Anonymous wrote:I think this is the kind of project that sounds exciting and worthwhile (we all watch too much HGTV), but almost everyone who has ever done it has hated it enough to counsel against it. Like opening a restaurant. If you surprised yourself with the profit you made on the house that only needed cosmetic repairs (and it didn't destroy your relationship), then why not wait for another opportunity like that to come along?

8:14 here and that is exactly the opportunity we will be looking for next. Kitchen, bathrooms, paint, floors, maybe adding central a/c, that's it. We might never do another gut job again, and if we do we would use cash.

Let it go, OP.

I think this is the kind of project that sounds exciting and worthwhile (we all watch too much HGTV), but almost everyone who has ever done it has hated it enough to counsel against it. Like opening a restaurant. If you surprised yourself with the profit you made on the house that only needed cosmetic repairs (and it didn't destroy your relationship), then why not wait for another opportunity like that to come along?

Anonymous wrote:How are you going to get the cash to do the renovation? The bank won't loan you money in excess of the home's value. Even if you get a deal on the property its unlikely you'll get an appraisal for significantly higher than your purchase price.

Anonymous wrote:If it isn't livable now, check into how you will get a mortgage. Sounds like you are going from easy to huge project without the cash. Yes, the real estate market may take a hit from rising rates in the next few years.

OP will have to get an FHA 203K or a FannieMae Homestyle construction loan. As someone who has done this and is still not quite at the end of it almost two years later, I would NOT recommend it. We bought for less than $200K and will sell for almost $500K so we will still have plenty of profit, but getting and dealing with the construction loan has been horrifying, the project has taken forever, and our partners in the deal - experienced flippers themselves - are on the verge of divorce and our contractor won't speak to the wife.

Anonymous wrote:I was on the fence until you said historic home. No way in hell would I touch that.

+1. This is a divorce waiting to happen.

Expecting six-figure appreciation in three years seems like a pipe dream to me. Don't forget to factor transaction costs.

If it isn't livable now, check into how you will get a mortgage. Sounds like you are going from easy to huge project without the cash. Yes, the real estate market may take a hit from rising rates in the next few years.

How are you going to get the cash to do the renovation? The bank won't loan you money in excess of the home's value. Even if you get a deal on the property its unlikely you'll get an appraisal for significantly higher than your purchase price.

I was on the fence until you said historic home. No way in hell would I touch that.

Nope, don't do it.

Anonymous wrote:DYI or are you hiring people to do the work? Our realtor's estimates for renovations were laughable compared to the market.

I paid an architect/contractor team to make a realistic assessment of the renovation costs. Once we get an inspection, they'll be able to line item the costs more specifically, but unless something huge shows up on the inspection (and there's not much left to show up that we don't already know about, really the house is being rebuilt already), their $225 estimate should be on the high end of where we'd land. If inspections showed something to make it any more expensive than that, we probably would not go forward with the project.

I'm someone who is pretty obsessed with houses, renovations, and real estate values, so I'm also not worried about having the patience for it. I know it will be stressful, but for me this is a good kind of stress. The financial aspect is what I'm concerned about, I just don't want to be foolish. I think some financial tightness and a bit of gamble with the real estate market is worth it for this project, but I'm also looking for some objectivity.

Unfortunately it's not the kind of renovation that would allow for much DIY. It's basically the (beautiful, historic) shell of a house that will need to be rebuilt in many ways. The $225k renovation budget (property being purchased for $100k) includes project management by a team I know and trust, including an architect who has a ton of experience with renovation and rebuilding of old houses.

Without being very modest, I do have great design sense, and have previously worked for a designer (although I am not one myself). I've also profited off of a home that we were able to sell for frankly more than it was worth, because buyers loved the updates we'd done, and probably honestly just the way we staged it. That was a house where I was able to DIY a ton, for very little money, and I even surprised myself by how well we came out ahead on that one. That probably emboldened me a bit to trust myself. I've also made all of the finish and design decisions for a friend's renovation, which came out really beautifully, and she's actually considering selling it now just because the aesthetic changes have made it worth substantially more than she bought and renovated it for. So I do trust myself as far as what to do with the house, but would leave the actual work to professionals, since it is an old house that needs basically everything.

Are you guys handy? Have good design sense? If you bring something to the table it could make sense. I don't think I'd have the patience for it myself.

DYI or are you hiring people to do the work? Our realtor's estimates for renovations were laughable compared to the market.

Our HHI is about $100k/year, and could be more like $130k whenever I decide to switch back from part time to full time work (I'm home part time with a baby now). We live in a mid-sized town in a moderately priced area, and our only debt is $200/month car payment and $100/month student loan payment. We have two kids in good public schools, so no monthly education expenses. We live pretty frugally, in general.

So we are looking at a potential investment property, and considering renovating it, living in it for two years (or 3, however long we'd need to avoid capital gains upon sale of the property), and selling. The profit potential is reasonably $75k-100k (possibly more, depending on what the market does between now and then; home prices have been rising steadily in our area). The overall cost of purchasing and renovating the property, however, would be about $325k. In a normal scenario, we would be looking at houses around $250k, for an ideal long term mortgage. However, this would be for investment purposes, sort of a long flip scenario. We are weighing if it would be worth having a substantially higher mortgage for 2-3 years in order to gain a nice profit at the end of it. We'd then use that profit to buy something in the $250k range, with a really substantial down payment, so that our monthly mortgage would be very low long term and allow us to save a larger portion of our salary in the long run.

I'm not sure if this is a crazy idea. Of course it's a bit of a gamble in a number of ways. The housing market could crash between now and then, but that seems improbable at the moment anyway. We could have a big emergency of some sort and have less cash reserve than usual (although we both have families we could turn to for a loan in an emergency situation). We could be more uncomfortable than we'd like to acknowledge now, with less discretionary income than usual. But it feels totally worth it for the profit potential. We have conferred with numerous real estate professionals as well as an architect and contractor, and are confident in the profit potential.

Is this completely insane? Or maybe worth the gamble?