.

It sounds like a good deal, but I'd have a bigger contingency than the contractor's recommend. I would also talk to the city first and make sure there aren't any other big things to know about the rehab on that home.

hoffse · May 2014

Yeah there are loans that do this. It's basically a combo buy+build loan that gets rolled into one thing. You can get them with a single closing too, and they loan/insure based on the future value. It's very similar to a new construction loan.

Property taxes are significantly less here than other places we've been looking. I think they're something like 0.6%....? It's stupid low. We've set our budget significantly less than we can afford just in case, and this still falls in that range (even rehabbed it would not be close to the nicest house on this street - it's just significantly undervalued because of its condition). Anyway, I'm not too worried about that.

We haven't pursued it seriously yet. Like I said, contractors haven't even walked through it yet - we just called around to see if the basic ballpark was anywhere close to our budget. Turns out it was. And now it has us wondering if we should pursue it any further.

CuriousKiddosMama · May 2014

One thing that popped out at me right away is how old is the house? My uncle bought an old farmhouse with the idea of doing the same thing, and found asbestos- which is VERY costly to get rid of. If these contractors have done this lots before, that may be included in your quote, but I would ask specifically about that. And plan for extra because there may be some surprises. But I love old houses, so I wouldn't let a remodel scare me away from it. I think it could actually be a lot of fun because you can maintain the charming characteristics you like, but update it at the same time to your taste.

Erikan73 · May 2014

Like a pp said, you need to plan for the expected like asbestos or lead paint. Also what if any of the floor joist or something else is rotted out & needs replacing. Or in the case of my house, any prior work done was done halfxss and wrong so you have to spend extra money to have it done right. You need to leave yourselfs a nice big cushion for unexcepted surprises once the walls have been removed because you don't know what you'll find in the process.

hoffse · May 2014

Oh yeah lead paint and asbestos are good things to ask about. I will add that to my list.

goldiemu · May 2014

AprilH81 is right on with the questions. I would add the idea of checking in on all your expectations such as

*When do each of you expect the renovation to be done? You may be thinking within the year and your partner may be thinking of doing this over 5 years.

*How do you feel about taking breaks to rejuvinate? How often?

*What type of renovation do you expect? Inexpensive but nice or high-end?

*Are you comfortable hiring people to do some of the work? Are you comfortable hiring someone to do all of the work? Would you trust someone to carry out your vision. Can you work with a contractor?

*How will you divide up your domestic duties as well as managing the renovation?

*Who will manage the project, vendors, contractor etc?

Good luck with your new adventure.

Wulfgar · May 2014

I would have a few of the contractors walk through with you and your DH so they can explain what will need done etc. From doing capital projects for a few years, it is best if you get all contractors that will be bidding together at one time so you don't have to repeat yourself multiple times and everyone has the same information.

It sounds like the location is good and within your price range so you should really think about making a move.

Since it has been on the market, you may be able to wait a few more months and still buy it.

brij2006 · May 2014

Sounds like it would be something worth looking further into if this is a neighborhood and home you would like to live in for at least 10 years.

As far as the relationship aspect of the remodel, we weren't married before the full gut of our home, and I was kind of glad it was "H's" home and he had the final say. However, I worked with the contractors, got bids, did the calling, and pretty much managed the project. It definitely adds stress to the relationship, that is for sure. But in the end it's worth it.

A few tips I would give is to make sure your contingency is 20% of the cost of the project, then factor in an extra 10% toward little extra's you may choose to upgrade while the house is tore apart. Also, take the timeline they give you and add an extra 4 weeks to it.
Our house was a full gut and remodel, and we had planned to be living in it within 3 months. It ended up being 5 months, and we moved in while work was still being done.

Just going to ditto others to ask them about asbestos, lead paint, and have the contractor along with the inspector check out the foundation and structure. We knew for a fact we wanted a fixer upper when buying a home, but we walked away from many with structural problems, because that would've taken a lot of our budget to fix.

Although, if you're already planning to do the electrical and plumbing, then your budget is factoring many of the largest costs they could run into.

If you have any questions, feel free to ask or PM me. We bought our Victorian 5 years ago and completed gutted it and re-did everything. One of the hardest parts with the old homes was making sure the character was kept with the new finishings and the trim would go back up.

Gutting a house

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