Wanted to get the opinions of some people. When I start working and savign some money I was going to eventually buy a house. Ignoring current conditions I was thinking about taking advantage of Uncle Sam's tax break on property. The one that allows you to keep 'x' amount of returns from the sale of real estate given it was your primary residence for 'x' number of years (2 off the top of my head). So with that in mind I was going to basically buy-hold 2-sell and move assuming I could find more good places to buy (and my old property experienced some nice appreciation). I don't know if I would be a fan of renting & I think I will be pretty busy with work. If I don't sell I still have a nice place to live. I am single so as long as it doesn't get to be a burden why not? Any opinions? JG be brutally honest.
JG & Real Estate people
- Thread starter wildcat
- Start date
Hi Wildcat!
This approach can certainly work and being single helps (most wives don't seem to be thrilled about moving so often). I have seen this work nicely with people that can build their own house or buy a fixer upper and basically create the equity. As single you can shelter up to $250K of the gain if you live there 24 months out of 5 years. The cons: transaction costs are high (you can try for sale by owner, we have had good success with that) and finding the next property, as you mentioned. The bottom line, if you didn't care, I would definately sell when approaching the $250K profit and buy the house next door or down the street.
Beachbumz 8)
This approach can certainly work and being single helps (most wives don't seem to be thrilled about moving so often). I have seen this work nicely with people that can build their own house or buy a fixer upper and basically create the equity. As single you can shelter up to $250K of the gain if you live there 24 months out of 5 years. The cons: transaction costs are high (you can try for sale by owner, we have had good success with that) and finding the next property, as you mentioned. The bottom line, if you didn't care, I would definately sell when approaching the $250K profit and buy the house next door or down the street.
Beachbumz 8)
Yep, in general taking advantage of tax breaks on primary residence can be beneficial. But you're talking about buying in at the very top of the market, even Greenspan is beginning to wonder about local bubbles. So not sure this is best time to buy in, unless you have equity elsewhere that you can move, and you hope to catch the tailwind of CA/FL/DC or NV etc and intend on working and living therefore for a substantial period.
I've been tempted to consolidate and invest in a place in SF working there for the next few years, but I'm not sure how wise this is, and so I'm dithering. Nobody including Greenspan expects the housing market to collapse, but it may brake heavily, and any equity you put in might work better elsewhere. Many economic prophets are predicting a correction in the US housing market by 2010, it’ll be interesting to see. In Europe its bubble r us in most of the original EU member states The UK is the first to begin to show signs of a stroke . . .
I've been tempted to consolidate and invest in a place in SF working there for the next few years, but I'm not sure how wise this is, and so I'm dithering. Nobody including Greenspan expects the housing market to collapse, but it may brake heavily, and any equity you put in might work better elsewhere. Many economic prophets are predicting a correction in the US housing market by 2010, it’ll be interesting to see. In Europe its bubble r us in most of the original EU member states The UK is the first to begin to show signs of a stroke . . .
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
wildcat said:
I hardly know where to begin. However, since it is cocktail hour here
in the heartland, I will hold off until tomorrow. I have the knowledge.
Now, if I only had the drive. Anyway, more to follow tomorrow if
I can squeeze it in before we go fishing. I will say..................there are fortunes to be made, independent of what the DJIA is up to.
Bubbles? Forget it.......means nothing.
JG
OP
OP
wildcat
Thinks s/he gets paid by the post
So the house has to be mine for 5 years? I know it has to be my primary residence for 2.
You may be right overall (JG is correct you can make some $$ in any real estate mkt) but I was just working with a strategy in general.
JG I expect more later. Enjoy the cocktails and fishing in no particular order.
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
wildcat said:
There is much more to follow as this is among my fav. topics.
Thanks for the good wishes and stay tuned..............
JG
wildcat said:
NO! The rule is 24 months out of 5 years. IOW, you don't necessarily have to live in it 2 yrs straight, or sell it immediately after that (you could rent it for a couple of years if need be). It's just a little more flexible than 2 yrs straight.
You could live in it for 9 months out of the year and rent it 3 like we do and then you would meet the qualification in about 3 years.
There are other rules, like only one residence qualifies in any given year (the one you live in the most that year), so be sure to consult your tax advisor.
Beachbumz 8)
It's worked fine for us, Wildcat.
The problem is when your job/career gets in the way of your home improvement plans. (Let alone marriages and/or kids.) If you buy a place and get transferred, or have to go on a business trip when the drywall guy has FINALLY promised to show up, or... you get the point. Think of Tom Hanks & Shelley Long in "The Money Pit."
You'll want to buy neglected, crappy homes in nice neighborhoods. You'll also want to make friends with realtors who can show you places like that, home inspectors who can tell you what it'll cost to fix them up, and maybe even a general contractor to help you through the plans & permit process. Heck, you might even get to talk to soil engineers or drive a Bobcat! I'm jealous already.
Which will leave you free to sleep on the diningroom table, shower at the gym, eat over a trash can, keep a portapotty in your front yard (next to the rental dumpster), and be on a first-name basis with every home-improvement store employee in a 10-mile radius. We like the lifestyle.
There's an old book-- 1970s or 1980s vintage-- by a woman who did exactly this in the San Francisco area. She had a whole chapter on being ready to move at a moment's notice (when a good deal popped up) and on getting financing from credit unions, sellers, or landlords. And she did it as a single parent. I'm going to see if it pops up from my memory, but if anyone remembers who I'm talking about then feel free to point WC toward a library copy of the book...
The problem is when your job/career gets in the way of your home improvement plans. (Let alone marriages and/or kids.) If you buy a place and get transferred, or have to go on a business trip when the drywall guy has FINALLY promised to show up, or... you get the point. Think of Tom Hanks & Shelley Long in "The Money Pit."
You'll want to buy neglected, crappy homes in nice neighborhoods. You'll also want to make friends with realtors who can show you places like that, home inspectors who can tell you what it'll cost to fix them up, and maybe even a general contractor to help you through the plans & permit process. Heck, you might even get to talk to soil engineers or drive a Bobcat! I'm jealous already.
Which will leave you free to sleep on the diningroom table, shower at the gym, eat over a trash can, keep a portapotty in your front yard (next to the rental dumpster), and be on a first-name basis with every home-improvement store employee in a 10-mile radius. We like the lifestyle.
There's an old book-- 1970s or 1980s vintage-- by a woman who did exactly this in the San Francisco area. She had a whole chapter on being ready to move at a moment's notice (when a good deal popped up) and on getting financing from credit unions, sellers, or landlords. And she did it as a single parent. I'm going to see if it pops up from my memory, but if anyone remembers who I'm talking about then feel free to point WC toward a library copy of the book...
cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The only downsides are that in some areas, home prices and ownership costs are WAY out of line with rents. You either have to buy into fixing problems yourself or hiring contractors to do it for you. Home maintenance and repair can become a full time job on an older home...I remember years ago having people come up to me in home depot and ask me where stuff was...I told them and then mentioned that I didnt work there "oh, but you're here every time we come in! We recognized you!". Swell.
Your home, if in a 'bubble area' may decline in value rapidly. You should be sure you can make use of the mortgage tax deduction before you start laying out payments that are 90+% interest for the first half of the loan period.
But if you live in an area where home prices are rational and appreciating at a decent rate, you can snag a recent model home, get it inspected 9 ways from sunday (hint: do not use an inspector the realtor suggests...or use them AND someone you find yourself), need a good tax deduction, and dont mind breaking out the tools for a few hours a week...its a good idea.
Your home, if in a 'bubble area' may decline in value rapidly. You should be sure you can make use of the mortgage tax deduction before you start laying out payments that are 90+% interest for the first half of the loan period.
But if you live in an area where home prices are rational and appreciating at a decent rate, you can snag a recent model home, get it inspected 9 ways from sunday (hint: do not use an inspector the realtor suggests...or use them AND someone you find yourself), need a good tax deduction, and dont mind breaking out the tools for a few hours a week...its a good idea.
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
"Neglected crappy homes in a good neighborhood" is a good way to go,
especially if you have some DIY skills. I have almost none and still
made a bunch of money. A lot of regular "flippers" basically live in the
homes while they spruce them up (or make it appear so). Anyway,
even with my limited skills, I used to do the simple cosmetic stuff
myself (paint alone can work wonders). One thing I always wanted to try but never did was to buy a large (think 12+ unit) apt. building.
Thought I could get some economies of scale........example,
if you own a single family and have a vacancy, you are 100% vacant.
In a 12 unit, you would hardly notice one empty apt. I made offers
on buildings and/or groups of buildings from 12 to 24 units.
Never closed any, mostly because I lowballed all of the offers I expect.
Since I've lived here (3.5 years) I have not made offers on anything
(too lazy). But, I have passed up four (4) no-brainer fixer-uppers
that I can see from my house.
When I was younger and a realtor asked what I wanted in a RE
investment (cash flow, tax advantages, appreciation), I always said
"I want it all!" It was true then. It was true 'til I quit.
There may be "bubbles" in some RE markets, but to a real investor
(as opposed to someone who just buys anything and waits for the
market to make his money) there are always opportunities.
Re. "no cash". Obviously it is difficult to buy and fix up with no cash
out of pocket. But, it can be done with seller financing
(here, all things are possible, limited only by your imagination),
credit cards, bridge loans, relatives, using old cars, motorcycles, boats,
appliances, collectables, etc for part of the purchase price.
I have also given discounts to tenants who did part of the "fix-up" work.
That is risky though and you have to screen the tenant twice as
carefully.
Being around is important
even if it's just making an appearance. In management circles
it's called "management by walking around". It works. Out of sight,
out of mind as far as your typical tenant is concerned.
Don't get caught up in looking for property you would live in.
This is investing, not your lifestyle. A place that you wouldn't
keep your cat in might look like Windsor Palace to someone.
OTOH, generally the lower you go on the economic/social
scale, the more trouble you will have as a landlord. There are
exceptions. Here's an idea. Buy with a very small (or no)
cash downpayment with seller financing. Then, delay the first payment
for 6 months or so. Gives you time to repair and locate a
tenant/tenants. Interest may still accrue or maybe not, but if you
get a 6 month hiatus and then rent the place in month 2, you will
have a big head start by the time you start making payments.
If I was starting out today, I would buy and manage with no
money out of my pocket for anything. It makes it a lot harder
to buy property, but with 100% leverage the ROI is
as good as it gets. More to follow..................
JG
especially if you have some DIY skills. I have almost none and still
made a bunch of money. A lot of regular "flippers" basically live in the
homes while they spruce them up (or make it appear so)
. Anyway,even with my limited skills, I used to do the simple cosmetic stuff
myself (paint alone can work wonders). One thing I always wanted to try but never did was to buy a large (think 12+ unit) apt. building.
Thought I could get some economies of scale........example,
if you own a single family and have a vacancy, you are 100% vacant.
In a 12 unit, you would hardly notice one empty apt. I made offers
on buildings and/or groups of buildings from 12 to 24 units.
Never closed any, mostly because I lowballed all of the offers I expect.
Since I've lived here (3.5 years) I have not made offers on anything
(too lazy). But, I have passed up four (4) no-brainer fixer-uppers
that I can see from my house.
When I was younger and a realtor asked what I wanted in a RE
investment (cash flow, tax advantages, appreciation), I always said
"I want it all!" It was true then. It was true 'til I quit.
There may be "bubbles" in some RE markets, but to a real investor
(as opposed to someone who just buys anything and waits for the
market to make his money) there are always opportunities.
Re. "no cash". Obviously it is difficult to buy and fix up with no cash
out of pocket. But, it can be done with seller financing
(here, all things are possible, limited only by your imagination),
credit cards, bridge loans, relatives, using old cars, motorcycles, boats,
appliances, collectables, etc for part of the purchase price.
I have also given discounts to tenants who did part of the "fix-up" work.
That is risky though and you have to screen the tenant twice as
carefully.
Being around is important
even if it's just making an appearance. In management circles
it's called "management by walking around". It works. Out of sight,
out of mind as far as your typical tenant is concerned.
Don't get caught up in looking for property you would live in.
This is investing, not your lifestyle. A place that you wouldn't
keep your cat in might look like Windsor Palace to someone.
OTOH, generally the lower you go on the economic/social
scale, the more trouble you will have as a landlord. There are
exceptions. Here's an idea. Buy with a very small (or no)
cash downpayment with seller financing. Then, delay the first payment
for 6 months or so. Gives you time to repair and locate a
tenant/tenants. Interest may still accrue or maybe not, but if you
get a 6 month hiatus and then rent the place in month 2, you will
have a big head start by the time you start making payments.
If I was starting out today, I would buy and manage with no
money out of my pocket for anything. It makes it a lot harder
to buy property, but with 100% leverage the ROI is
as good as it gets. More to follow..................
JG
OP
OP
wildcat
Thinks s/he gets paid by the post
JG -
I imagine my time will be a bit on the low side & I am not sure I want to fool with tenants or at least for a while. So I guess it will be my house for 2 years (assuming appreciation is good & can more than cover costs to sell). Not really a hardcore flip strategy but to me a good start, time range is at least 2 yrs to complete projects & allows me to keep cap gains.
No doubt I will rent for a little while if I am in one of those areas. The disparity seems to make renting a good deal for a while.
Right on Nords. I am hoping 2-3+ years will give me a little cushion and it should be about how long I wait to jump jobs or even locations. Money Pit - yikes but funny b/c I haven't experienced it yet. Well I did in my former job. Got a small dose of commercial real estate and large dose of contractors.
Reponses appreciated as always
I imagine my time will be a bit on the low side & I am not sure I want to fool with tenants or at least for a while. So I guess it will be my house for 2 years (assuming appreciation is good & can more than cover costs to sell). Not really a hardcore flip strategy but to me a good start, time range is at least 2 yrs to complete projects & allows me to keep cap gains.
No doubt I will rent for a little while if I am in one of those areas. The disparity seems to make renting a good deal for a while.
Right on Nords. I am hoping 2-3+ years will give me a little cushion and it should be about how long I wait to jump jobs or even locations. Money Pit - yikes but funny b/c I haven't experienced it yet. Well I did in my former job. Got a small dose of commercial real estate and large dose of contractors.
Reponses appreciated as always
tryan
Thinks s/he gets paid by the post
- Joined
- Mar 25, 2005
- Messages
- 2,607
Couple other caveats to the 2 of 5 rule (haven't seen mentioned yet):
1. the IRS will allow an exemption (less than 2 years) if you claim you moved/sold for employment purposes.
2. More than 250k can be sheltered by a single person if you have good improvement records (receipts). Improvements are taken off the sale proceeds.
In an up market I would identify the property to BUY before selling. Nothing worse than being homeless in an UP market. You could rent your existing place to move into the new place (for no more than 3 years) and come out WAY AHEAD. The current trend will take a while to reverse. We're at least 2-3 years from coming "unraveled".
If carrying 2 mortgages makes you quezy then renting after the sale is an option but know it'll be YEARS before you can get back into the market without taking a hit. Point being that the upward tend puts the odds on future price increases higher than the odds of declines.
Enjoy!
1. the IRS will allow an exemption (less than 2 years) if you claim you moved/sold for employment purposes.
2. More than 250k can be sheltered by a single person if you have good improvement records (receipts). Improvements are taken off the sale proceeds.
In an up market I would identify the property to BUY before selling. Nothing worse than being homeless in an UP market. You could rent your existing place to move into the new place (for no more than 3 years) and come out WAY AHEAD. The current trend will take a while to reverse. We're at least 2-3 years from coming "unraveled".
If carrying 2 mortgages makes you quezy then renting after the sale is an option but know it'll be YEARS before you can get back into the market without taking a hit. Point being that the upward tend puts the odds on future price increases higher than the odds of declines.
Enjoy!
bamboogrrrl
Dryer sheet aficionado
- Joined
- Nov 30, 2004
- Messages
- 33
DH and I bought our first home (main house where we lived with a guest house which was rented - I HATED landlording) in 1997. The house was structurally sound and aesthetically challenged (a perfect combination BTW), so we got it for a great price. Seemed like other buyers couldn't see beyond the gold shag carpeting to the perfect oak floors they concealed. So we did all the cosmetic work ourselves - painting, ripping out carpeting, etc.
We sold it after three years (made about $60K - this was before housing went really crazy) and found another "deal" BEFORE we sold the first place. A HELOC on the first place provided the down payment for the second. We've been in our second home almost five years and it has about tripled in value. If housing prices stay stable or continue to grow, I'd imagine we'll cash out again, but the plan right now is to stay at least another few years.
For us, it was really important to live where we are fixing up, or we wouldn't make any $$$. The rent from our guest house at the first place paid our taxes and insurance, and allowed us to ramp up retirement savings for a couple of years. We sunk the chunk o' change from the first sale into the next place and also created an emergency fund from these proceeds.
In real estate, timing and choice of property are key. I keep my eyes peeled for additional rental opportunities, but most properties don't pay for themselves right now.
The big questions are: "What is the top of market?" and "Are we there yet?" (You can refer to me henceforth as "Captain Obvious")
We sold it after three years (made about $60K - this was before housing went really crazy) and found another "deal" BEFORE we sold the first place. A HELOC on the first place provided the down payment for the second. We've been in our second home almost five years and it has about tripled in value. If housing prices stay stable or continue to grow, I'd imagine we'll cash out again, but the plan right now is to stay at least another few years.
For us, it was really important to live where we are fixing up, or we wouldn't make any $$$. The rent from our guest house at the first place paid our taxes and insurance, and allowed us to ramp up retirement savings for a couple of years. We sunk the chunk o' change from the first sale into the next place and also created an emergency fund from these proceeds.
In real estate, timing and choice of property are key. I keep my eyes peeled for additional rental opportunities, but most properties don't pay for themselves right now.
The big questions are: "What is the top of market?" and "Are we there yet?" (You can refer to me henceforth as "Captain Obvious")
JR Andrews
Confused about dryer sheets
- Joined
- May 22, 2005
- Messages
- 8
Thought Id chime in Wildcat if you dont mind-Its a good idea but you have to say that it is assuming all positive things will happen in the real estate market. What will happen if the value of the home goes down and you cant resell? What if the neighborhood is soon to fall apart and rents aren't enough to cover. Yes they tax breaks are potentially great, but are the tax benefits alone enough to cover potential loses? See if you can make it work without a positive scenerio and if the numbers still workout, then go for it! Also, its very easy these days to set up a business to buy the property then you get into a whole other level of tax law and deductions which can actually create some income in terms of "phantom cash flow"
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
JR Andrews said:
Don't assume "all positive things". On the contrary, assume everything
will go bad. Bad tenants, bad plumbing, bad neighbors, dangerous pets, crime,
dirt and termites. Make your money when you buy. How? Consider
what you will do if everything goes to hell. That way, if it does you already have an exit strategy. Much easier on the nerves. BTW, I also do this with
all other investments, i.e. assume the worst and hope for the best.
JG
Spanky
Thinks s/he gets paid by the post
MRGALT2U said:
Be prepared for the worst is useful in the event of a disaster. What is the liklihood that eveything will go wrong. Would it be better to asume something will go wrong and some do not.
cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Unless you REALLY know what you're doing, a lot more can go wrong than not.
Watch the tv show "house detectives" on HGTV (if you have cable or sat). Watch people who actually do (or should) know what they're doing and the marvelous situations they find themselves in with real estate. I'm stunned how many realtors buy homes without an inspection, people who had a 'professional' inspector look at a house that found none of the bad stuff, or 'expert contractors/carpenters' who 'assured' the new owners that everything was up to snuff, only to have a real pro show them the 20k worth of stuff they screwed up.
The comments about tenants, neighbors and other stuff thats not really under your control is also well taken...
Watch the tv show "house detectives" on HGTV (if you have cable or sat). Watch people who actually do (or should) know what they're doing and the marvelous situations they find themselves in with real estate. I'm stunned how many realtors buy homes without an inspection, people who had a 'professional' inspector look at a house that found none of the bad stuff, or 'expert contractors/carpenters' who 'assured' the new owners that everything was up to snuff, only to have a real pro show them the 20k worth of stuff they screwed up.
The comments about tenants, neighbors and other stuff thats not really under your control is also well taken...
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
wildcat said:
Aw, come on wildcat, very little of life is truly under our control.
I think it was Cut-Throat who pointed out that we don't have nearly
the amount of control over events that we think we do.
I am a control freak and I agree with him completely. Anyway,
one of the attractions for me is the amount of control
(in real estate) RELATIVE to the stock market, where you
effectively have none, other than picking the horse.
JG
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
Grand Banks said:
"Inspections"..............I'm guessing maybe I had less than 50% of all real
estate I've owned inspected by others prior to buying. For example, for our house
I hired a couple of local contractors (for cheap). They found a bunch of
insignificant stuff. The main thing that worried them was a lack of
insulation in the garage and the fact that there were water pipes in the garage and in a crawl space (unheated). Turns out this
"problem" was a major plus. The garage stays at around 50 degrees
in winter without direct heat and freezing is never a problem.
Heating costs are very low. On the condo I just winged it. No problems.
Biggest problem I ever had was my manufacturing plant in Michigan.
16,000 SF and the roof was shot. I never felt like I wanted to cough up for a new roof, so it was patch patch patch until I found a tenant
who put on a new roof as part of his rent. Creativity won out again
JG
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
Spanky said:
You are right Spanky, assuming everything will tank at once is a bit dark. For me though, I always consider the "dark side" and then ask
"What would I do if..........?" The one area where I was late in
using this theory was ER and that was because I never gave it any thought at all until I was in my late 40s. I'm not kidding. My ER planning could have been designed by Rodney Dangerfield.
(It got no respect
JG
JG
cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Because he only made that kind of bad decisions half the time, and then used the cheap contractors for the other half that didnt know enough.
I do my own 3-4 hour walk-through, because I know what to look for, then I pay good $ for an experienced home builder to tell me all the structural stuff and code violations I dont know about.
Its a good idea to get an inspection even on a new property. New home builders often fail to redo work that didnt go well the first time.
Seems like the worst problems have to do with drainage, hidden water damage, and hidden pest damage. I've found, or had inspectors find, massive rot or termite damage in a home the 'pest inspection' whiffed on. Seems like every home I look at has a downspout that doesnt take water from the foundation, so thats shifting or the whole property is incorrectly graded and bringing water in. Lots of times the 'brand new work' is incorrectly done and needs to be redone.
Lets look at three homes I didnt buy.
One was a structural marvel. Completely steel framed home, builder had about 20 homes in the area, ~3800 square feet on a half acre, sloped down from the street. Just a beautiful home and the steel framing was unusual but a plus...very strong, wont rot, highly resistant to damage. Unfortunately as it turned out, the builder hadnt done a steel frame house before, hadnt prepared the lot correctly, and started running out of money halfway through construction and took shortcuts, substituted cheaper labor, and did some of the work himself (halfassedly). A lot of what he didnt do right wasnt obvious to me at first. Inspector said it would be a race to see if the floor collapsed in the main entry/living room as it hadnt been trussed properly, or if the whole house would slide down the hill first due to the improper grading.
Second was a nice little one story on a half acre. Cute little house and cheap. Brick halfway up the waist and siding from there. Former owner had added on to the home and poured a concrete carport and concrete walkways and patios all around. Unfortunately he poured the concrete top even and in a few places slightly above the level of the slab, which was hard to tell due to the brick. All of the bottom plates in the house were rotted out and the studs were starting to rot as well because water hit the concrete and laid against the brick, which absorbed it and kept the framing damp. The whole house was leaning on the decorative brick...a few years and it was going to fall apart. Taking all the brick off to fix the problem? Not worth it, it was a knocker-downer. Further, a big room he added on was trapezoidal and he didnt use any tar paper or other moisture barrier under the siding so all of the framing was rotting. All almost impossible to tell unless you know what you're doing. I now carry an 18" long thin screwdriver with me on inspections, and measure rooms not just for size but for squareness and level.
Almost a brand new home, experienced builder. Skip to what was wrong: bad siding that had been recalled but the manufacturer would only pay about $1000 towards a $15k replacement. Roof had been installed incorrectly and because it was huge, complex and very high it would be about $18k. Central fireplace completely built completely wrong, fire hazard, needed to be gutted out and fully replaced; since it ran up the middle of the home, probably 15-20k. Gutters installed incorrectly so they would allow some water damage to edges of roof sheeting during heavy rains and roof pitch in one spot improper, allowing some water to back up into a decorative exterior wall that was starting to rot from the inside out...probably $8-10k to fix. House looked great...no obvious problems.
Ok, one more quick one...an $800k home in the bay area. Foundation was improperly done so the first good earthquake and about half of the back of the home was likely to collapse. The front was floor to ceiling two story glass, but they didnt use tempered, so if you were in the part of the house that didnt collapse in the earthquake, the falling shards of glass would cut you to pieces.
The good news is that most homes are well made and dont have huge repair/engineering needs. But you wont know unless you're an expert, or pay someone that is to find out. Bad, bad place to 'save' a few hundred bucks.
I do my own 3-4 hour walk-through, because I know what to look for, then I pay good $ for an experienced home builder to tell me all the structural stuff and code violations I dont know about.
Its a good idea to get an inspection even on a new property. New home builders often fail to redo work that didnt go well the first time.
Seems like the worst problems have to do with drainage, hidden water damage, and hidden pest damage. I've found, or had inspectors find, massive rot or termite damage in a home the 'pest inspection' whiffed on. Seems like every home I look at has a downspout that doesnt take water from the foundation, so thats shifting or the whole property is incorrectly graded and bringing water in. Lots of times the 'brand new work' is incorrectly done and needs to be redone.
Lets look at three homes I didnt buy.
One was a structural marvel. Completely steel framed home, builder had about 20 homes in the area, ~3800 square feet on a half acre, sloped down from the street. Just a beautiful home and the steel framing was unusual but a plus...very strong, wont rot, highly resistant to damage. Unfortunately as it turned out, the builder hadnt done a steel frame house before, hadnt prepared the lot correctly, and started running out of money halfway through construction and took shortcuts, substituted cheaper labor, and did some of the work himself (halfassedly). A lot of what he didnt do right wasnt obvious to me at first. Inspector said it would be a race to see if the floor collapsed in the main entry/living room as it hadnt been trussed properly, or if the whole house would slide down the hill first due to the improper grading.
Second was a nice little one story on a half acre. Cute little house and cheap. Brick halfway up the waist and siding from there. Former owner had added on to the home and poured a concrete carport and concrete walkways and patios all around. Unfortunately he poured the concrete top even and in a few places slightly above the level of the slab, which was hard to tell due to the brick. All of the bottom plates in the house were rotted out and the studs were starting to rot as well because water hit the concrete and laid against the brick, which absorbed it and kept the framing damp. The whole house was leaning on the decorative brick...a few years and it was going to fall apart. Taking all the brick off to fix the problem? Not worth it, it was a knocker-downer. Further, a big room he added on was trapezoidal and he didnt use any tar paper or other moisture barrier under the siding so all of the framing was rotting. All almost impossible to tell unless you know what you're doing. I now carry an 18" long thin screwdriver with me on inspections, and measure rooms not just for size but for squareness and level.
Almost a brand new home, experienced builder. Skip to what was wrong: bad siding that had been recalled but the manufacturer would only pay about $1000 towards a $15k replacement. Roof had been installed incorrectly and because it was huge, complex and very high it would be about $18k. Central fireplace completely built completely wrong, fire hazard, needed to be gutted out and fully replaced; since it ran up the middle of the home, probably 15-20k. Gutters installed incorrectly so they would allow some water damage to edges of roof sheeting during heavy rains and roof pitch in one spot improper, allowing some water to back up into a decorative exterior wall that was starting to rot from the inside out...probably $8-10k to fix. House looked great...no obvious problems.
Ok, one more quick one...an $800k home in the bay area. Foundation was improperly done so the first good earthquake and about half of the back of the home was likely to collapse. The front was floor to ceiling two story glass, but they didnt use tempered, so if you were in the part of the house that didnt collapse in the earthquake, the falling shards of glass would cut you to pieces.
The good news is that most homes are well made and dont have huge repair/engineering needs. But you wont know unless you're an expert, or pay someone that is to find out. Bad, bad place to 'save' a few hundred bucks.
Similar threads
- silvor
- FIRE and Money
- Replies: 15
- Views: 679
- RetiredAt49
- FIRE and Money
- Replies: 22
- Views: 2K
- Safire
- FIRE and Money
- Replies: 53
- Views: 2K
