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Help, I bought a money pit
Old 08-07-2014, 07:25 AM   #1
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Help, I bought a money pit

So I tried to downsize our house. We bought a 1200sf house with a 700sf guest house out back. I figured we could always rent out the guest house if we needed to. So now we've moved in. So far we had to replace both roofs (I knew this was probable during the inspection), tear out kitchen and both bathrooms in the main house, break through the slab to replace rotten cast iron drain pipes, after breaking out the slab found a 20' diameter void under the slab from a previous water leak. So far about 50,000 in repairs and still going. Now that I've been staying here I realize I don't want to rent out the guest house and have people living in our back yard on our shared pool.
So after doing all the repairs, this house cost more than our original house and costs more to maintain. We now have two of everything to take care of and really will only live in one (other than when guests come).
So I'm unsure how to get out of this situation, if I sell now I will take lose around 100k after the cost of repairs and real estate commissions etc.
What a mistake I made, definitely sets my er plans back a few years.
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Old 08-07-2014, 07:29 AM   #2
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I'm really sorry to hear that. I have no advice, but want to thank you for sharing. I get the "itch" every now and then to move, but stories like yours are why I'm 25 years in on my house. I know it well, and can readily predict future expenses. (I do wish it were a ranch, however.)

Really, I wish you the best of luck. Can you pause here and see if the bleeding has stopped?
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Old 08-07-2014, 07:36 AM   #3
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Sorry to say it but there isn't anything we can do for you. My suggestion, if you can afford it, enjoy it, laugh about it, learn from it and move on. We bought a home last year from a 90 year old lady......kitchen looked like brand new, it passed an inspection BUT after we closed and moved in we found every one of the major kitchen appliances needed a new part or two......guess what! Appliance manufacturers stop making parts after 20 years.....so, new frig, new ovens, new dishwasher.....so, refaced cabinets....changed floor......30k later, like you, I have to laugh about it and enjoy it!
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Old 08-07-2014, 07:41 AM   #4
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The guesthouse option gives you a great selling point for someone looking for in-law or returning child accommodations which seem to be active segments these days.

Financing a buyers purchase could get you out from under it however it may create additional risk that you may not have the stomach to deal with.

Sorry to hear about your maintenance issues, but thanks for posting, lest we all think real estate is an easy foolproof business.


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Old 08-07-2014, 08:11 AM   #5
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Thanks everyone for the replies, I guess I'm going through a lot of buyer's remorse, hopefully some will pass after the work is done and we are not living in a construction zone.
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Old 08-07-2014, 09:00 AM   #6
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Not having the construction will help. We made a similar mistake. The home had a basement wall that was caving in. The former owner had built a false wall to cover up the damage. They had made up an elaborate story as why the inspector couldn't get near that area.

We went after her, by the time we did she had moved out of state and had no assets to go after. So enjoy the best you can and know your not alone.
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Old 08-07-2014, 09:08 AM   #7
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I'm actually in a similar situation with a guest house.. and a bit of work to do on both places. (roofs, termites, plumbing, etc) I have been renting out the place though, and while I've had the occasional problems with tenants, it's certainly helped offset the costs. The property as a whole is nearly free for me to live now.

If you can find the right person to live there, it might make the world of difference.
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Old 08-07-2014, 09:55 AM   #8
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How much of the work is cosmetic/preference, vs absolutely required. When I hear all bathrooms/kitchen being redone I assume it's cosmetic because things were dated. Obviously the foundation and pipes issues had to be handled.

We have a detached granny flat in our backyard that we rent out. We have constructed fences so that we have a private backyard NOT shared with the tenants. They have a private outdoor space not shared with us. This works well for us. They access the unit from the side of our house - but we've structured things so that they have their own gated path (not through our portion of the yard) to get to the casita.

The rental income definitely takes the sting out of some of our other expenses.

We're moving slowly on our other projects. We finally replaced the 1960's era kitchen a few years ago - it functioned before, despite being dated. We're now remodeling the master bath... Again, 1960's original - but it functioned. It will be nice to have 2 sinks and a bigger shower - but it was not required. It was a "want", not a "need".
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Old 08-07-2014, 10:04 AM   #9
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Thanks Rodi, yea most of the work is required due to having to cut holes in the slab to get to the drain pipes. All in all, it will be about 30k more than I was planning right now, but we will have a new kitchen and 2 new baths. I guess I'm kind of freaking out seeing the huge holes jack hammered in the floors.
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Old 08-07-2014, 10:10 AM   #10
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I guess I'm kind of freaking out seeing the huge holes jack hammered in the floors.
The visual image of a pit (literally a money pit) is striking!

It's a reminder that any move entails risk. You could not have known what lay underneath before buying the home. Hopefully you will have no more nasty surprises.
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Old 08-07-2014, 10:12 AM   #11
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For the rental could you try to find a renter who will not be around much? Someone who travels a lot for business or works crazy hours (medical resident, graduate student with another full-time job or a crazy commute who only needs the place a few nights a week, divorced parent who needs a place to stay when they visit their kids, etc.)? Would enable you to get some rent for the place without having someone around all the time.
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Old 08-07-2014, 10:30 AM   #12
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No advice.

A guest house would scare me. We have too many relatives....it could turn out to be something quite different than a revenue property.

We owned our own home for 40 years. We sold, downsized, etc. Have been renting for just over a year now. I like it.
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Old 08-07-2014, 11:14 AM   #13
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If you can find the right person to live there, it might make the world of difference.
This would be my suggestion. You can probably find someone suitable, and offset the costs, until you are ready to sell.
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Old 08-07-2014, 11:27 AM   #14
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Sorry to hear about the expenses. At this point though it seems like you have addressed most of the major functionality issues that could possibly go wrong, so perhaps your future expenses will be lower than average. The money spent on past repairs is a sunk cost at this point.

I was reading the book Plentitude by Juliette Schor the other day (author of Born to Buy, Overworked American and Overspent American) and I realized many of the upgrades people do to their homes in our neighborhood are because of marketing and home fashion issues, and are not really necessary due to loss of functionality. When I realized that going forward really we just need to paint, put on a new roof every couple of decades or so and address functional issues like dry rot repairs or plumbing problems, I thought wow, this book saved us tens of thousands of dollars in home upgrade money we could just leave invested instead.

I think all you can do going forward is calculate and compare the cost of future housing options to where you live now. What are you considering going forward? Renting? Smaller house without the guest house? Or something else?
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Old 08-07-2014, 11:30 AM   #15
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Spoiler alert: all houses are money pits.

You will really enjoy the improvements once they are complete. Can you offer the guest house on vrbo or something so that you can rent it short term at your discretion?
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Old 08-07-2014, 11:39 AM   #16
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Spoiler alert: all houses are money pits...
+1

But what can you do, other than making sure that the maintenance and operating costs are properly accounted for in your budget? I never look at them as investments, only as a lifestyle choice that I have to pay for out of other investable assets.

We all need a roof over our head. Even a housing solution such as an inexpensive RV costs money to maintain, though some are smaller money holes rather than pits.
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Old 08-07-2014, 11:42 AM   #17
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I'm sorry about the expenses you have had to endure.

I bought a new house, and have been told that my house insurance will cover any leaks under the slab. Did your house insurance cover any of the items that you have had to deal with? Wouldn't leaky pipes be covered by your insurance.

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Old 08-07-2014, 11:56 AM   #18
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Thanks Rodi, yea most of the work is required due to having to cut holes in the slab to get to the drain pipes.
....snip...
I guess I'm kind of freaking out seeing the huge holes jack hammered in the floors.
Totally relate, when our basement was fixed we had two guys with jackhamers running in the basement for close to three weeks. DW has hated our new homes bathroom shower from day one in this house. Every time I offer to get it improved she remembers that experience and refuses.

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Old 08-07-2014, 12:34 PM   #19
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This is a bit of a wakeup call to me about the old "Devil you know, versus the Devil you don't". I'm currently living in a house that's almost 100 years old, on a 4.28 acre lot. It has a few outbuildings...a 24x40 garage I had built about 9 years ago, a 12x16 workshop that dates back to probably the 30's (it's been there as long as Grandmom can remember, and she came down here in 1934), and an old garage, about 10x20, that needs to come down...and probably will, before too long!

I've had a fantasy about moving out to the next county over, getting a newer, nicer, bigger house, on at least two acres of ground, with an upper price range of $700k. But, the more I think about it, I could get into something that seems nice at first, but ends up being a money pit. At least with the house I have, I know what most of its problems are.

If I really do want to move, I'm starting to see that I need to also budget some money in for repairs that the new place might need. Just because it might be a "new" house to me, doesn't mean it's necessarily going to be a NEW house! Sometimes that's easy to forget, I guess, because my house is so old almost anything else seems new-fangled!
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Old 08-07-2014, 12:49 PM   #20
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If I really do want to move, I'm starting to see that I need to also budget some money in for repairs that the new place might need. Just because it might be a "new" house to me, doesn't mean it's necessarily going to be a NEW house! Sometimes that's easy to forget, I guess, because my house is so old almost anything else seems new-fangled!
Newer is not necessarily better. An old house whose quirks you know and have managed may be a much better crafted structure than a more recent shoddily built house. And then there's the neighbour issue.

I owned an old character home for 20 years. I did several renovations including kitchen and bathroom, and I more than got my money back on it. But there was always something that needed fixing. Even with new insulation and some new windows, my heating costs in a cold climate were ridiculous. But the neighbours were the best!
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