What to do when you need money on your personal residence?

Question

Hello BP world!
I have been rather quiet in the last couple of months and have actually been focusing my time and efforts on a potential job opportunity that would be best for my family. With this opportunity though comes some major change as we would be leaving the Milwaukee area and heading to the Houston area. That being said, I have a couple questions regarding the exit strategy for my personal residence.

1) Is it more beneficial to complete all the work, minor and major (IE: Windows, doors, trim, interior lighting, etc.) and try to sell for top value while obviously putting a bunch of money into it?

2) Should I just do the minimal work to get it into a state where I can off-load it quick, but limit my potential for profit? Obviously this would be cheaper than option #1.

3) If I do opt to do all the necessary work, what options would I have to acquire the remainder of the funds I would need to complete the work. Private Money, Hard Money or a lender are the options that I am aware of.

Some other things to consider (please take into consideration I purchased my house well before I knew about BP and never thinking it would be a short-term flip or rental property)

Current Mortgage Balance: $91K

Projected Improvements: $15-20K (Option #1) $3-$5K (Option #2)

ARV: $120-$130K based on current market conditions, comparables in my neighborhood, etc.

Any comments, suggestions, concerns, would be greatly appreciated.

Jon Holdman · Answer

There are some cheap things you can do that will help with selling. Clean, dejunk, put half your stuff in storage, depersonalize, paint, and fix anything minor. According to surveys, most major improvements cost more than they help the value. OTOH, if the problems are ones that will kill a deal - bad furnace, bad roof, and the like - then they may hurt the price more than you will get back.

This is a place where a good agent is a big help. Get at least three agents to give you an opinion of what you can get and what you could do to increase what you get.

Few investor oriented lenders will lend on an owner occupied house. Its too highly regulated. If you don't have the cash, I'd suggest you not do anything too elaborate. If it doesn't pay off you could end up being stuck with the debt.

Jean Bolger · Answer

Your option 1 is way too risky, IMO. 91k (loan balance) + 20k (improvements) = 111k . If you sell for 120k you'll net 112.8k after commissions. At best you'd break even, but if you have to drop the price AT ALL to sell you'll be losing money.

Modest cosmetic upgrades will help a lot. Get some realtors over and ask them what would get you the most bang for your buck. Or, you could just sell "as is" and price it a bit under market. Some (but not most) buyers just want the best price and would prefer to do their own cosmetic upgrades

Robert Taylor · Answer

Hey Mike, if you'd like a personal opinion on which way to go with what or how much work to do to your house from someone that is both a RE broker as well as who flips a fair amount of houses himself, I'd be happy to come and take a look for you, do a little research on what's out there recently sold and currently listed in your part of town and price range and let you know what I'd do or what I think you would want to do. Basically, you're looking at doing your own possible flip project, you're in the same shoes I'm in after I pick up a house at the auction or from wherever and I've got to decide which way and how far to go. Let me know!

Mike Lowery · Answer

Oh and to cover some of the other questions posed, I would probably be shooting to be in Houston by the first of June at the earliest and first of August at the latest. Obviously if I could hold off until August that would give me some more time to figure things out.

Mike Lowery · Answer

I have thought about the points mentioned above. My family would more than likely rent when first move down to Houston. There is no sense in trying to purchase a home down there without knowing exactly where we want to live, schools, commute, etc.

I dont think I would qualify for a mortgage with a property still listed for sale in Milwaukee, however, I dont expect that will be an issue until I start looking to buy a house in Houston, at which point I (hopefully) would have sold the house in Milwaukee, or have a years worth of rental income from it.

Lastly, there is no way I could afford to live in Houston and have a home in Milwaukee unless I rented it out. The decision to sell, or rent will have to be made prior to my family leaving the area. Anything over a 3 month window where we would be paying a mortgage and rent without selling or receiving rent is too big a financial burden to carrry.

When all is said and done, I really dont want this to be the deciding factor on whether or not we move, but its looking like it very well could be.

Gautam Venkatesan · Answer

It does not sound like there is enough equity to pull out a home line of equity so you would need to use savings or credit cards to pay for repairs. As far as selling versus renting have you considered:

Do you plan to rent or purchase a home in Houston?

Would you qualify for a mortgage if you decide to purchase in Houston while the property in Milwaukee is listed for sale?

Would you be able to afford 2 mortgages till your Milwaukee property sells?

Mike Lowery · Answer

I am sure the numbers would work to rent it out, but being so far away, I would rather just get rid of it and be done with it That was something else that I was contemplating though Essentially renting it out for a few years, taking care of the work that needs to be done and then selling it in a more realistic time frame.

Ben Hughes · Answer

Exactly what I was thinking. Why not rent it out? Do the numbers not work?

Dawn Anastasi · Answer

From your post I believe you are looking only to sell and are not considering renting it out, correct?

Brian Mathews · Answer

I think a lot depends on how quickly you need to be in Houston. If it's a fairly small window, I'd do as little as possible. The heck with the cheese, let me out of the trap so you can start your life again.

What to do when you need money on your personal residence?

What to do when you need money on your personal residence?

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