Like many song lyrics, this idiom has been twisted around like kids playing ‘telephone’. Who hasn’t heard “there’s a bathroom on the right” in a Three Dog Night song or “Excuse me while I kiss this guy” in a Jimmy Hendrix hit? It still works though. Basically, to effectively determine a thing’s value it must be tested. So, here I am scribbling out truths from my life’s professional experience that I am asking you to trust. The big step is that you may not really know until you test these nuggets in your own life. Well, my life has had a series of twists recently that bring me to the very place many of you are at. I own a property that I must do something with. By the way, the songs I referred to are Boomer staples. Even if you aren’t a Boomer, every generation has lyrics that get shredded by the music. Bad mixing is timeless.
Our situation is similar but certainly not the same as many of you are in. No two homeowner situations are alike. Lots of variables prevail and everyone’s situation is somewhat different. So let me lay out where I am at this point. We own a house that has been in my wife’s family for over 100 years. About 12 years ago, we bought it from the estate of her aunt with the blessing of the two surviving elders in the family. In fairness, we got it for $50. However, it’s 120 years old this year! Hardly a fixer-upper. Conversely, it does have significant historic provenance. That’s another story but it is a driving force for why I think it should be salvaged in some fashion. The downside is it will cost as much to save it as it would to bulldoze it and start over. The Catch-22 is that we must do something with it. The options are to either sell it as it is, renovate it and sell it or renovate it and live in it. A quandary on a good day.
12 years ago, we bought it for family. The in-laws had memories of being in this home back in the 1930’s. My wife’s elderly parents were reaching a point where mobility was growing difficult. My father-in-law had a neuromuscular disease that left him wheelchair bound and mom-in-law was getting up in years. This fabulous old 4-chamber farmhouse has wide interior doors throughout. It was all on one level. No stair other than the porch. So, we chose to renovate it and make it wheelchair accessible throughout to include an exterior ramp. This gave them a home that was familiar and functional. It was a great success and they have enjoyed it for over a decade. Well, dad passed and mom is now at a place where in-home care is not financially feasible in Georgia. The home is not a good fit for most modern families as it would require a significant investment just to sell it with an eye to saving it. We cannot heal the cost of keeping it just for the sake of keeping it in the family. For the remodel, I did most of the work myself. Even then, we invested $65k into the property. So, there is a modest mortgage and tons of sweat equity.
The neighborhood where it resides actually grew up around the house starting in the late 1940’s. Following the war it has gone through the usual bell curve of gained value and lost value. In recent years it has fallen to the bottom of the curve and grown pretty “tired” as a community. Now the neighborhood is “gentrifying”. This is not a particularly good word but it is our reality. This is the reality of real estate in the greater metro as it continues to expand. These neighborhoods may be the last bastion of affordability. Now, with rising taxes and significant maintenance costs, we have an asset we must use or lose. For better or worse, I now have a real-world example of what I’ve been discussing.
In your life the driver may be different. You may need to expand for a growing family. You may be consolidating family to address our current economic realities. Retired parents are moving in with you or perhaps you are moving in with them. Your kids are out of college and trying to launch careers. Lower overhead gives them a needed leg up. Regardless of the driver, this is our reality.
For good reasons, we have chosen to rent for about 8 years now. We found the cost was a balanced trade for quality of life and convenience vs maintenance and operational costs. It has worked very well and allowed us to focus on building this practice with my daughter. Unfortunately, carrying rent and this soon to be vacant property is not practical. My sweetheart has retired and I’m not far from it. We now have to consider life on a fixed income. It’s a good income but limited. We must again consider quality of life vs cost. Everybody gets here at some point or another. Tada! Our turn.
In our minds, the choice was clear. If we sell the property we will get a nice profit. However, we have other family obligations as the eldest of the current generation. These considerations may continue beyond our exit from the stage, so to speak. An as-is isn’t enough profit to have a profound impact in this economy and virtually no continuing impact. Selling as-is has been poo-pooed by the board of two. Option 2 considers renovation for resale. Interesting but still filled with variables. That’s me speaking with a long history in building construction. Although values are rising quickly, and resale odds are high, how much do you do? Costs are still greatly in a fluid state. The house itself has value but it is also a potential liability. Maybe we ignore the historic value and flatten this puppy. Build new. The thought of that just constipates me. I feel like I’m spitting in the face of history and generational wealth. Not to mention, will I estimate the amount of money to put in and the resale values when it’s done. The odds are even that we’ll make the same return when it’s renovated that we would just selling as-is. We can’t pay rent and carry this house if it lingers on the market. Again, our choice seems clear. Follow a scenario where our options are still somewhat fluid and we maintain a quality of life we can sustain while preserving the asset. We renovate to live in it.
At this time we are downsizing for the process. We are cutting our rent by nearly half by moving into a smaller unit within our complex. We will place all the furnishings we are not using in the interim in storage. We have shopped “construction to perm” loans and found a very good product through a savings and loan based in North Florida. During the building process, we will only have to pay interest before the house is ready for move-in. We can invest sufficient money to create a home that meets current resale standards and suits our desired living standard. If we get an offer during construction that we can’t refuse, so be it. If not, we have a lovely home in a desirable community. As we have not been occupants of the home while we had family there we paid tax as an investment property. Now we’ll get homestead exemption and other breaks based on our ages. In the end, we should have a far more valuable asset and a quality of life at about half of what we spend now. Not too shabby but, time will tell. Over the next year, we’ll find out together.
Until next time….
