Should we spend 500k on a renovation?

[Anonymous]

Anonymous wrote:

Anonymous wrote:At that cost... sell and buy a newer house

+1

+2

I thought there was going to be some really specific and odd need that you can't find anywhere else - but you should just wait until there is more inventory in the spring and move.

[Anonymous]

Anonymous wrote:OP here. Great advice from most people here. The issue is livability of the kitchen. I think we will need to work within the existing footprint and perhaps hire an interior designer and DIY on paint etc.

Re colleges we had to pay off student loans and had a nanny at the same time, so we will no longer have the nanny in a year or two, and we've completed paying off student loans. Family savings is just that, non retirement family savings in stocks bonds cash etc.

You have a huge spending issue and living above your means.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. Great advice from most people here. The issue is livability of the kitchen. I think we will need to work within the existing footprint and perhaps hire an interior designer and DIY on paint etc.

Re colleges we had to pay off student loans and had a nanny at the same time, so we will no longer have the nanny in a year or two, and we've completed paying off student loans. Family savings is just that, non retirement family savings in stocks bonds cash etc.

You have a huge spending issue and living above your means.

OP here, think this a gross overgeneralization. We've saved or paid down huge amounts of student loan debt every year as an adult earner, while also managing to save money and have a good quality of life. Please keep your unasked for opinions to yourself.

[Anonymous]

Anonymous wrote:I think $500K is a reasonable investment considering your location and comparable homes but would it be the house you’d choose if you were looking today. New builds today have 9’ ceilings, have upgraded insulation and HVAC systems. The layouts wouldn’t be making best use of your existing home but maximizing livability. Would you choose the somewhat busy street you’re on now? Is the yard what you hope?

We put about that much in our renovation but we have a great neighborhood that we couldn’t have afforded to buy into without the sunk costs. The existing home had 8.5+ ceilings (so not terrible) BUT we did spend extra to work around existing footprint and the work took longer than a new home would have (and if we’d just bought an existing house we would not have had to move out for 6 weeks of the long process.)

Its a good question. Comparable new builds in our area are $1.4-$1.6. I don't think we are going to do this huge renovation. Its just too expensive. Thanks for the feedback, its a good question to ask.

[Anonymous]

Anonymous wrote:These are always interesting threads to read.

I'm in Mclean in a house that would sell for $1.5mm now, and i'm considering a major renovation as well to enlarge bedrooms and living areas and improve our outdoor space. The challenge with moving is that there is nothing 'better' than my current $1.5mm house, in the same area/schools, for less than $2.5mm+. Short of spending substantially more to buy or moving to a new school, renovation seems like the best option and i have to imaging that is what is driving up contractor fees. If we had dozens of $1.8mm-$2mm houses on the market moving might work. Probably similar situation in Bethesda.

I agree - these responses are very different than what you would hear in my neighborhood AU Park. 500k is a lot for a renovation but certainly isn't unheard of. It's not that easy to "just move" because inventory is always very low. Doing a new build can take a lot more time than even a gut renovation.

I think I saw OP said they are in Bethesda, so I am guessing 500k isn't that crazy and also inventory might be an issue.

OP, I would say if you like the location of your house, go for it. Your kids have time before college and you could very likely sell and recoup any costs. Focus on getting a contractor with a good reputation. This might seem to cost more up front, but really can save you a lot in the end.

[Anonymous]

Anonymous wrote:That's a really high price. We are about to begin a 500K renovation. We will double the size of our house above ground. We will go from 3 to 5 bathrooms (4 brand new/redone). We will have a new kitchen. Go from 2-4 bedrooms upstairs. This seems very high for what you are doing. We are close in, inside the beltway too.

There is extremely low inventory in our neighborhood, we love our neighbors, and want to stay in our location. We've bid on multiple nearby houses and were outbid every time. We just got our appraisal back and judging by it, will come out well over $100K ahead based on today's prices after spending the $500K. So we are moving forward.

However, we are in a much better financial situation than you with our net worth, college savings, and HHI.

As someone who was in the same situation ( we did a $600k renovation/expansion), I would say be prepared to pay more than $500k in the end. And expect your property tax to be increased once you finish.

[Anonymous]

Anonymous wrote:That's a really high price. We are about to begin a 500K renovation. We will double the size of our house above ground. We will go from 3 to 5 bathrooms (4 brand new/redone). We will have a new kitchen. Go from 2-4 bedrooms upstairs. This seems very high for what you are doing. We are close in, inside the beltway too.

There is extremely low inventory in our neighborhood, we love our neighbors, and want to stay in our location. We've bid on multiple nearby houses and were outbid every time. We just got our appraisal back and judging by it, will come out well over $100K ahead based on today's prices after spending the $500K. So we are moving forward.

However, we are in a much better financial situation than you with our net worth, college savings, and HHI.

How many bids did you do? Are you using design build or an architect?

[Anonymous]

Anonymous wrote:

Anonymous wrote:That's a really high price. We are about to begin a 500K renovation. We will double the size of our house above ground. We will go from 3 to 5 bathrooms (4 brand new/redone). We will have a new kitchen. Go from 2-4 bedrooms upstairs. This seems very high for what you are doing. We are close in, inside the beltway too.

There is extremely low inventory in our neighborhood, we love our neighbors, and want to stay in our location. We've bid on multiple nearby houses and were outbid every time. We just got our appraisal back and judging by it, will come out well over $100K ahead based on today's prices after spending the $500K. So we are moving forward.

However, we are in a much better financial situation than you with our net worth, college savings, and HHI.

As someone who was in the same situation ( we did a $600k renovation/expansion), I would say be prepared to pay more than $500k in the end. And expect your property tax to be increased once you finish.

We're on the cusp of doing this ourselves: a few more points:

- We would have done a refi on our house since interest rates are lower than when we bought six years ago, so now we're going for a construction to permanent loan instead of a regular refi
- while we need to increase our college savings, we figured 8 months of construction hell will give us a house that we'll enjoy living in with our kids more while we're all still here full-time (also 10 years off from college)
- Our income just increased a fair bit too, so we can save more aggressively

It's a risk: we half-heartedly looked at moving, but the assessment is for more than our original mortgage + what we're investing in the reno - not the 80% one might typically expect to get back. That's a reflection of our neighborhood where demand far outstrips supply. A risk, yes, really want a house we love even more.

[Anonymous]

We are in the process of preparing for a $500K architect designed renovation/addition on our N Arlington colonial, but we are effectively doubling our house size. Besides two already renovated bathrooms, not much else will stay the same. It’s not a tear down but close to it. $500K for a renovation seems really high, but $500 for a three story addition with new basement, kitchen/family room, and a master suite is the consistent number we received when we interviewed architects and design/build companies. For us, it’s less expensive to add on rather than move. We love our neighborhood, so moving isn’t appealing anyway.

[Anonymous]

Anonymous wrote:We are in the process of preparing for a $500K architect designed renovation/addition on our N Arlington colonial, but we are effectively doubling our house size. Besides two already renovated bathrooms, not much else will stay the same. It’s not a tear down but close to it. $500K for a renovation seems really high, but $500 for a three story addition with new basement, kitchen/family room, and a master suite is the consistent number we received when we interviewed architects and design/build companies. For us, it’s less expensive to add on rather than move. We love our neighborhood, so moving isn’t appealing anyway.

I meant $500K not $500 for an addition.

[Anonymous]

FWIW, I think the high price is related to the basement expansion. Those are quite expensive. A friend was going to do one and the price ended up so high he ended up selling and moving. If you will consider it, I would drop the basement portion and see if that substantially reduces the price.

[Anonymous]

I'm married to an architect and my DH has been raising prices consistently to find the top. Contractors are doing the same. I'm very glad I'm married to the business because prices are sooooo inflated right now. I just saw where someone paid $6sq ft for labor only for LVP flooring! LVP🤣 his rates are 30% more than this time last year.

[Anonymous]

You mentioned that you house was built in the 1980's and has a mid-century style. I believe that vintage/style might be a liability when it comes time to sell in the future. Also, you said it's on a somewhat busy street. Another negative for re-sale.

Also, the quality of life during a massive renovation would be a huge inconvenience, especially with 3 children at home.

Like you, we live in Bethesda, have 3 kids, and have contemplated a big renovation. Many of our neighbors have done them, and absolutely love them. In your case, however, I might just move. I had always disregarded Potomac, but you can get a good bit of house for the money, and many of the commuting downsides are mitigated by work-from-home.

[Anonymous]

OP, we're in the middle of a reno/addition that started at $300k and will probably cost us $450k all in. That's what we originally paid 15 yrs ago for our house w/good schools & quick commute. The differential between the original estimate and the final tally comes with (1) remedial work to the original house that wasn't anticipated; (2) deciding to add a big screened-in porch to the project; and (3) the costs of tile, cabinets, counters, lights, etc for the new space. We're just at the tail end of the main project and I'm glad we did it. There is nothing we could have bought in our general area with the same outlay of cash - anything else we could have found at that price would have needed a lot of cosmetic work at minimum. We only added 500sf plus a 300sf porch but to have all new windows, doors, bathrooms, etc is a life changer.

I realize that the numbers are tough to stomach, but I think most of the people who insist this is crazy haven't done the math. A teardown would have cost us at least 50% more and at least 6 more months. Now arguably the final product might have been worth more, but I don't know that the ROI would be worth it. My only caution is to be realistic about how much you'll spend beyond the contractor cost. I was caught off guard by all the little things you need as well as by the temptation to upgrade everything once you see how nice the new space looks.

[Anonymous]

If you want to look at this from a mathematical point of view, which I do because I’m an appraiser, here is my take.

Lets assume you live in McLean 22101

Let’s assume we are looking at the average house size of a home UNDER 2M (price per square foot goes DOWN the lager the home, a big home has diminishing returns)

This fictional home based on current listings is 2051 sqft and goes for $535/sq ft. I’m speaking of homes under 3500sq feet, because any larger the price per sqft starts to plunge.

You will see an uplift from the AVERAGE for a well updated home of 10%, this means your home potentially could be worth $588/sqft if you do a very nice quality renovation

Lets say your current home is REALLY beat up and is worth only $486/sqft

If being a prudent investor is your goal and you live in the beat up home, I think you could spend $210,227 and if you do a bang up job, at least break even before realtor fees. I would be leary of adding square footage as you start now working with diminishing returns.

If you tell me your zip code and FINISHED above ground square foot I can give you your exact formula.