In looking for a place we'd like to move to in the city, options are pretty limited to get something with the functional space we need and the style we like. Lots of 100+ y/o houses here, either too small, setup as multi family dwellings, or outdated mansions. This is an urban neighborhood so pretty small lots etc. Looking to get into something in the 4BR, 2.5BA range, likely 2 floors plus a finished basement. We don't want anything too wacky, just relatively open floor plan on the first floor with at least a half bath, bedrooms upstairs, simple finished basement. At any rate, I'm thinking about options beyond buying already built.
A. Buy something with a decent basic structure and do the gut rehab thing. Again, these are mostly very old homes with small rooms and outdated layouts. A fair amount of the bigger places are converted to duplexes.
B. Buy something hopeless, demo and build from scratch.
I'd rather just buy something pretty close to what we want and make small tweaks but that looks fairly unlikely. Not a ton of new construction around here in the city so its difficult to know who to talk to or where to start. I have seen a lot more places like this in neighborhoods in Chicago, for example. However, also not looking to build a $1M plus vertical mansion with an elevator and formal DR, etc.
1. How do mortages work for projects like this? We currently have what is more of a starter house and would anticipate spending 2-3x our current home's value on the next one.
2. Who can help me scope things out? I don't want to buy a decent house to gut and find out that it just needs to be knocked down and to start over.
3. Anybody here happen to be an architect or builder in SE Wisconsin?
Any words of wisdom or advice welcome.
Start with researching a 203k loan.
Got it, thanks. I will add that I am not a huge home DIY guy. I'd be willing to do some small amount of work, but I don't really enjoy home projects and it's honestly probably more sensible for me to just work more shifts and make the money to pay a pro. Labor cost seem relatively cheap around here. I work on my own cars almost exclusively, but I do this because I enjoy it. I'm also much more comfortable with doing yard and garden projects myself.
203k's pretty much require you to hire out all the work to be done. So that sounds perfect for you. We had looked into them when purchasing our fixer-upper but decided against it due to the fact that we wanted to do at least some of the work.
From what I recall, 203k's require that you have a property identidied, have the work needed identified, and contractors all lined up, etc. So it's fairly intensive from a prep-standpoint.
The other thing to keep in mind is, you will need to buy a place at a healthy discount relative to FMV in order to be able to borrow the money needed to finance the fix-up. This can be difficult, particularly in "hot" markets. We searched for a year before we bought the place we're in now. We made offers on at least a half-dozen places in that year, all of which got rejected for one reason or another. We also learned that if a place needs too much work, you can't get a conventional mortgage, even if the price is well below FMV.
One place you might start looking is at Short Sales. This is kindof a "pre-foreclosure" deal where the owner is still involved, but the bank is trying to sell the property to recoup what's owed. That's how we bought this place- short sale. The process took about 3 months, and had plenty of hoops to jump through, but we got it at around 2/3 of what it would have sold for on the open market.
After getting quotes of $40k-$50k to do “basic” rehab on the 100-year-old house on out property, we decided that money would be better spent on new construction. YMMV.
That said, a buddy of mine got a KILLER deal on a 1930’s home in ATL. Plumbing, wiring, foundation were all good, so they’re just tackling one project at a time while living there.
Look into how the property taxes work. A tear down and rebuild is taxed as a new home. A remodel may see an increase, but probably has a cap and will be much less.
Don't underestimate how much coordination work exists, even if you find an excellent general contractor. (And if you happen on a bad one watch out).
What I'm saying is even if you don't do the work, it's a LOT of work.
Picking what you want, dealing with banks, local governments, managing and paying the contractors, moving and storing stuff, projects taking longer than expected, researching options, disagreeing with wifey on small stuff, utility changes or outages, etc.
STM317
SuperDork
4/6/18 12:10 p.m.
Robbie said:
Picking what you want, dealing with banks, local governments, managing and paying the contractors, moving and storing stuff, projects taking longer than expected, researching options, disagreeing with wifey on small stuff, utility changes or outages, etc.
This has been my experience as well. We took a month to tackle the big/dirty remodeling jobs before moving into our house. We're both easy going people, we've known each other more than half our lives and have a great relationship but Nothing tests a relationship quite like remodeling a house. Dealing with an endless list of jobs to accomplish, the little headaches that pop up, two different peoples ideas of how things should be prioritized and dealing with a definite timeline will add strain.
But, I still think it's better than trying to do that work while living in the house. Living in a job site sucks.
The area I'm looking at doing this is only about a mile or so from where we live. We would do all the work before moving in and then sell our current house. It sounds like the process is even more complicated and involved than I thought. Is it more common for people doing this as a business to just buy places cash so they can avoid the hassles of getting a mortgage on a property that you want to tear down? It does not seem easy as an individual.
