What would you do??? - Posted by Fauver

Posted by Ralf on May 22, 2005 at 21:34:08:

If I stood to make 30K+ NOW, or a couple hundred/month AFTER doing 70K worth of repairs(which would be no less than 2-3months) I’d take the 30K and move on to the next. But that depends on the individuals situation; take the 30K for money in your pocket now, or keep the home for retirement cashflow or appreciation.


What would you do??? - Posted by Fauver

Posted by Fauver on May 22, 2005 at 21:26:36:

We bought a house for $138,000.
Put $2,500 into it.
Can now sell for $180,000.
We’ve only lived there for about 8 months.

The reason we’re considering selling is we could sell the lot for $180K. The house needs a lot of work. It is habitable, but it is block construction, and is crumbling above the windows. There is some sagging on one side. So, to fix these problems would be about $60-70K (including tearing off/putting on new roof which is needed). We could keep the home and rent it out and make a few hundred per month, but in the end we still have a home that needs work.

Just wondering what you would do?

Re: What would you do??? - Posted by Don

Posted by Don on May 24, 2005 at 17:54:36:

You left out one vital number: What would the house be worth after the repairs? Looking strictly at the numbers, if fix-up/repairs would cost $60,000, but you could sell for $300,000 (raising the value by $120,000), then you’d be doubling your investment. On the other hand, if it would raise the value to only $240,000, it’d be only break-even. (That’s leaving aside the hassle factor.)

As one of the other posters suggested, those numbers seem high. (A roof, for instance, is in the $3,000-$5,000 range.) I’d double-check all of that.

Finally, if it were me, unless the investment produced a really great return, I’d do as another poster suggested–stay there for a full year, then sell. You bought for $138,000, put $2,500 into it, and can sell for $180,000. Take the profit and move on.

Re: What would you do??? - Posted by Sean

Posted by Sean on May 23, 2005 at 10:53:28:

60-70k to fix??? I’d double check those costs…

But anyway, if you can make 30k today, or after lots of work a few hundred a month… take the 30k and run… of course I might wait until I’ve owned the house a year at least, so you don’t pay short term capital gains on it.

Just food for thought… - Posted by Killer Joe

Posted by Killer Joe on May 23, 2005 at 10:44:16:

Hi Fauver,

If you choose to do the rehab the next big decision facing you will to be stay until your two years of owning the property qualifies you for the tax free status of the sale of your primary residence.

A rehab as you mentioned will take considerable time. If you can fulfill the tax code requirements, the tax savings should be computed into the overall decision.



It Depends - Posted by Mark-Chicago

Posted by Mark-Chicago on May 23, 2005 at 08:52:32:

Mainly on whether you’re willing to do the work that needed, as it sounds like quite a bit. If you are willing to take on the project, the next step is to evaluate what you can get for a completed home versus the profit you’ll make selling as-as. I’ve seen situations go either way, with the rehab being worthwhile, but also with rehabbed homes not even getting those costs back because the next buyer only wanted the land to build something brand new.

Re: What would you do??? - Posted by dealmaker

Posted by dealmaker on May 22, 2005 at 21:34:26:

I generally like to say that nobody ever got hurt taking a profit. But, if a buildable lot is worth $180K, what would it be worth if you put the $70K into the house?

Generally though I like quick profits with no extra work.