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First Post Here...Buying Old House
Hi, this is my first post to this board. My husband and I recently relocated for new jobs (back to the area where we grew up), and have been staying with my family for the past few months while we look for a decent rental. As it turns out, there aren't any...it's a strange situation, but there are very few rentals available (run down, disgusting 1000 sq ft house was renting for $1800).
So, we started casually looking at houses for sale. This area is relatively economically disadvantaged with a lot of older houses in poor condition, but we came across a for-sale-by-owner house that would fit our needs. Unfortunately, it's the first house in 4 months that has been reasonably priced and not a complete wreck.
It's a beautiful, large house in the country with a nice yard. It has 3 nice sized bedrooms, a small bedroom and a gorgeous loft (playroom--score). It has high ceilings and all original hard word floors and a full basement. It has all brand new, high end windows. It appraised in the 90's (which surprised me as it seems low) and they are willing to take low 70's, so it's a decently priced house. DH is in love and can't wait to start re-modeling.
My concerns: It's old. It has oil heat and takes a lot due to the size of the house. The roof would most likely need replaced in the next few years. It has one small bathroom downstairs and one small half bath in the loft. There is a second bathroom that has been convert to a first floor laundry. It would need a completely new kitchen, all new flooring (either new carpet or refurbished hard wood) and new paint throughout. We can do most of the work ourselves, but there's still the materials to consider. We may not be here long term, so pouring tens of thousands of dollars that won't increase the re-sale value of the house just doesn't seem responsible.
We have a friend who offered to do an inspection for free, but is there anything else I can do to alleviate my concerns? I know next to nothing about older houses/buying a house. Is there something I should be concerned about that I'm missing?
If you read through all of that, thank you in advance!
Re: First Post Here...Buying Old House
Greatly depends on how old you're talking....1930 or 1830? The only other thing I would suggest is to please be sure your inspector friend is a real inspector...OLD homes can have quite there share of big problem...insulation, wall composition and so on. Therefore, it doesn't matter if you have oil heat, if there's no proper insulation in the home, you're going to lose heat. I prefer oil heat over everything else but it'll cost you an arm and a leg if your home isn't properly insulated. New windows are great but you can lose just as much heat through the walls of very old homes.
As for the roof, get a price now so you know what you'll be dealing with later. Ditto on the kitchen...kitchen overhauls can be pricey. Check out the wiring...many OLD homes are no longer up to code and some of the older home wiring is actually dangerous. What are the comps in the area? Say you sink 75K into the home - does that work in the neighborhood? Lots of things to consider...good luck!
No, we definitely don't have money to blow, of course. But that's why we're only looking to spend much less of what we think we can afford. Most of the renovations are cosmetic things (with the exception of the kitchen, which our contractor friend can get us a reasonable deal on); the possible roof replacement is the biggest concern as far as money goes. I think realistically, we will be able get what we will pay out of it but I'm not sure how much the renovations would increase the value in this area.
To be honest, I would prefer to rent...I'm a complete commitment-phobe. I just can't see paying 3x's the amount in rent that we would be paying toward a mortgage...and there aren't many rentals available. Rent is so ridiculous right now, we've actually thought about buying the house, renting it out for 6 months and using that money to complete some of the renovations
Our other option is a newer house that is pretty significantly more expensive (but less of a risk) and much smaller. The plan, right now, is to stay here for 2.5 more years but it could potentially be longer. We're just sort of at a loss for a better idea.
That is a really tough spot to be in, but honestly, I would rent if you only intend to be there for another 2.5 years. The buying and selling costs on a home are about 6% of it's value. So you would need the house's value to increase 6% over your total investment (purchase price, closing costs, all maintenance/repairs, and all renovations) in 2.5 years just to break even. While there are cases where this could be reality, I'd say that 95% of the time this sort of situation does not work out well. In the current economy (in general) and particularly in areas that are more distressed than average, expecting a house to appreciate in such a short period of time is just asking for trouble.
Obviously I am just someone on the internet. Maybe it would be helpful for you to talk through this situation with a financial adviser or a money-smart family member/friend who is impartial? Sit down with someone you can trust and start crunching the numbers.
FWIW, if you are new to home ownership, take the estimated cost of any renovation project and multiply it by 1.5-2, and you will get a more accurate idea of what your real cost for a particular project would be. Or, at least, that has been our experience so far. Everything costs us twice as much and takes three times as long to do vs. how much we allocated for that project in the budget and schedule. It's been frustrating at times.