Considering putting an offer on a house but need input
May 25, 2015 2:58 PM Subscribe
Please advise if this house mught be a good investment. I saw it a while back and liked a lot about it but certain factors turned me off from it. Now that it's had a price reduction i'm reconsidering if it's a worthwhile investment. I plan to live in it but resale value is important to me as I don't know how long I plan to stay and want to be able to sell it quickly without losing money. Details below
The house I'm considering is in a great location walking distance to shops and restaurants. It's a flipped house and has been on the market for a while and just recently reduced its price by 9k. My concerns (and the reason it hasn't sold) is that the largest bedroom in the house (usually considered a master bedroom) is not attached to the 2nd bathroom (which is tiny and only a petite person would be able to fit in the shower). The 2nd bathroom instead is connected to a very small bedroom so it's quite an awkward layout. Also the backyard is tiny and there's no walking closet. I love everything else about the house though and would probably use that small bedroom connected with the small 2ndary bathroom as a guest room. Obviously considering the house is remodeled and looks great otherwise these issues are big enough to deter potential buyers. How much impact would this affect resale value in the future? What price would the house have to sell for to be considered a worthwhile investment and not lose out on too much money at resale if I do put an offer on it. Thanks!
Here is the link to the listing.
The house I'm considering is in a great location walking distance to shops and restaurants. It's a flipped house and has been on the market for a while and just recently reduced its price by 9k. My concerns (and the reason it hasn't sold) is that the largest bedroom in the house (usually considered a master bedroom) is not attached to the 2nd bathroom (which is tiny and only a petite person would be able to fit in the shower). The 2nd bathroom instead is connected to a very small bedroom so it's quite an awkward layout. Also the backyard is tiny and there's no walking closet. I love everything else about the house though and would probably use that small bedroom connected with the small 2ndary bathroom as a guest room. Obviously considering the house is remodeled and looks great otherwise these issues are big enough to deter potential buyers. How much impact would this affect resale value in the future? What price would the house have to sell for to be considered a worthwhile investment and not lose out on too much money at resale if I do put an offer on it. Thanks!
Here is the link to the listing.
You say it's a flipped house, you mean that the current sellers are flipping it? If so, your chances at making a profit are reduced, as in theory they've already done most of the profit making.
posted by crawltopslow at 3:24 PM on May 25, 2015 [2 favorites]
posted by crawltopslow at 3:24 PM on May 25, 2015 [2 favorites]
How much impact would this affect resale value in the future?
Think about how much it's impacting your decision to buy.
posted by feckless fecal fear mongering at 3:30 PM on May 25, 2015 [2 favorites]
Think about how much it's impacting your decision to buy.
posted by feckless fecal fear mongering at 3:30 PM on May 25, 2015 [2 favorites]
First, you're right it's a cute house, but I agree the bedroom/bath layout is strange. The reason it hasn't sold may just be that they put more money into the remodel or want more for their efforts than the comps can support. This could also make financing difficult for buyers to secure if the appraisals come in low. In which case eeking even more out of it when you were ready to sell might be difficult. I also noticed the Zillow estimate is a good bit lower than the asking price, though those can't often be trusted.
posted by cecic at 3:39 PM on May 25, 2015
posted by cecic at 3:39 PM on May 25, 2015
Like crawltopslow, I figure they've done all the reasonable upgrades (read: the upgrades that will give the most profit). If there was a cost-effective fix for the bathroom situation, it would've been done most likely. It looks quite nice but the bedroom/bath situation is going to be a turn off every time. Fixing that is probably cost-prohibitive for the cost of the house.
Just going off zillow, it seems quite expensive. Now zillow is flawed somewhat in that regard but just consider looking at comparables - upgrades are great but they can price you out of the neighborhood and you don't want to own the most expensive house for its specs in the area.
It's been on the market a while already - that tells you right there this may not be a quick sale. Also, houses as investments are always huge risks.
posted by Aranquis at 3:39 PM on May 25, 2015 [1 favorite]
Just going off zillow, it seems quite expensive. Now zillow is flawed somewhat in that regard but just consider looking at comparables - upgrades are great but they can price you out of the neighborhood and you don't want to own the most expensive house for its specs in the area.
It's been on the market a while already - that tells you right there this may not be a quick sale. Also, houses as investments are always huge risks.
posted by Aranquis at 3:39 PM on May 25, 2015 [1 favorite]
The problem is that the same thing that is lowing its price now will still be impacting the price when you go to sell. So, however much they have to drop the price to get you to buy, you should plan on having to drop it that much to sell it on the other side. Furthermore, in my experience, these things drag down the price more in soft markets so if your market is currently strong, you will have to give up even more to sell in a softer market.
posted by metahawk at 3:51 PM on May 25, 2015 [1 favorite]
posted by metahawk at 3:51 PM on May 25, 2015 [1 favorite]
This is a beautiful house, but it is not an investment property. It was an investment property when the current owners purchased it and renovated it, and now they are trying to sell it for a profit (and being potentially greedy which is why no one has met their asking price yet and they've been forced to reduce price).
The (eventual) buyer will end up paying for the sellers profit, rather than make a short term profit of their own. The sellers will not sell to a buyer for a price low enough for the buyer to make their own easy profit down the road, because that would cut into the sellers' own profit. The current sellers will make a profit long before the (eventual) buyer does, and there's only so much profit to go around in a limited amount of time. If you wanted to live there for 15+ years it'd be a different story, but as it stands with respect to your current timeframe and leverage, this house is not an investment property. Do not buy this house if you are looking for an investment property.
But it is otherwise a lovely house, and would suit many buyers looking through a different lens than "investment property".
posted by grog at 4:06 PM on May 25, 2015 [4 favorites]
The (eventual) buyer will end up paying for the sellers profit, rather than make a short term profit of their own. The sellers will not sell to a buyer for a price low enough for the buyer to make their own easy profit down the road, because that would cut into the sellers' own profit. The current sellers will make a profit long before the (eventual) buyer does, and there's only so much profit to go around in a limited amount of time. If you wanted to live there for 15+ years it'd be a different story, but as it stands with respect to your current timeframe and leverage, this house is not an investment property. Do not buy this house if you are looking for an investment property.
But it is otherwise a lovely house, and would suit many buyers looking through a different lens than "investment property".
posted by grog at 4:06 PM on May 25, 2015 [4 favorites]
I think it looks like a nice family home for the right family, but it's not a good short term investment. From the outside it looks like any other house, so the weird layout is going to turn off a lot of potential buyers (different when something is really cute/quirky/historical and weirdness is considered a feature).
If you go to sell it, especially in a bad market, buyers will have the option of houses with regular layouts and that will put you in a bad spot. I also don't consider a $9K reduction much of a reduction at all at that price. $25K less, might be a different story.
When you buy a house that's been done up recently, you do so for the convenience factor. Lots of people like to be able to move in without the hassle of major renovations, even if it means enjoying someone elses taste for the next decade. That's why I think it would be a nice home for the right family. But if you want to make a profit you need to be the one to add value. With this house, the current sellers have done that.
posted by kitten magic at 4:48 PM on May 25, 2015 [2 favorites]
If you go to sell it, especially in a bad market, buyers will have the option of houses with regular layouts and that will put you in a bad spot. I also don't consider a $9K reduction much of a reduction at all at that price. $25K less, might be a different story.
When you buy a house that's been done up recently, you do so for the convenience factor. Lots of people like to be able to move in without the hassle of major renovations, even if it means enjoying someone elses taste for the next decade. That's why I think it would be a nice home for the right family. But if you want to make a profit you need to be the one to add value. With this house, the current sellers have done that.
posted by kitten magic at 4:48 PM on May 25, 2015 [2 favorites]
Ignore the listed price and the price reduction. What are similar houses selling for? Are you really serious? Call your bank, ask who they use for appraisals, and get an appraisal, and get a ferocious inspector. if the appraiser says it's worth 245, then don't offer more.
posted by theora55 at 6:58 PM on May 25, 2015 [2 favorites]
posted by theora55 at 6:58 PM on May 25, 2015 [2 favorites]
To be able to turn around and sell the house with no loss, you need to buy it at a price that, even with transaction costs, is lower than what you can sell it for.
So if the house can sell for $100k, you would need to buy it for $100k minus all the costs -- agents' fees, county taxes, etc. The $9k drop is meaningless (other than as a signal that they priced it too high to start); your key figure is what Joe Random would be willing to pay, then subtracting all the costs if you sold it a month later -- that would be your maximum price.
posted by Dip Flash at 6:59 PM on May 25, 2015 [1 favorite]
So if the house can sell for $100k, you would need to buy it for $100k minus all the costs -- agents' fees, county taxes, etc. The $9k drop is meaningless (other than as a signal that they priced it too high to start); your key figure is what Joe Random would be willing to pay, then subtracting all the costs if you sold it a month later -- that would be your maximum price.
posted by Dip Flash at 6:59 PM on May 25, 2015 [1 favorite]
I rented, and sort of considered buying a house with a weird layout like this. The en-suite bathroom had never been completed(it was just a closet with the proper hookups and a redo of the flooring/walls/etc would need to be done to make it an - awkward - bathroom), and to get to the master bedroom you had to go through another bedroom. Fixing the second one would have been expeeeensiiive, fixing the first one would have yielded an awkward bathroom.
It was a super duper strong, turgid even sellers market where houses were going over asking... the house sold for stupidly cheap for the location and overall niceness of the yard/interior/etc because everyone would see the cute exterior, go inside and see the awkward interior, and lose interest.
If it just had some deferred maintenance or fixer stuff but was "cute" and had a nice kitchen it would have gone instantly. Weird layout stuff like this turns people off, because even if it could be fixed for cheaper than a kitchen remodel or something, it's just hard to visualize and the awkwardness kills them.
It's like reverse staging. People want to see themselves in there and see how cute their life could be in it. Awkward shit like this makes them not want to deal with it, and just makes couples argue and stuff.
If the market is so strong there, this would have sold quickly. The fact that it didn't is turning a lot of people off. If you don't want to live in it and fix it, you'd be a sucker to buy it.
posted by emptythought at 10:37 PM on May 25, 2015
It was a super duper strong, turgid even sellers market where houses were going over asking... the house sold for stupidly cheap for the location and overall niceness of the yard/interior/etc because everyone would see the cute exterior, go inside and see the awkward interior, and lose interest.
If it just had some deferred maintenance or fixer stuff but was "cute" and had a nice kitchen it would have gone instantly. Weird layout stuff like this turns people off, because even if it could be fixed for cheaper than a kitchen remodel or something, it's just hard to visualize and the awkwardness kills them.
It's like reverse staging. People want to see themselves in there and see how cute their life could be in it. Awkward shit like this makes them not want to deal with it, and just makes couples argue and stuff.
If the market is so strong there, this would have sold quickly. The fact that it didn't is turning a lot of people off. If you don't want to live in it and fix it, you'd be a sucker to buy it.
posted by emptythought at 10:37 PM on May 25, 2015
Flipped houses are not good investments. They have all the profit squeezed out of them by the flipper.
posted by blue_beetle at 4:34 AM on May 26, 2015 [6 favorites]
posted by blue_beetle at 4:34 AM on May 26, 2015 [6 favorites]
This does not look like a good investment to me. And I am an active real estate investor in Central Florida. It seems to me that this house is being sold at close to retail market value, and it is hard to say how much the market will move in the short term.
Central Florida has the highest percentage of underwater homes in the country. There are lots of foreclosures out there. If you work at it, you can find a better deal. There are still great deals available in your area.
You might try going to the Central Florida Real Estate Investment Association. REIA's are becoming a big thing nationally for investor, and CFREIA is a good one.
Also, another note, if you are planning to live in house that you want to sell for profit, you should definitely plan to live in it for at least 24 months. Because then you do not have to pay capital gains on the profit. Talk to your accountant about that.
posted by Flood at 6:12 AM on May 26, 2015
Central Florida has the highest percentage of underwater homes in the country. There are lots of foreclosures out there. If you work at it, you can find a better deal. There are still great deals available in your area.
You might try going to the Central Florida Real Estate Investment Association. REIA's are becoming a big thing nationally for investor, and CFREIA is a good one.
Also, another note, if you are planning to live in house that you want to sell for profit, you should definitely plan to live in it for at least 24 months. Because then you do not have to pay capital gains on the profit. Talk to your accountant about that.
posted by Flood at 6:12 AM on May 26, 2015
As a general rule in Florida, real estate in these kinds of subdivisions just does not appreciate, ever. Because in Florida, there's plenty of land for more subdivisions and if there is an uptick in a local market, somebody starts building more houses. There are short term variations in local markets, which enables flipping, but you can see on the Zestimate that this house is worth less than it was 10 years ago. So don't count on any gain, ever. If you like the house and the neighborhood and can see yourself living there in the long run, then buy. Some solution to the bathroom problem can probably be figured out whenever it's time for bathroom upgrades. And if eventually you sell it at the same price or even a small loss, your cost for housing will have been very reasonable. But if you have a short-term housing need, rent, for sure.
posted by beagle at 6:31 AM on May 26, 2015 [1 favorite]
posted by beagle at 6:31 AM on May 26, 2015 [1 favorite]
I don't think the layout is the main issue with the house, I think it's overpriced for the current market, so this would not be a good candidate for a short term investment unless you planned on renting it out after you left and the rent rate in the area could support the mortgage.
posted by WeekendJen at 11:17 AM on May 26, 2015
posted by WeekendJen at 11:17 AM on May 26, 2015
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Then it's foolish to buy a house, because even in a place where home values are climbing at a reasonable rate it takes a good while to break even with all the transaction costs. A 6% Realtor's commission alone on $280K is almost $17K. Unless you are fairly confident of staying for several years, you should rent.
posted by jon1270 at 3:20 PM on May 25, 2015 [12 favorites]