Renovating an Older Home? (floor, roof, granite, foundation)

[mrsincredible]

I wanted to start a new thread instead of going off-topic in another thread...

Has anyone here bought a cheaper, older home and gutted or done extensive renovations to make it more liveable?

How difficult is government permitting to add a 2nd story to a single level home?

How would one go about with the financing? Do you get a 2nd mortgage on top of the mortgage for the purchase price? Do you have to use cash reserves to cover the renovations? Are there such things as mortgages for construction when it's not a new home?

I'd like to hear about the good, the bad and the ugly about this!

[Ira500]

I've done it a couple of times, and things have changed since I last did it.
A lot depends on what the condition of the place is when you buy it. If it's in decent enough shape, just needs updating or is ugly, a lot of people don't get a rehab loan and just fix up a bit at a time with cash. That's what we've been doing with out existing house, and since we bought it we remodeled the kitchen, bathroom, put on a roof, new plumbing, added new windows, etc.
Our previous home required a rehab loan, meaning it wasn't habitable or had extensive problems. Right now the most common rehab loans ( a lot of lenders will say the only rehab loans) are the FHA 203K loans, which are combined with a regular loans. Most banks and mortgage brokers do FHA 203K loans.
The downside with them is that you can't do any or all of the work yourself, and can't use a lower cost handyman. I believe that they will dole out money as needed to pay the contractors bit by bit.
If you did it with cash reserves you would have more flexibility, but a lot of people like and use FHA 203K loans. If there are any loan officers or mortgage brokers on here, I'm sure they can provide you with more clear and accurate information. I'd be happy to give you names of loan people if you'd like to contact them for more information.

[Ultrarunner]

I've done it a number of times and frankly, today... I think you could probably do better finding something than have to add on... material is not cheap and some homes are being bought for less than the cost to construct.

Than said... you need to know the zoning of any area where you plan to do this... setbacks, coverage area and prohibitions on multi-units can easily come into play... even homeowner associations... if applicable.

The way I did it was to buy a "Bad" home in a good area for cash... make my improvements while living there and then take out a fixed rate loan to get the money out... then repeat.

There as a period of time where I did this every 12 to 14 months...

I figured I have to live somewhere and being able to make improvements as a home owner with cash kept things simple... I did use a few credit cards starting out that were always paid off in short order.

[mrsincredible]

Thanks for the comments. I've seen some of the current listings with MIL suites quite obviously created in basements with 2nd kitchens and wondered about their legality. I grew up in Honolulu where it was very common to get around the laws about multi-family housing by having separate units share the main entry and have access restricted by doorways in what would otherwise be the foyer area. The extra units weren't always meant as rental income. The housing is so high in Hawaii that often times, you have 3 generations living under the same roof and a little personal space and separation is a huge relief.

In our particular case, we wouldn't be needing to build any separate living areas. I just asked about adding a 2nd story because I live in the mid west now and I like having a basement and a 2nd floor with enough space for my kiddies and all of our stuff. Was thinking finding a ranch style (rambler I think they're called in Seattle?) single story home with basement and adding on a 2nd floor would add a significant amount of square footage and allow us to customize to fit our lifestyle.

My kids are all young now so all of our bedrooms are together upstairs but as they get older our needs will change. Hubby and I really like the idea of having a ground floor master with the kids upstairs separated by bathroom(s) and a bonus room for their electronic entertainments.

I guess what I'm saying I ultimately want is a large modern floorplan in a large lot size without the accompanying half mil plus price tag. Tall order, right? We don't plan on relocating until summer 2011 and will probably rent for the first year.

We hope to have $100k cash after selling our current home. If we found something for $300k or less, we could put 20% down and have $40k cash for renovations. That's not much in terms of a full gut or extensive reno. I wouldn't even know where to begin to find something that's uninhabitable. Conversely could I find a house that I think is close to perfect and move in ready at $450k? Or is all this a pipe dream? Should I set my sights on a cheap place like Texas to live? If only the public schools there didn't teach creationism or downplay slavery and the civil war.

[Barking Spider]

Adding a second story can potentially be a huge headache if the current foundation isn't big enough to support the loads.
Depending on the Building Dept. in the area, a large renovation can bring on a lot more compliance to current codes.

A friend of mine found a condemned property for almost nothing. One huge problem for him was, that once the City condemned the property, they made him bring all the electrical, plumbing and mechanical up to current code. It turned in to a much bigger project, and cost a lot more money than he planned, and it took him several months longer to complete.

[Inkpoe]

Originally Posted by mrsincredible

I guess what I'm saying I ultimately want is a large modern floorplan in a large lot size without the accompanying half mil plus price tag. Tall order, right? We don't plan on relocating until summer 2011 and will probably rent for the first year.

We hope to have $100k cash after selling our current home. If we found something for $300k or less, we could put 20% down and have $40k cash for renovations. That's not much in terms of a full gut or extensive reno. I wouldn't even know where to begin to find something that's uninhabitable. Conversely could I find a house that I think is close to perfect and move in ready at $450k? Or is all this a pipe dream? Should I set my sights on a cheap place like Texas to live? If only the public schools there didn't teach creationism or downplay slavery and the civil war.

There's a possibility that the Real Estate in Seattle area will continue to decline. Who knows, by the time that you guys are ready to buy a house, it could still be a seller's market.

As for the bolded question, yes. You'd be surprised. 450K is a very reasonable bag.

[BigDGeek]

Originally Posted by mrsincredible

I wanted to start a new thread instead of going off-topic in another thread...

Has anyone here bought a cheaper, older home and gutted or done extensive renovations to make it more liveable?

How difficult is government permitting to add a 2nd story to a single level home?

How would one go about with the financing? Do you get a 2nd mortgage on top of the mortgage for the purchase price? Do you have to use cash reserves to cover the renovations? Are there such things as mortgages for construction when it's not a new home?

I'd like to hear about the good, the bad and the ugly about this!

If you're thinking about gutting a house to the studs or adding a story, here are 2 other options to consider:

1.) Move to a house that better suits your needs instead of renovating your existing one or buying one that is totally unsuitable
2.) If you are that attached to your current location consider having the house torn down and another built in its place, or find a "scraper" in the same neighborhood and tear it down and rebuild

Usually adding a story or gutting to the studs is more trouble than it's worth. I don't know anyone who has ever done it who said "Wow, thank god we did that...that was easier than just moving to a house that was already what we wanted."

In the neighborhood due south of mine there are a few new builds. They are almost indistinguishable from the original homes. The person who did them found distressed properties or properties that were too small to realistically be attractive to a family in today's market. He bought them cheap then tore them down and built new houses in the same style as the existing houses on the street. They are just modern on the inside and a bit bigger than their neighbors. Apparently this is much less hassle than gutting or adding a story. I'd believe it.

Someone also mentioned foundations; that is absolutely something to consider. If your foundation won't take the weight of an extra story, that should kill the project right away. Once you get into pinning or strengthening the foundation to take extra weight, you are looking at a lot of expense and hassle. Not to mention the fact that your house will be unliveable for a good portion of the project if not all of it.

[golfgal]

You will be able to find what you are looking for, main floor master, rooms upstairs, etc. for $300K in many areas of the midwest. I don't know where you are looking to move but I know even in our area, which is considered on the more expensive end of the midwest, you can find exactly that for around $300K. The DECOR may be outdated but that isn't a big deal to spruce up and for a lot less then $40K. At $450K you will find something EXACTLY like that with updated decor pretty much everywhere in the Midwest.

[mrsincredible]

I guess a mod moved my thread to a general forum about housing. I live in the mid-west in Madison, WI. It's moderately pricey IMO and the taxes are outrageous. But I guess we have to pay for all that salt, repaving and maintenance of the greenery.

We are looking into relocating to the Seattle, WA area next year. We have a great house right now. The layout is fine for us and the ages of our kids. What attracted us to this house was its proximity to work, huge 17,000 sf fenced and level yard (fences are uncommon in our HOA unless you have a pool), open concept great room and huge basement with a 4th legal bedroom.

Thanks for the points about the foundation and headaches of gutting. I will probably check out some general contractors and find someone I want to work with. They would be able to give their opinion on the scope of the job I would hope. Razing and starting from scratch isn't a bad idea either. We do plan to rent for a year and with 3 young kids, I don't think we would enjoy at all trying to live in a home that's undergoing major reno.

Yeah, we could find an existing home and I'm certainly not ruling that out. I'm just picky I'm not into the lavish lifestyle either. I don't care about huge master suites with "water closets" or cavernous walk in closets. I don't care about granite counter tops or stainless steel appliances. I do care about the practicality of how we live and it seems that many new homes are being built with a lot of the features I like - bonus rooms, open concept, 2nd floor laundry, etc. But they're either over priced, have huge master suites or have an arms length between properties.

[rickheinz]

Whatever you decide to do - assume the renovation will take 2.5 times the MAXIMUM amount of time you think it will.