Hi Sally,
I’m a great admirer of your blog [I had to leave that in!] and your take on KW market trends and the implications for today’s buyers and sellers.
In
early 2000, we bought a Key West house with a detached cottage on a 4000sf lot. We have rented out both structures
successfully. No damage in these 7 years, no flooding.
We have an actual, old-fashioned 30-year mortgage, fixed rate, all
that stuff, very manageable. We bought at $240k, and a year ago or so the property appraised at $700K (= funny money), maybe
could sell at $500K-$550K today. But we do not want to sell, we want to live in Key West 9 months, up north for the summer.
Here’s the question: we are looking to renovate and expand footage, spending about $300K. We can handle the
financing with a fixed rate loan, monthly payments easily manageable. In
10 years, we may sell and then who knows…move to
Xalapa or something…more or less.
Should we renovate?
Bill
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Hi Bill,
Thank you for writing and asking your questions. I’m so glad you are reading and enjoying the blog! I’m sure enjoying writing it!
Ohmygod, a 30 year mortgage, fixed rate, MANAGEABLE? What planet are you from??? When I meet someone who didn’t use their house as a credit card, I’m in awe. Congratulations.
Markets tend to be symmetrical, so the correction will likely be as deep and long as the rise. If money were your top priority, if this were solely an investment and you were looking for my financial advice, I’d say sell now and rent a house. But it doesn’t sound like that would meet your needs.
If it were us and: we had the money, we knew our income would not change (money in/out would stay manageable), we had good insurance for health emergencies (because the house won’t be liquid for quite some time) and it would make us happy… we’d renovate. We aren’t going to live forever. If we don’t allow our money to buy us a comfortable lifestyle and a few pleasures, what good is it?
I would not put TOO much into the house, I wouldn’t rebuild. But I’d make it nice and comfortable. $300k seems like a big number for a renovation, but then, I’m not familiar with your property. We’ve done a couple of renovations in the $30-$90/sf range, doing some of the work ourselves. Not rebuilds by any means, but including pools, new kitchens, central air.
By the way, an excellent gauge of value has always been cost to build. Home prices used to keep pace with construction costs. It was rare you could get more for your house than it would cost to build. The last few years have seen a serious departure from this rule of thumb: houses you could build for $200-$300/sf selling for $1000/sf. But we believe that will come back in line with sanity.
Does that answer your question? [He said it did!] If you have others, please ask. Questions make me think about topics from a different perspective, food for thought and blog! Thank you for asking, and thank you for reading! See you around,
Pura vida,
Sally
