Relocation Strategy: Buy, Sell or Rent? (Portland, Brunswick: real estate market, rental, credit)

[221B]

Our plan is to move to the Mid-Coast region, and here is the strategy we are considering:
Our thoughts are that, upon moving, (from California), we realistically won't land in exactly the house or area that we will want to ultimately stay in, long-term. So we are thinking that we'll purchase a fixer-uper, and spend a year or so getting the house up to snuff and looking good. By that time, we should have a much better idea of a home that we would like to purchase and stay in for the long haul.
We see this as potentially a better alternative than renting somewhere for the first year or so, as we should, via careful selection, be able to at least break-even, or hopefully make a bit on the first home.
We would appreciate any input on the pros & cons of such a plan that we may not have considered, such as the local market, tax impact, etc.
Thanks!

[RetiringInMaine]

How old are you? Do you have some source of income other than expecting a job in Maine? Where on the mid coast are you looking? Much of this has a real bearing on what you should do.

[retiredtinbender]

This should help you with local property tax info:
Maine Revenue Services: Property Tax -

Now you're going to get hammered wqith questions on here. Have you ever been to Maine? Why the move? Are you going to be looking for work or are you tranferring/have something lined up alll ready? It would be good if you could visit a few times to get an idea of this area of the country. It is quite different than the left coast. I'm not just being nosey; these questions help us all on here. Search other posts on here too. This will give you a ton of info and probably bring up more questions.

Welcome to the forum, 221B. Kick back and enjoy.

[WhoFanMe]

Originally Posted by 221B

Our plan is to move to the Mid-Coast region, and here is the strategy we are considering:
Our thoughts are that, upon moving, (from California), we realistically won't land in exactly the house or area that we will want to ultimately stay in, long-term. So we are thinking that we'll purchase a fixer-uper, and spend a year or so getting the house up to snuff and looking good. By that time, we should have a much better idea of a home that we would like to purchase and stay in for the long haul.
We see this as potentially a better alternative than renting somewhere for the first year or so, as we should, via careful selection, be able to at least break-even, or hopefully make a bit on the first home.
We would appreciate any input on the pros & cons of such a plan that we may not have considered, such as the local market, tax impact, etc.
Thanks!

Welcome to the forum, 221B.

Are you selling your primary residence in CA, have you lived in it for 2 of the last 5 years? 5 of the last 8? Are you selling at a profit? There are lots of tax ramifications involved, I urge you to speak with a CPA to find out where you stand before you even start. Will you be financing your Maine purchase (s)? If you believe the market is trending lower, have you considered buying a home in 2010 at 2011 prices? What is your budget for improvements and what type of payback are you expecting. The latest statistics on remodeling in New England show a 55% to 85% return on investment, the higher number for external remodeling such as fiber cement siding vs. wood or vinyl. What you are proposing to do, sometimes known as flipping, can be very lucrative or can start you on the road to financial ruin. Do you have any experience in flipping, have you renovated homes before? How long do you plan to stay in Maine? Do you plan to stay in your permanent home for the long term? Do you believe the market in mid-coast Maine has bottomed and will trend upwards in 2011 and beyond? Nobodys knows for sure, but all of the indicators point toward a long, slow recovery once we (and perhaps we already have) hit bottom, the days of double digit gains in house appreciation are long gone and may never come back.

I'll sit back and watch the others respond, but you've got some serious planning and budgeting ahead of you. Good luck.

[Northern Maine Land Man]

Good advice above.

I think you have a good plan. The lowest cost improvements come from sweat equity. That is your labor. As long as you have some skills you'll do well.

Let me caution you about the mid-coast. Brunswick Naval Air Station just closed. Over 3,000 families are leaving the area. A few of those folks lived in military housing, but there is a huge excess of units in the housing market right now, both rental and homes. The effect of this diminishes as you move further from Brunswick. The upshot is that you are far less likely to profit from an investment in the Brunswick area than you would elsewhere in Maine. In my opinion, the real estate market in many areas has another hard hit to go through before we hit bottom. (Hey, somebody has to tell him.)

The hottest market right now is residential on 25 acres or more. People are looking for a safe place where they can hunker down and ride out what is coming. Nobody knows the details, but when numerous people from many areas are calling looking for safe "bug out destinations" we should learn from that. The FBI says that Maine is the safest state. People know that.

The hard hit areas I mention above are those areas where people live solely due to job opportunities. As my friend in Washington, DC says, "You got to go where it sux to make the big bucks." As employment opportunities decline "where it sux", people flee because "it sux". I have another friend who learned he could buy a home in Detroit for $10,000. It needed fix-up, but it was structurally sound. He could buy it from the city. He offered full price in cash. There was just one contingency. The city has to issue my friend a concealed weapons permit. The city turned down the offer.

You'll like Maine. There are still some areas where you can make double digit gains if you improve a property. Plan to own it at least a year to avoid a short term capital gains tax. Take a look at the Lincoln area.

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[221B]

Originally Posted by WhoFanMe

Welcome to the forum, 221B.

Are you selling your primary residence in CA, have you lived in it for 2 of the last 5 years? 5 of the last 8? Are you selling at a profit? There are lots of tax ramifications involved, I urge you to speak with a CPA to find out where you stand before you even start. Will you be financing your Maine purchase (s)? If you believe the market is trending lower, have you considered buying a home in 2010 at 2011 prices? What is your budget for improvements and what type of payback are you expecting. The latest statistics on remodeling in New England show a 55% to 85% return on investment, the higher number for external remodeling such as fiber cement siding vs. wood or vinyl. What you are proposing to do, sometimes known as flipping, can be very lucrative or can start you on the road to financial ruin. Do you have any experience in flipping, have you renovated homes before? How long do you plan to stay in Maine? Do you plan to stay in your permanent home for the long term? Do you believe the market in mid-coast Maine has bottomed and will trend upwards in 2011 and beyond? Nobodys knows for sure, but all of the indicators point toward a long, slow recovery once we (and perhaps we already have) hit bottom, the days of double digit gains in house appreciation are long gone and may never come back.

I'll sit back and watch the others respond, but you've got some serious planning and budgeting ahead of you. Good luck.

Thanks for the input! That is awesome! Here are the answers to your questions so far:
Yes, we will be selling our primary residence in the L.A. area which we've been in for over 20 years. The profit shouldn't exceed the threshold where we get clobbered with capital gains tax under 'current' laws.
We are approaching semi-retirement age, and if we continue to work, it'll be part time for the next few years. We plan to stay in our permanent home long term. You bring up an excellent point, in that our initial home may need to be lived in by us for, I think 2 years before we either sell or rent it, in order to avoid capital gains. I'll double check on what the details are on that. We are very handy at fixing up a home, and can do most of the work ourselves, as we have done with our current home.
Also, we have visited Maine twice so far, and will visit again in a couple weeks (in the winter) to check out the temps, snow, etc! It's during this visit that we plan to really narrow our search for areas that we like, which I think will be between Waldoboro and Camden somewhere, possibly around St George. Is this area also affected by the Brunswick Naval base closure?

[WhoFanMe]

You may qualify for the $6500 tax credit if under contract on your new home by April 30, but you'd need to stay there for 3 years or re-pay. Most folks I work with (especially those who have been in the same home for years) absolutely dread packing and unpacking, that might be a consideration for you. Since you are going to move for the long term, you might consider homes that are structurally sound, but need updating throughout, I see many that have been in families going back to the 50s or 60s, solidly built but with avocado fixtures, paneling, extensive wall paper, cigarette smoke, etc. Depending upon the owner (or the family's) motivation and time on market, those homes can be purchased at considerable discounts to the current market and you can live in them while renovating to your standards. You'll obviously want to get a thorough building inspection and research the home at the local town hall, but you might find a diamond in the rough. Since you are in no hurry you might also consider distressed properties, although you need to carefully add up what you'd need to pay in renovations vs. what you could buy a conventional re-sale house for. Often you're better off buying the house from the owner that has taken care of it, but may not have the same tastes as you.

I work in the Greater Portland area and don't know values in the mid-coast so I can't comment on the effect of the base closure, but on your next trip you might consider interviewing real estate agents to find one who could start the process of showing you areas and homes that might fit your needs. A good agent that you can trust can save you time and money and will work with you for several months to find what you are looking for as long as you are up front and honest with them about your plans and expectations.

[AustinB]

Originally Posted by 221B

I think will be between Waldoboro and Camden somewhere, possibly around St George. Is this area also affected by the Brunswick Naval base closure?

These areas won't, or at least, shouldn't be affected from the base closure. Too far away to have any major impact, and there are other reasons to live in these towns than the base.

[Maineac]

Rent. Find the best deal and put your money somewhere besides the real estate market. We're on our 11th year in the same place, have paid the landlord over $120,000.00, and, frankly, when I run the numbers, I'm glad we did. But we're not in Maine and have a really good, cheap rent. That said, we still own a farm in Central Maine and land on Deer Isle. I'd get rid of the farm, the land on DI is part of sorta a "family compound" type of thing for po' folk like us.