Should I Sell?

Question

Hey all,

I’ll try and keep this post as concise as I can!

My wife and I bought a townhouse in 2020 with the goal of moving from it and turning it into a rental as quickly as possible! We were able to do that within about two years and bought ourselves our own single family home in the country for us.

The townhome profits very well and is in a desired area, we love it and plan on holding it forever! You can’t beat a 2.5% interest rate!

The problem is the single family home we have moved to, it was made in the 1950’s and was flipped by some really terrible flippers. They really put lipstick on a pig and sold it to us and our long time home inspector retired so we didn’t catch the problems ourselves. We’re sitting at 6.78% interest comparatively.

Since moving in, we’ve had to totally repair the custom chimney (a couple of grand), get a new roof (had to get a 26k loan at 10%….. kill me now) and have discovered the crawl space ventilation needs to be addressed, our old cast iron pipes are blocking the plumbing up, and we need to change the pipes from Poly b in some places.

If we sold the house we’re in for a minor profit, we could cover the costs of my roof loan, selling costs, expenses for fixing it up to sell etc. we’d essentially loose most of our down payment to get out of this deal. we would have to move back into the town home and start saving again for another day. that being said, we wouldn’t have the high interest debt and wouldn’t have to worry about paying for all of the big repairs.

We have our first baby on the way and are worried that the house is going to keep giving us problems and become a money pit. Would you keep the SFH with the big loan for the roof and just fix as it goes to hopefully maintain the long term (hoping no more major problems arise) or sell, cut my losses, reduce my high interest debt, and start over.

there’s always more to the story including personal reasons but hopefully this paints a picture, feel free to ask questions so I can clarify!

🙏🏼 Conner

Theresa Harris · Answer

I'd sell it. From the sounds of it you are not happy there and even if you fix one problem, you are going to worry about what is next. Move back to the townhouse which should also cost you less money and then take your time finding your next home.

Dawn Roy · Answer

@Conner Hitchcock,

The most difficult thing in any decision regarding real estate is to keep emotions out and look at the raw data. The townhouse is a win for you financially and can be the vehicle that rights the ship. Before rushing out to sell your SFH, look at options like a HELOC on the townhouse to help bring things into alignment. It sounds like you need to consolidate debt into something manageable.

If your SFH provides the space for your growing family, perhaps it is best to tackle the most pressing issues and continue to stay where you are. Remember, the improvements you are making or items that you are correcting will add value to your home when you do decide to sell.

The advise from others to have a home inspection is solid. From there, you can work your way to making this the home you were wanting for your family.

Take a breath, enjoy the season of becoming parents and try not to eat the elephant all at one time. Slow and steady will always win the real estate race.

Cheers!

Brandon Spurlock · Answer

Hey @Conner Hitchcock, hate to hear this for you man. Fellow investor and Richmond Realtor here.

Unfortunately, it sounds like you were underrepresented by your agent and missed out on having a qualified set of inspector eyes to scope this home out in 2020. Buying a poorly flipped house, in my opinion, can hurt a lot more than buying an old, completely outdated house.

A few questions. Where is this house located? Is it in an area that is appreciating? You said if you sold, you'd lose most of the equity (down payment) in the sale, and then would move back into the townhouse to begin saving again. If you're in an appreciating area, I'd really try and keep the house, so you don't start back at zero to begin saving again. I'd love to see you salvage the equity you have and see it grow.

In order to see if that is worth the effort, I'd highly recommend having an inspector come and check the house out to see what else is going on. I'd also get some 2nd opinions on the crawl space. Hopefully you didn't have JES come out - they'll upsell and over charge every time. I have a fantastic Renovation Coach who isn't an inspector, but knows homes better than anyone I've seen. For $150, he'll walk the property and "inspect" it and help you know if you have any other major red flags to deal with. Let me know if you'd like his contact.

If the inspections are satisfactory, I might use some equity (or cash flow) from the townhouse to begin paying down the roof debt, and find a way to improve the mess that the flippers left, and keep the house. (This coming from a realtor who benefits from selling houses). Then, when rates come back down in 1-2 years, you could refinance and improve your rate and payment a bit, maybe even get enough money out of the refi to pay off your roof debt.

If this house is not in an appreciating area, or if the inspections reveal more necessary repairs than you can stomach, then maybe it's time to sell. The problem being, the next buyer's inspection will likely reveal these same issues, and you could be caught needing to make the repairs or issuing credits to a future buyer. At the end of the day, they still may bite you. The best you could hope for in that case would be selling in a hot Spring market where some/all of the inspection is waived by the buyer.

I'd be happy to process more with you, send some good contacts your way, or bow out. Let me know if I can help!

Kevin C. · Answer

Sorry to hear that Conner. I'm in Richmond and happy to chat investments and home repair. I am in a similar situation as we just moved out of our primary to rent and bought our new primary at 6.875% off market. I'm not a realtor so I have no skin in the game, happy to chat and bounce ideas off each other!

Preston Dean · Answer

With the current 2.5 rate you have maybe a HELOC would make sense to pay off some of that debt. You might get a lower rate than 10%.

I'm a huge advocate for buy and hold. If you're able to weather the storm I would say keep the property you already have. Maybe turning that into a rental and moving back to your old place?

Sorry man this sounds like a headache. My wife was 38 weeks pregnant when we had to fix the cold water pipes under the ground. It was a headache but got it fixed and we were able to keep it as a rental.

J. Mitchell Bernier · Answer

My follow up question is this home the one you want to raise your family in. If yes then I wouldn't sell it. Get another inspector to take a look at it see what other repairs may be needed or at all. Then I would use the equity in the condo to refinance the roof debt and any other debt that is associated with repairs to the house. Reason being the Investment property loan is tax deductible.

I dont like the idea of looking at your family home as purely an investment. I understand the pain points now, but if you were planning to stay there for the next 10 years or more, it will all work out in the end from a dollar and cents perspective.

Logan Ryan · Answer

Hi Conner,Man, I hate hearing stories like this. I'm in the Richmond as well, I'd like to message you if you don't mind?You may be through the worst, like you said hoping for no more major problems. It might be worth it to get a 2nd opinion from another inspector (I have some great ones if you need recommendations). They aren't fortune tellers, as you know, but might help you make this very big decision.If you decide to sell, I'd wait at least until after the 1st of the year. Things have really slowed down because of the holiday season here. Happy to help any way I can!Congratulations on the new baby :)

Jason Wray · Answer

Conner,

I would tell you to sell the SFH for a few reasons first it sounds like its a bad investment due to the age and work still needed. Secondly mortgage rates are coming down as of this week and by 2025 they will be attractive enough to buy again. Last but most importantly you and your wife are having a Baby always prepare for that “What if factor”

Take any cash from the sale tuck it into savings and rent in a reasonable spot "Close to family" if possible because they come in handy with newborns. Keep the townhome rent it out and use the cash flow and future equity for a rainy day. Down the road when you are ready pull out some cash from the townhome for another down payment on a property.

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