Over-improved a house I thought I was going to live in long term

[Edward Neuman]

Long story short, I thought I was going to live in Grand Rapids long term so I bought a house for $450k and after some surprises and some impulsiveness I ended up spending $370k on renovations. 

Due to work and personal circumstances, I would like to leave and move to Chicago within the year.

Even though it truly is a beautiful and very unique modern home after the renovations, a real estate agent I’ve worked with before told me the house wouldn’t resell right now for more than $650k (even though the house is like 300 yards away from neighboring East Grand Rapids where homes like mine go for 30% more just because they are in EGR).

So I have an unrealized loss of $170k if I try and sell now which really isn’t an option. Based on appreciation trends in Grand Rapids, the house won’t appreciate to break even in like 6-8 years. I estimate I could rent it for $3,500/month which isn’t amazing but feels like the only option now.

I wanted to check with the community to see if this has happened to anyone else and maybe get some advice as I’m feeling really stupid. I very much appreciate everyone’s time and thank you very much in advance for.

Additional context: I paid for the house and renovations by getting a bridge loan from my parents. I’m planning on selling my Nashville condo next year and expect to be able to pay them back around 60% and pay the rest by taking out a mortgage. They’re not pressuring me to pay back until the Nashville condo is sold.

[Luka Milicevic]

@Edward Neuman

Believe it or not, I'm going to go ahead and tell you—you didn’t actually make a mistake. What happened is simply that life happened to you.

I had a neighbor recently who made an upgrade to their house that they’re never going to see a return on. Is that a mistake? Not really. If you're going to live there, you want to enjoy the space you're in.

The only thing that happened here is life, and there's not much you can do about that. I don’t think you made a mistake by overspending on a house you're going to live in. Not every decision has to make perfect financial sense. In your case, maybe it didn’t make financial sense—but it made life sense. And I think that’s perfectly okay.

I’ve been laid off from a job I didn’t expect to lose. I’ve known people in military families who had to transfer unexpectedly, even when they weren’t supposed to. Just recently, I showed a house overlooking the river that was custom-built by a family planning to stay there forever—then one of them got cancer.

Sometimes, life just happens, and we have to deal with it.

Now, as for what you should do from here, you also have to consider opportunity cost. What is keeping this house preventing you from doing?