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what to do with 2nd house? fix? sell? rent?
My parents recently passed away & I inherited the house I grew up in that they never did any work on, especially in the last 20 years.
DH & I planned to put in about $2500 -- $3000 to fix some obvious problems & replace the broken dishwasher. We had hoped to rent it out for extra income.
Unfortunately a pipe burst & practically destroyed the house. It's been gutted to the studs to avoid mold from setting in. Insurance comapny is denying coverage so I have to sue them.
My Q to MM is what should we do now?
Option 1: Sell the house as is. we'd probably get $75k -- 90k for it. As is (or was) the house may have fetched about $135k before it was damaged.
Option 2: Pay out of pocket to fix it up completely including stuff that wasn't damaged by the flood but which has to get done to get it to code so somebody else could qualify for a mortgage (roof, new windows & doors) which would cost about $50,000 & then sell. We'd never get more than $200k for the house based on the neighborhood & the number of distressed properties in the area. This house is 3 BR, 1.5 BA; comps in the area have 4BR with 2 BA & fireplace selling for $195 - 220k.
If we chose fix it, do we lay out money in savings or take out a mortgage on the property?
I have no idea how long it will take to sell either way. We're still stuck paying high property taxes ($6,000 / year) plus sewer, water, heat & insurance. Of the $50,000 we'd have to pay, only about $35,000 would be covered by insurance if we got full value & there are cuit costs, lawyers & expert fees to consider.
I feel so overwhelmed with this.
Re: what to do with 2nd house? fix? sell? rent?
I think you should protect the assets you already possess. In other words, don't put your savings into this house.
Personally, I would probably cut my losses and just sell the home as-is. You cut out headache and you still pocket $75-90k that you didn't have before.
Out of curiousity, what reason is the insurance company giving for not covering the damages?
I would go for option #1. Just to not have to take out a mortgage or put any personal money into fixing it.
Although, I too am interested as to why the insurance claim is being denied. Was it because the house was vacant when the pipes burst, or the heat wasn't on?
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I have spoken to 3 realtors plus I ran the comps myself. For those who don't know: a "comp" is a comparison of nearby homes of similar size & quality; they are not that hard to figure out using the internet. The figures I mentioned in my Q were the ranges they provided.
To add to the mix DH & our accountant also suggested a 3rd option: fix the house up, live in it, & rent the house we live in. I don't feel so great about thta but it may be the better financial move.
UGH!
If I were in your situation, I would try to sell at the reduced cost so I wouldn't have to worry about it. It doesn't sound like you're too attached to the home, so I see no reason to stress about it, if possible to sell quickly. If months went by with no interest in the property, then I would look into making investments that would increase the likelihood of a sale.
The last option you mentioned seemed the riskiest to me. There is no way that I'd want to move to a house I was less than thrilled with and needed a lot of work, while my "real" house was being occupied by renters, unless the situation was absolutely dire. Is there even a guarantee that you'd be able to rent your own house out?
@MrNibbles
I would focus a huge chunk of my energy on fighting with the insurance company. I would get an outside expert opinion and consult a lawyer or two to see what your chances are at winning. Once the house is sold and the new owners make improvements, you will have less room to negotiate.
I would try fighting for 60 days, see where you get with the insurance company and then make a decision.