We may own a house in two years
January 8, 2012 9:22 PM Subscribe
This Christmas we were told by my Dad that he will be giving us his house when he moves out of state. It doesn't have a functioning kitchen (no sink, just a fridge and a microwave and he washes his dishes in a tub with water from the bathroom) The house has charm, and there could be plumbing problems and it's also in a dicey neighborhood. So my question is this:
What do we do with this house? Fix it up enough to live in it for the price of utilities and taxes for a few years so we can go back to school? Try to sell it without even fixing it (we'd get maybe $20,000). Fix it up and become landlords after living there for a few years?
Also, if we keep the house, what should I be saving up for since I have an almost two year window before we'd even possibly be taking ownership? And what else should I consider?
Also, if we keep the house, what should I be saving up for since I have an almost two year window before we'd even possibly be taking ownership? And what else should I consider?
You didn't mention if he owns the house outright or if you're going to have some mortgage payments once it's signed over to you, but lordy, either way, this sounds like a giant ball of money that you're about to set on fire.
Based on your description, it's a house that is possibly not, in its current state, salable. If you think you can get even $20,000 for a house with no functioning kitchen and unknown plumbing problems in a dicey neighborhood in any state, you're overstating the perceived value. (For reference: houses that fit this description in Chicago go for $5,000 or less.) It may not even technically be habitable. You may find that the land is worth more than the structure. Be aware that if you get someone in to determine whether the home is habitable and the answer is "no," your dad is going to have to leave sooner than he planned. At the very least, get the place appraised.
posted by juniperesque at 9:38 PM on January 8, 2012 [3 favorites]
Based on your description, it's a house that is possibly not, in its current state, salable. If you think you can get even $20,000 for a house with no functioning kitchen and unknown plumbing problems in a dicey neighborhood in any state, you're overstating the perceived value. (For reference: houses that fit this description in Chicago go for $5,000 or less.) It may not even technically be habitable. You may find that the land is worth more than the structure. Be aware that if you get someone in to determine whether the home is habitable and the answer is "no," your dad is going to have to leave sooner than he planned. At the very least, get the place appraised.
posted by juniperesque at 9:38 PM on January 8, 2012 [3 favorites]
It sounds like you should be saving up for a sink... if the house is otherwise charming, then I think you should install the sink before you think about selling it - all anyone's going to see in its current state is "it doesn't have a kitchen sink!" It sounds like you could potentially increase your resale value by more than the cost of the sink installation by doing it, not to mention the ease of selling it generally.
In order to answer the question about whether you should sell it or live in it, it would be helpful to know what your current housing situation is (are you renting? If so, how much are you spending on rent?), and what your current life situation is - you say you're thinking of going back to school, and you make it sound like living in the house would be the way you could go back to school. Not knowing about what your current profession is or what kind of school you want to go back to, it's hard to advise whether this is a good idea or not. But if you really want to go back to school, and the only thing stopping you is money, and you can afford to do it if you live rent-free in this house... well then it seems like that would answer your question. Then again, it seems to me that if you could make $20,000 on the house by selling it, that would be enough to pay for renting a place and your other personal expenses for the duration of most degrees.
posted by treehorn+bunny at 9:42 PM on January 8, 2012
In order to answer the question about whether you should sell it or live in it, it would be helpful to know what your current housing situation is (are you renting? If so, how much are you spending on rent?), and what your current life situation is - you say you're thinking of going back to school, and you make it sound like living in the house would be the way you could go back to school. Not knowing about what your current profession is or what kind of school you want to go back to, it's hard to advise whether this is a good idea or not. But if you really want to go back to school, and the only thing stopping you is money, and you can afford to do it if you live rent-free in this house... well then it seems like that would answer your question. Then again, it seems to me that if you could make $20,000 on the house by selling it, that would be enough to pay for renting a place and your other personal expenses for the duration of most degrees.
posted by treehorn+bunny at 9:42 PM on January 8, 2012
Juniperesque, you make me realize we don't really know what anonymous counts as a bad neighbourhood. In Winnipeg I saw a house that was gutted by fire sell for $30 000. It was a neighbourhood that was either really bad or just middle-of-the-road, depending on who you asked.
posted by RobotHero at 10:01 PM on January 8, 2012
posted by RobotHero at 10:01 PM on January 8, 2012
You should consider whether you even want the house as a gift. Get information from real estate agents, estate and real estate lawyers, a house inspector and an accountant (considering taxes too). It would be worth every penny to avoid a huge moneypit or liability. Maybe it's better to inherit the benefit of the house another way, especially if you're just plain not wanting any of this responsibility. You should know as much as you can about what you're getting into before you even accept the gift.
It's nice that he wants to do this, but it might be more of a burden than a gift, and you don't have to accept it just because he offered it. Without knowing anything more, it can't be said whether it would be better for him to sell it and offer you the proceeds a different way; or for you to invest in it if, say, the neighbourhood stands to gentrify; or what plans you should make should something happen to him or the house over the next two years.
Two years is long enough for all sorts of things to happen, be it personal health issues or accidents, or for more degradation or damage to the house to occur. Before he does the legal stuff (and well, how good is he with getting good advice and good paperwork done?) perhaps you should do some homework.
posted by peagood at 10:44 PM on January 8, 2012
It's nice that he wants to do this, but it might be more of a burden than a gift, and you don't have to accept it just because he offered it. Without knowing anything more, it can't be said whether it would be better for him to sell it and offer you the proceeds a different way; or for you to invest in it if, say, the neighbourhood stands to gentrify; or what plans you should make should something happen to him or the house over the next two years.
Two years is long enough for all sorts of things to happen, be it personal health issues or accidents, or for more degradation or damage to the house to occur. Before he does the legal stuff (and well, how good is he with getting good advice and good paperwork done?) perhaps you should do some homework.
posted by peagood at 10:44 PM on January 8, 2012
First things first: get it inspected by someone who won't be doing it in an official capacity (i.e. can slap a 'CONDEMNED' notice on it) but can give an honest assessment of how much the essential repairs will cost. Houses are at least as much liabilities as assets.
What you don't want is for your dad to move out and for it to be left unoccupied for any extended length of time.
posted by holgate at 10:47 PM on January 8, 2012 [1 favorite]
What you don't want is for your dad to move out and for it to be left unoccupied for any extended length of time.
posted by holgate at 10:47 PM on January 8, 2012 [1 favorite]
How handy are you?
Paying to have the house fixed might not be feasible, but doing it yourself might be a good investment. It does however depend on the neighbourhood -- not necessarily what it's like now, but what it's going to be like in five years' time.
For fun, read the Devil Queen blog and realise, whatever happens, it can't get that bad :-)
posted by wrm at 1:02 AM on January 9, 2012
Paying to have the house fixed might not be feasible, but doing it yourself might be a good investment. It does however depend on the neighbourhood -- not necessarily what it's like now, but what it's going to be like in five years' time.
For fun, read the Devil Queen blog and realise, whatever happens, it can't get that bad :-)
posted by wrm at 1:02 AM on January 9, 2012
Get the house valued. Get the valuer to also tell you how much you might get if you fixed it up.
Price up fixing the house, both in money and in your time.
Investigate the cost of selling the house (in solicitors fees and so on)
Investigate the potential tax liability that will arise when you are gifted the house, and the tax liability that will arise when you sell should you sell it at a profit.
Look at the resulting figures and you will probably find it easy to work out what you want to do.
posted by emilyw at 2:14 AM on January 9, 2012
Price up fixing the house, both in money and in your time.
Investigate the cost of selling the house (in solicitors fees and so on)
Investigate the potential tax liability that will arise when you are gifted the house, and the tax liability that will arise when you sell should you sell it at a profit.
Look at the resulting figures and you will probably find it easy to work out what you want to do.
posted by emilyw at 2:14 AM on January 9, 2012
I think the landlord plan wouldn't work out very well. If the house is in what you consider a dicey neighborhood, potential tenants who would consider that a good match to their needs might not be treating the property the way you'd like it to be treated. Looking at other AskMe's related to renting out a house instead of selling it, you'll see lots of stories about various ways this can go wrong - the basic conclusion is, if you get good tenants, this is a great plan, and average tenants are okay but it takes a lot to make up for the financial damage caused even one bad tenant. Especially in a neighborhood that isn't a hot market, with a property that's likely to be less than perfect even after repairs, it will be hard to say no and hold out for the good tenants.
posted by aimedwander at 6:50 AM on January 9, 2012
posted by aimedwander at 6:50 AM on January 9, 2012
A realtor should be able to answer most of these questions. Call one and say you are thinking of selling the house and want to get it appraised and also would like some advice about whether to fix it up or rent it.
posted by orange swan at 7:11 AM on January 9, 2012 [1 favorite]
posted by orange swan at 7:11 AM on January 9, 2012 [1 favorite]
Having a house free and clear to live in is a pretty invaluable situation. Compare that to paying mortgage or rent indefinitely. The amount of money you would otherwise be putting towards rent could go into rehabilitating the house.
Dicey neighborhood may mean you are unfamiliar with it, or don't have a street sense of how things function there. Try not to get freaked out by the reflexive negativity of many folks who spout the worst case circumstances to anybody nearby. By all means check it out thoroughly. I would recommend going to some neighbors and asking about what's up on the block, explaining you were thinking of purchasing nearby.
Anyhoos, free and clear house plus afford to go back to school. That sounds like a great deal assuming you get the title to the house in your name with no encumbrances. Watch out for gotchas like bad foundations, or toxic waste pits seeping nearby. Forewarned is forearmed.
My two cents, your mileage may vary.
posted by diode at 7:40 AM on January 9, 2012
Dicey neighborhood may mean you are unfamiliar with it, or don't have a street sense of how things function there. Try not to get freaked out by the reflexive negativity of many folks who spout the worst case circumstances to anybody nearby. By all means check it out thoroughly. I would recommend going to some neighbors and asking about what's up on the block, explaining you were thinking of purchasing nearby.
Anyhoos, free and clear house plus afford to go back to school. That sounds like a great deal assuming you get the title to the house in your name with no encumbrances. Watch out for gotchas like bad foundations, or toxic waste pits seeping nearby. Forewarned is forearmed.
My two cents, your mileage may vary.
posted by diode at 7:40 AM on January 9, 2012
What is the reason it doesn't have a kitchen and sink?
Is it possible that the house is not a legal residence, for zoning or other reasons? Sometimes a residence is not legal either because the area is not zoned for residential use, or because designating it a residence would exceed prescribed density for that neighborhood, or because the location of the house in relation to other structures or geography is not considered appropriate, or because there was never planning permission in the first place, or because the building doesn't meet code (e.g. the ceilings are too low) for various other reasons.
People can get around this by living in a place without a kitchen and thus giving the appearance that it is not a home.
It would definitely be worth finding out whether this house is legally a residence.
posted by y6t5r4e3w2q1 at 7:55 AM on January 9, 2012
Is it possible that the house is not a legal residence, for zoning or other reasons? Sometimes a residence is not legal either because the area is not zoned for residential use, or because designating it a residence would exceed prescribed density for that neighborhood, or because the location of the house in relation to other structures or geography is not considered appropriate, or because there was never planning permission in the first place, or because the building doesn't meet code (e.g. the ceilings are too low) for various other reasons.
People can get around this by living in a place without a kitchen and thus giving the appearance that it is not a home.
It would definitely be worth finding out whether this house is legally a residence.
posted by y6t5r4e3w2q1 at 7:55 AM on January 9, 2012
Seconding that you don't want to be a landlord of this place. If you're renting a sketchy house in a sketchy part of town, you're going to get sketchy tenants, which you don't want as a landlord, especially as a non-professional landlord.
posted by craven_morhead at 11:26 AM on January 9, 2012
posted by craven_morhead at 11:26 AM on January 9, 2012
This thread is closed to new comments.
posted by parmanparman at 9:29 PM on January 8, 2012