At Stonyford

Should I Buy This Old House?

Realistic advice and a dose of common sense if you find yourself in love with a run down old house.

// June 29, 2017

I wanted to write this post because we get emails all the time with links to real estate listings asking us if we would buy the old house! We love emails like that cause we dive into the pros and cons of jumping into a big project like restoring an old home – and we get to connect with a person who is just like us when we started looking at an old home. This post is for everyone who is considering buying an old home, but you need a smack of reality and reasoning before signing on the dotted line.

Two things before we get to the juicy part: We love old homes and will always recommend buying one – we’re biased on that front. We don’t know what your personal financial situation is like. This can be things like cash flow, credit history, what state and county you live in, which can affect mortgages. You know your personal situation best, be realistic about what’s possible. A big part of buying a home, then to complicate it with renovation costs, is so personal to your money situation and lifestyle.

1. Is it a good investment?

Anytime you are spending a decent amount of money on anything, we ask is it a good investment? We plan on staying in our house for the rest of our life and never selling, but common senses says, if something happened and we had to sell, will this property and house resell for a profit or at least break even? We look at things like: what’s the town like? Is it run well and not too high on taxes. Are there good schools? Is there a giant shopping complex across the street that’s a serious turn off to potential buyers? Does the property lend itself to a defined life style (for example, country living, city living, small town living, etc). All these details matter.

We went with friends to look at a beautiful mid-century modern property, probably the best mid-century modern house I’ve ever seen. Here’s the thing: it had a shared driveway with an apartment complex PLUS homeowners association fees that the apartment complex had? Who wants to buy a huge, expensive, property and share a driveway, plus be obligated to pay for fees on top of your mortgage in the middle of the country? Lame, right? That’s the kind of stuff I’m talking about. Be smart and negotiate changes before buying a property that would affect resale value.

2. How much will it cost you to live in the house right now?

Seems like a stupid question, right? Not with an old home. Sometimes the best real estate deals and homes with the most potential are very run down. There’s a beautiful gothic revival up the road from us and it’s a great price. But it has no plumbing?!? When you are buying a old house, especially if it’s run down, figure out how much it will cost you to live in the house. Think running water, electrical, sewage, etc. We like to think of this as part of the move in costs. We had a few things done to our house as soon as we moved in. Things like fix a beam in the basement, install a water treatment system, and treat the basement for mold (I’m highly allergic). It costs us about $31,000 for those three items. For us, we had a huge down payment, closing costs, plus actual moving costs out of NYC, and we had to buy a car since we moved from the city. AND we had to spend 31,000 on house projects so we could live in the house.

Make a list and get estimates before putting in an offer if the property is very run down. Also, we recommend triple bidding contractors/services and calling references if you are new to an area. Heck even if you aren’t new, it’s a good idea. Totally worth it! Just understand and be aware of what you are getting into before you buy. Plus if you need cash to pay for fixes, you should know how much you need so you can have it on hand. Keep in mind, everyone’s living standards are different. You might not ‘need’ hot water, but I do. Our mold infested basement: if you are not allergic, it’s not an immediate concern. Everyone has a different version of living standards. Make sure you can function daily and if you are making a concession to live in an old home, you don’t end up hating the house.

3. Make a time based renovation plan

The list of renovation projects is never ending, and owning any house, old or new, is a lot of work. It’s great if you can do everything at once, but most of us can’t. Make a 1 year, 3 year and 5 year plan. This will keep it realistic as far as how much you spend each year on renovations, and how fast you’ll see results. If you are spending a significant amount each year, you might want to consider saving that amount as part of your ‘mortgage payment’. You’d put the money in a savings account, but see it as part of the monthly house expenses. Believe me, if I could renovate our kitchen right this second, I would. It’s a six figure project and we have to be realistic about how we’re going to pay for it, hence saving up. The kitchen is not on our hot list of projects to do – we have so many more less expensive projects that will greatly improve our quality of life. But we are thinking about it as a future project that will be very expensive and planning on that expense.

4. Know thyself and thy skill level

If you are not the type of person who likes doing projects around the house, owning an old home is gonna be way more expensive for you. We personally will do anything we can, within our skill set. It’s way cheaper than calling a contractor and spending a ton of money on labor we could be doing ourselves. If we don’t know how to do something, we look it up online – we’re constantly watching videos on YouTube. We have friends who have never picked up a paint brush. If that’s you, plan on spending a lot more money on renovations.

5. Understand your money situation with mortgages and cash

In some cases, older homes sell for SO cheap because they need a lot of work. We looked at a house like this. It was priced at $200,000, and needed at least $150,000 of work. Some of the work was to make the house livable. It did have a very run down garage apartment we could have lived in while the house was being renovated. We would have worked with the bank to provide us with a mortgage of $350,000 to purchase and renovate this property. Sometimes this works and sometimes it doesn’t. You have to prove to a bank you are going to use the money to do the renovation work, plus when the work is complete, the property value has to be $350,000 or more for the case of the house we looked at. This makes your mortgage a good investment for the bank. I know it’s a bank – but put yourself in their shoes for a hot second. If you were to go buck wild and up and move to France overnight and default on your mortgage, what’s the bank left with? Will they make their money back because the property is a good investment?

There are specific loans for renovation in some states, but you have to look into your state and see what’s available. I recall when we started going down that path it was so complicated in NY we thought twice about it. We were already making a big transition moving out of NYC, first time homeowners and renovators. That property we were looking at would have been better suited for an experienced renovator. If you can’t get a renovation loan, you’ll need cash. Make sure you understand the loan market if you’re relying on a bank to finance your purchase and renovation.

One last note: Get creative

We got some serious push back from the people closest to us about buying an old house. The people that should have been excited for us and supportive, were naysayers. Don’t listen to it! We love living in our old home and wouldn’t trade it for the world. It’s a unique house filled with history. Be smart and find a way if a certain house is calling you. We looked at the house we bought online for THREE years. It was out of our price range, so we didn’t even go look at it. I’d keep checking the listing and one day it said: reduced!!! We jumped on it and our dream house became a reality. Stick with it and you’ll find the perfect old home for you.

If you haven’t already read this “10 Things I wish I knew before buying an old house” pop on over for a good read.

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4 Comments

  • Reply Eric July 12, 2017 at 10:09 pm

    These are amazing ideas. I’d like to add (as a licensed Realtor) to get the home professionally inspected. This will uncover any big -ticket items and even some smaller things that can help you make your decision. It’s sort of pricey at several hundred dollars but can save you literally tens of thousands in the long run

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  • Reply Rachel M July 18, 2017 at 3:29 pm

    These are all things I’m constantly asking myself as I search for and obsess over old houses! Right now I’m actually focused in the Hudson Valley area and have my eye on a certain house. The main thing stopping me from really pursuing it though are the (to me) very high property taxes. It’s hard to justify paying $7,000+ a year in taxes on a house assessed at $170,000 and listed for $150,000. What if the assessment goes up a ton? Just two years ago the house and land were assessed at over $400,ooo. The unknown cost is what’s holding me back. It’s hard to plan for something when it seems to fluctuate so wildly in recent years with big jumps in how they assess properties and growing tax rates. I think the rate went down a few tenths last year which is good and they did get the property reassessed to a much lower rate but if I plan on renovating and improving the property it could very likely cause the taxes to increase too. Just fun things to think about when looking at old houses! haha Still isn’t stopping me from looking and dreaming of moving to the country in a big old house though.

    • Reply William Brinson July 18, 2017 at 3:44 pm

      We felt the same way.The property taxes always seem out of control. We just had to decide if it would fit in our budget and if this is the location we want to be in. Good luck house hunting!!!

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