Remodel or move (take 2)
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Remodel or move (take 2)
Hi, I've previously posted a similar topic in 2020. We ended-up doing nothing (no remodel, no move). Our situation is that we have 4 young kids (ages 8, 6, 3, 3) in a small house ~1600 sqft. The house has 4 rooms we're using as bedrooms, although one of them is very small (7 ft wide) so calling it a 4-bedroom is a stretch. The house is feeling very small lately, and it seems clear that as the kids grow it's only going to get worse. We love our location: the elementary school up the street is great, and we love our neighbors and street (quiet cul de sac, several other families with kinds we're very friendly with). We need more space but don't want to move. We just engaged a design+build firm to explore the possibility of adding a second story to our house. They did a lovely job with a set of plans that would add ~1200 sqft and get us to 6 bedrooms, but they're estimating it'll cost $1.1M. Yeah. They have some variations that are a bit smaller but the cost is only slightly lower (e.g. $900k at the lowest-end). This is obviously an enormous amount of money and it will obviously take a year to complete the job and be a huge hassle. However, larger homes (2,500-3,000 sqft) in good neighborhoods around here are either (1) fairly old and run-down and cost ~$1.4-$1.7M or (2) in good shape and cost ~$1.7-$2.2M. Our current home is probably worth ~$900k so the financial difference between spending $1.1M to add a 2nd story versus buying a nicer larger house is not that crazy, although if we remodel the house it certainly won't be worth $2M at the end.
The real estate market is insane right now, and obviously the cost and difficulty of doing a major remodel is also astronomical. But what to do?
On paper, the right answer is almost certainly to move, but the prospect of leaving our happy street is very difficult for us -- the kids are happy in their school and we're very integrated into the neighborhood community. I'm really agonizing over this and looking for some wisdom. I know nobody can decide for us, but I'm trying to figure out if there's some kind of 3rd option that I'm not seeing. The idea of spending $1M+ on a remodel makes me want to throw up (tho we can probably afford it) but I worry that moving will be almost as expensive and would be pretty disruptive to the family. The remodel would be pretty disruptive, too, although we can probably rent a house in the neighborhood while it's happening so the "cultural" impact might not be so bad.
PS - re-reading my older post, it seems like we still have exactly the same issue, only (1) now we have more money and (2) everything got more expensive in the mean-time
The real estate market is insane right now, and obviously the cost and difficulty of doing a major remodel is also astronomical. But what to do?
On paper, the right answer is almost certainly to move, but the prospect of leaving our happy street is very difficult for us -- the kids are happy in their school and we're very integrated into the neighborhood community. I'm really agonizing over this and looking for some wisdom. I know nobody can decide for us, but I'm trying to figure out if there's some kind of 3rd option that I'm not seeing. The idea of spending $1M+ on a remodel makes me want to throw up (tho we can probably afford it) but I worry that moving will be almost as expensive and would be pretty disruptive to the family. The remodel would be pretty disruptive, too, although we can probably rent a house in the neighborhood while it's happening so the "cultural" impact might not be so bad.
PS - re-reading my older post, it seems like we still have exactly the same issue, only (1) now we have more money and (2) everything got more expensive in the mean-time
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Re: Remodel or move (take 2)
Notes:
1
The "reality" vs "the numbers" don't add up.
It is not so simple as adding a projected 1.1 mil addition build cost to a current value of 900k.
The reality is that the total spent will be far greater and the total cost and value will be very close to or exceed market value by the time all is said and done, the cows come home and the ship has sailed.
2
A second story addition is the most costly addition per return.
(Depends on the % of the project on "structural", roof, and so forth).
3
The highest value per dollar is normally in an "as built"/used home that fits your needs.
While valuations may seem high now, consier the possibility that if you buy another home that is larger for, let's say "X" dollars, 10 years after purchase it will be worth even more.
3b
Consider that the driver of another home purchase should first be that it fits your needs.
4
All things considered with ample "dis laimers" for "exceptions which always crop up like weeds on a dry pasture after the lst spring rain", consider that families and children growing up in a 6-800 square foot apartment do just fine, while some families and children living in a 5,000 square foot home on 3 acres grow up miserable, for any number of reasons.
Point of the matter is. . . look at the "big" picture. (houses do not make for a "home" and good memories).
4
A "middle path" purchase of a "good" home that fits "most" of your needs at 1.7-2.2 mil makes a lot of sense, "As Long As" it fits your financial long term strategy.
Does it fit your finances?
Can you swing it?
Even if it costs more than you care to, will it all work out in the end?
5
Other option: wait. Do nothing. Wait for a larger home nearby to come up for sale. In the meantime, the kids won't notice a thing.
6
What does spouse want?
Spouse should be the deciding factor.
j
1
The "reality" vs "the numbers" don't add up.
It is not so simple as adding a projected 1.1 mil addition build cost to a current value of 900k.
The reality is that the total spent will be far greater and the total cost and value will be very close to or exceed market value by the time all is said and done, the cows come home and the ship has sailed.
2
A second story addition is the most costly addition per return.
(Depends on the % of the project on "structural", roof, and so forth).
3
The highest value per dollar is normally in an "as built"/used home that fits your needs.
While valuations may seem high now, consier the possibility that if you buy another home that is larger for, let's say "X" dollars, 10 years after purchase it will be worth even more.
3b
Consider that the driver of another home purchase should first be that it fits your needs.
4
All things considered with ample "dis laimers" for "exceptions which always crop up like weeds on a dry pasture after the lst spring rain", consider that families and children growing up in a 6-800 square foot apartment do just fine, while some families and children living in a 5,000 square foot home on 3 acres grow up miserable, for any number of reasons.
Point of the matter is. . . look at the "big" picture. (houses do not make for a "home" and good memories).
4
A "middle path" purchase of a "good" home that fits "most" of your needs at 1.7-2.2 mil makes a lot of sense, "As Long As" it fits your financial long term strategy.
Does it fit your finances?
Can you swing it?
Even if it costs more than you care to, will it all work out in the end?
5
Other option: wait. Do nothing. Wait for a larger home nearby to come up for sale. In the meantime, the kids won't notice a thing.
6
What does spouse want?
Spouse should be the deciding factor.
j
Re: Remodel or move (take 2)
Don’t even consider doing such a project with young kids unless you plan to move to temporary housing.
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Re: Remodel or move (take 2)
Since you're on the fence and construction labor costs and materials are high now I'd wait. I would not spend that much money to remodel. You will probably never get the money out of the house (other than through inflation). Many major additions/remodels wind up with "quirks" that you don't see as often in new construction. By quirks I mean design flaws due to working around what was already there. As you said you'd have to rent a house or find somewhere else to live for practically all of the remodel and that is an added cost and I don't know if you will be able to rent in your current neighborhood.
Re: Remodel or move (take 2)
What about bulldozing the current house and building a new one? It might actually not be that much different in cost, a lot of your $1.1M is eaten up in retrofitting everything. Remodel work is 3x harder and more complicated than new build.
Re: Remodel or move (take 2)
A few thoughts:
- Community is valuable but hard to put down on a spreadsheet. Are these people that would come together if a tornado takes out half the block? That's a kind of security you can't buy with money. Could find a similar community in a new spot but hard to tell. Could also see half the block move away in the next year.
- Schools- if you're going to spend this on a remodel I'd want to be happy with the middle and high schools too, cause moving after you do this remodel would really suck
- Remodels are terrible to live through but they are eventually finished. As long as you don't expect it to go smoothly and carry a 20% contingency on top of the builder's estimate you'll get through it
- Prices are up but the cost per square foot on the estimate you've got right now is wild to me (I'm in a cheaper labor market than I'm guessing you are based on home values). Have you discussed a tear down option? That's big dollars for the compromises in a remodel. Understanding of course you're probably in a ways on design fees at this point.
- Now that you've tasted the lure of the design process, if you moved would you leave the house as is or would you be tempted to mess with that one?
- Do the math on the construction cost v. expected increase in home value. The difference between the two is essentially discretionary spending, except on a house instead of a really fancy sports car (or three). Can you afford it?
We're planning a remodel for which we'll see maaaaybe 10% of the money we put in as an increase in home value, it's going to be an enormous mess, we're moving out for the duration, etc, but a) we can afford it even if we move in a year and never get the value out, b) most of what we're doing we would do to any house we lived in, c) I have a professionally developed tolerance for the construction process and d) we love our neighborhood. It is not a good financial decision but frankly we're at the point where we can afford to make bad ones of the planned magnitude without impacting any of our goals as long as we don't do it too too often.
- Community is valuable but hard to put down on a spreadsheet. Are these people that would come together if a tornado takes out half the block? That's a kind of security you can't buy with money. Could find a similar community in a new spot but hard to tell. Could also see half the block move away in the next year.
- Schools- if you're going to spend this on a remodel I'd want to be happy with the middle and high schools too, cause moving after you do this remodel would really suck
- Remodels are terrible to live through but they are eventually finished. As long as you don't expect it to go smoothly and carry a 20% contingency on top of the builder's estimate you'll get through it
- Prices are up but the cost per square foot on the estimate you've got right now is wild to me (I'm in a cheaper labor market than I'm guessing you are based on home values). Have you discussed a tear down option? That's big dollars for the compromises in a remodel. Understanding of course you're probably in a ways on design fees at this point.
- Now that you've tasted the lure of the design process, if you moved would you leave the house as is or would you be tempted to mess with that one?
- Do the math on the construction cost v. expected increase in home value. The difference between the two is essentially discretionary spending, except on a house instead of a really fancy sports car (or three). Can you afford it?
We're planning a remodel for which we'll see maaaaybe 10% of the money we put in as an increase in home value, it's going to be an enormous mess, we're moving out for the duration, etc, but a) we can afford it even if we move in a year and never get the value out, b) most of what we're doing we would do to any house we lived in, c) I have a professionally developed tolerance for the construction process and d) we love our neighborhood. It is not a good financial decision but frankly we're at the point where we can afford to make bad ones of the planned magnitude without impacting any of our goals as long as we don't do it too too often.
Re: Remodel or move (take 2)
I would buy new instead of $ 1 million remodel, but that also depends upon your financial situation . You and kids can also adjust to new place.
Re: Remodel or move (take 2)
I ended up scraping a house and building a new one instead of remodeling 10 years ago. It was shocking how quickly the math said teardown instead of remodel (we priced out both in parallel). And the final product was much better than a remodel would have been.
Re: Remodel or move (take 2)
I think I would buy a different house but in your same neighborhood.
Meaning, don't shop from whatever is on the market right now. Wait. And pounce as soon as you see a good enough house in your neighborhood.
IMO living in a major remodel is a non-starter. And the remodel will certainly be more time and money and stress than you think.
Also IMO you should not leave a neighborhood or school that you love.
Therefore you need to wait for a house to come available. Be very willing to compromise on it's style, features, and price, as long as it meets your primary criteria of size and location.
Meaning, don't shop from whatever is on the market right now. Wait. And pounce as soon as you see a good enough house in your neighborhood.
IMO living in a major remodel is a non-starter. And the remodel will certainly be more time and money and stress than you think.
Also IMO you should not leave a neighborhood or school that you love.
Therefore you need to wait for a house to come available. Be very willing to compromise on it's style, features, and price, as long as it meets your primary criteria of size and location.
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- Sandtrap
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Re: Remodel or move (take 2)
You can also do it in manageable stages with definite beginning and ends to each stage as far as completion in project and money. And, coordinated that it can stop at any point and be considered finished.
Most extensive addition remod renov can’t be done this way but some can without increase in costs etc.
For example: we’re 99% finished with a 7 year total renov/remod on a mil$ Estate size home with detached buildings. It was planned that way from the start and has worked out better than expected and also at far lower costs.
But, this approach is not for most people.
Dis laimer: zillions of ways and opinonions on everything and this is just one.
Most extensive addition remod renov can’t be done this way but some can without increase in costs etc.
For example: we’re 99% finished with a 7 year total renov/remod on a mil$ Estate size home with detached buildings. It was planned that way from the start and has worked out better than expected and also at far lower costs.
But, this approach is not for most people.
Dis laimer: zillions of ways and opinonions on everything and this is just one.
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Re: Remodel or move (take 2)
Can you do the classic temporary garage play room conversion to ease you through the coming crunch years? You could update the kitchen and baths as well.
The house you have is bigger than the houses many 4 child families had in the 60s. They are great houses to retire in if you can live on one level.
The house you have is bigger than the houses many 4 child families had in the 60s. They are great houses to retire in if you can live on one level.
Re: Remodel or move (take 2)
How did a 150k renovation you talked about in 2020 become a one million dollar renovation? Is the 150k renovation still on the table? I agree you will have to move out and if you move out for a year, will the neighborhood remain the same, meaning will the kids still remember the neighbors kids or have developed new friendships? Will they still go to the same school? If no, then move.
Re: Remodel or move (take 2)
You could choose to sell your house and rent a house in the neighborhood.roadnottaken wrote: ↑Sun Dec 05, 2021 7:57 am we can probably rent a house in the neighborhood while it's happening so the "cultural" impact might not be so bad.
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Re: Remodel or move (take 2)
Good question. The answer is that the company I worked at got acquired and we got around $1.4M (after taxes). I know we’re extremely fortunate, and I don’t want to “blow it”. We put $600k into the market and set $800k aside to deal with the house issue (to go towards a new one or a remodel). So here we are. I’m deeply torn between using the money for a bigger house (or remodel) versus toughing it out in the small house and keeping the money invested and getting closer to FI. There’s a middle ground somewhere, and I guess that’s what I’m trying to find.veindoc wrote: ↑Sun Dec 05, 2021 5:25 pm How did a 150k renovation you talked about in 2020 become a one million dollar renovation? Is the 150k renovation still on the table? I agree you will have to move out and if you move out for a year, will the neighborhood remain the same, meaning will the kids still remember the neighbors kids or have developed new friendships? Will they still go to the same school? If no, then move.
The $150k renovation seemed expensive at the time and didn’t seem like good value. Now it still doesn’t seem like good value and would probably cost $250k.
Re: Remodel or move (take 2)
I would scrap the house and build a new one instead of that expensive a remodel. Or just pounce when a house comes up and buy it in the exact area you. Just suck it up until then. That second option will be less painful in my opinion. We just did option #2.
Re: Remodel or move (take 2)
I like the suggestion to watch for a house to come on the market in your neighborhood.
Having a place where you like the schools and the neighbors is a huge benefit with young kids.
I was the oldest of 4 children in a house that size; the very small bedroom was at first the nursery, then the "own-room" sanctuary for the oldest child.
Have you optimized the space you've got? As someone suggested, use the space in the garage, or the basement?
Definitely don't try to live there through a renovation!
Having a place where you like the schools and the neighbors is a huge benefit with young kids.
I was the oldest of 4 children in a house that size; the very small bedroom was at first the nursery, then the "own-room" sanctuary for the oldest child.
Have you optimized the space you've got? As someone suggested, use the space in the garage, or the basement?
Definitely don't try to live there through a renovation!
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Re: Remodel or move (take 2)
I would not remodel, nor would I move at this point because you really love where you are living. What I would do with some of the money you received is to buy extremely functional furniture for your home that maximizes storage space or is a storage solution. I'd put 2 kids in each bedroom (if possible, and depending on ages, boy or girl, etc.) and suggest using the 7' wide room as a family closet. Turn the closets in the current bedrooms into some type of workspace for yourself/study area for the kids. Hopefully, there are decent sized closets? And I'd make it as highly functional as possible. I'd buy a really good dining room set, not necessarily formal, but functional, because dining room tables get a lot of use with kids and school projects over the years, etc. And I'd make sure the area where you, wife, and kids come into the home to drop coats, shoes, etc. is highly organized. We have four kids, and we had a "cubby" system built in our entryway with bottom drawers. One of the drawers is used for winter hats, mittens, scarves, etc., while the other drawer is used for extra school supplies--paper, writing tablets, note cards, etc. Coats and keys were hung on coat hooks in the middle, and at the top of the "cubby" was a small open space for each person to keep handy what they might need. It has been very functional over the years. I think you need to reimagine what your home could be with making some furniture/room changes versus spending that amount of money on a renovation.
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Re: Remodel or move (take 2)
Instead of adding a second floor do you have enough land to expand horizontally? I would not do a million dollar renovation. As others have said either tear it down and rebuild if you have to be in that neighborhood or buy a new home for the $2 million required.
Re: Remodel or move (take 2)
One thing to watch out for if you add a second story is that you will lose a significant amount of usable square footage on the current ground level where the new stairs and landing go in. That might still count in the legal definition of square footage but it would not really be usable. Depending on how it is done you might even lose a bedroom.
I would be real cautious about spending that much on expanding the house if you do not already have money set aside for your kids college. The million dollars is roughly what it might cost to send four kids to college. If you could time travel and ask your grown up kids if they would rather have lived in a smaller house or to have graduated college without student loans I would suspect that they would prefer to not have student loans. It sounds like there are other larger houses in the neighborhood that you could buy when they come up for sale for a lot less than the cost of the remodel.
1) Buy a different house in your neighborhood and the remodel it, or tear it down and rebuild. That might be a lot less disruptive. You might be able to find a house that has lots of issues and is less expensive than yours.
2) You could rent a larger house in your neighborhood until your oldest kid goes off to college. If you keep your current house as a rental you could then move back into it when you only have three kids at home.
3) Buy your next door neighbors home and merge the two houses together. Even if they are not looking to sell their home they might be tempted to sell it for the right price. Once a couple of the kids move out you might be able to then "un-merge" the house and sell off one of them.
4) Move to a different part of the country where housing is much less expensive where you could buy a large house for cash and retire, semi retire, or work remotely. That obviously will not work for everyone and that might sound extreme but one thing to consider is if you stay where your are if your kids will be able to afford to live near you when they are in their 20s and want to buy their first home. I have moved around several times and I am in an area where housing is still reasonable and my son was able to afford to buy a nice home about ten minutes from us. Virtually all of his high school and college classmates that stayed in the area were able to afford to buy nice homes when they were in their 20s.
You would then end up with a brand new house. If you do an extensive remodel instead then you would end up with a 40 year old(or whatever) house that has been remodeled and does not have a great floorplan. In the worst case it could be an odd looking Frankenstein house.
I would be real cautious about spending that much on expanding the house if you do not already have money set aside for your kids college. The million dollars is roughly what it might cost to send four kids to college. If you could time travel and ask your grown up kids if they would rather have lived in a smaller house or to have graduated college without student loans I would suspect that they would prefer to not have student loans. It sounds like there are other larger houses in the neighborhood that you could buy when they come up for sale for a lot less than the cost of the remodel.
They may not be good options but here are some more for brainstorming.roadnottaken wrote: ↑Sun Dec 05, 2021 7:57 am .....but I'm trying to figure out if there's some kind of 3rd option that I'm not seeing.
1) Buy a different house in your neighborhood and the remodel it, or tear it down and rebuild. That might be a lot less disruptive. You might be able to find a house that has lots of issues and is less expensive than yours.
2) You could rent a larger house in your neighborhood until your oldest kid goes off to college. If you keep your current house as a rental you could then move back into it when you only have three kids at home.
3) Buy your next door neighbors home and merge the two houses together. Even if they are not looking to sell their home they might be tempted to sell it for the right price. Once a couple of the kids move out you might be able to then "un-merge" the house and sell off one of them.
4) Move to a different part of the country where housing is much less expensive where you could buy a large house for cash and retire, semi retire, or work remotely. That obviously will not work for everyone and that might sound extreme but one thing to consider is if you stay where your are if your kids will be able to afford to live near you when they are in their 20s and want to buy their first home. I have moved around several times and I am in an area where housing is still reasonable and my son was able to afford to buy a nice home about ten minutes from us. Virtually all of his high school and college classmates that stayed in the area were able to afford to buy nice homes when they were in their 20s.
+1
You would then end up with a brand new house. If you do an extensive remodel instead then you would end up with a 40 year old(or whatever) house that has been remodeled and does not have a great floorplan. In the worst case it could be an odd looking Frankenstein house.
Re: Remodel or move (take 2)
I didn't read the entire thread but I can't get a good picture of the house from the first post. It's much more difficult to make a recommendation without seeing house and the property.
- quantAndHold
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Re: Remodel or move (take 2)
I would wait and watch for a house in your current neighborhood that fits your needs better.
You’re not in an emergency situation, and with current events, even if you moved forward with remodeling, it would probably be a couple of years before it’s done.
You’re not in an emergency situation, and with current events, even if you moved forward with remodeling, it would probably be a couple of years before it’s done.
Re: Remodel or move (take 2)
I have been 2nd home shopping in coastal areas of central California. Many of the homes are older in the 1400 square foot size. I've seen lots of garages converted to living space. The conversions are top notch. Another strategy that is common that I have seen is folks buying a quality RV and permanently parking them in the backyard to be used as living space.
I wouldn't do a remodel.
I wouldn't do a remodel.
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Re: Remodel or move (take 2)
You're in CA? You should review how Prop 13 works in re-assessing taxable value for substantial remodels versus tear-down-and-rebuild. You can end up with a $2M house either way, but the assessed value may be different