It's decision time and we cannot come to a common ground

14 Replies

Hi, guys!

It's decision time and we cannot come to a common ground on what to do. one thing that we agree on is to buy something with equity. we are reaching out to you guys for advice. It's gonna be a starter home. Our plan is to live in the house for 5 to 7 years max and resale it. We have 2 houses that we like. by the way, we only have a 7m old child.

The first one is in a Levittown 223k, 0.16 acre ( Pennsbury school district) good school district. no major work needed, but we still have to spend money on a few things. our major concern is that it is the most expensive house in the block. vinyl floor. doesn't look durable but it's new.

the second one is in the Bensalem 270k, 0.18 acre( Bensalem school district) it needs a little work like new hardwood floor, new appliances, and the master bath need a little work plus it's small but functional.

taxes are reasonable on both.

which one sounds like a better investment base on the description above? how low should we go with the offer?

Thank you!

@Reynald Jean

Its safe to suspect that this will be your primary residence, right?

If that is so then my questions for you is:

1. Do you have any experience in construction or handy where you can place floors, sheetrock etc.?

A. If the answer is yes, then go for the second one, because once you are finished with it,

it should have a significant After Repair Value (Resulting in higher equity)

B. If the answer is no, then go for the first one, does not need much work and could easily pay flooring company to fix  the floor.

2. Do you have substantial amount of money to spend on doing rehab work?

A. If yes, then the second house, If no then the first house. (New appliances are costly, especially if its going to be in your primary residence, you will want to get the most top of the line and up to date series of appliances for your own house)

3. How comfortable are you in having your 7 month old in a construction zone?

A. If comfortable, the second house. B. If not at all then the first house.

 

@Reynald Jean , or option C: neither.

If you're thinking of selling in as little as 5 years, why are you even remotely concerned about which school district it's in?

And if you can't agree anyway, by choosing either of them, one of you'll be miffed.

But yes, you do want to look for "something with equity", that you both agree on.

I'm not sure that BP should be your referees, when there's so many other variables!

Congrats on your little one, and your noble investment goal. All the best...

@Brent Coombs

New floor cause it has carpet now. I have a friend that's gonna help us installing the floor. We should get it done in less then a week. The bathroom is function for now we just have to put a new shower glass, we can use the appliances we wanted to change them for stainless steel with can be done this year or next year. 

I forgot to mention that we have to fence the yard. 0.16 acre and a new drive way.

Thank you guys for your help 

It is probably worth considering your reservations more.  To @Brent Coombs ' point, one of you might be unhappy.  Should you keep looking?  Now is usually the low point for inventory.  Consider continuing the search for a few more months and you should see a lot more choices.

My wife and I started out with "her" house choice, which I reminded her of occasionally.  We then moved to "my" choice as it was "my turn" to get what I wanted in a house.  She didn't like it.  We now live in "our" house and are much happier with our home than we've ever been.  My recommendation is to think less about the little stuff (may need a new floor someday) and discuss more about what you want in a home.  Keep looking.

To begin it is a mistake to consider a personal home as a investment ...it is not. Assuming you will continue to own a personal home you will not financially benefit in any way aside from forced savings. A personal home is a liability.

It is a life style choice. Pick a home that your wife likes the best. Keep looking if necessary until she is happy.

Sounds like the houses you are looking to live in with a baby need some work. After the work is factored and your resale closing costs down the line when you sell the amount of built up equity is likely negligible over time.

I would see this more of a place to live then an investment. How are the finances? Are you buying the 200k home because FHA at 3.5% down to live in or conventional at 5 to 10% down?

Investment property most lenders will want 20% down or more. If you have substantial money which for many starting out is 50k to 100k then maybe you buy and house to rehab and resale right away or a buy and hold rental. The demands of your current job and work/time commute daily with a young baby will factor in as well.

Is there a 4 plex close by where you live in one of the units and rent out the other 3 ? Some do that and go FHA.

Good Luck 

The most expensive house on the block usually appreciates the slowest. That is because human nature almost dictates buyers go for the best house they can afford at the lowest price.

For instance my subdivision in GA is about a 4,000 house master planned community. Prices start at 200k plus for 2,400 sq ft houses and go into the millions with those houses being 15,000 sq ft.

The top end houses over the last decade have pretty much stayed the same in value. The entry level to mid price houses have gone up a bunch in value because most buyers want to live in the super nice development but can only afford certain price brackets. Even if a buyer can afford the more expensive homes many buyers do not want them. We could afford a much larger home but have plenty of space already. The bigger house is just more to keep up with and maintain. I like houses where you are using most of the space and it fills cozy and using most of what you pay for. With a larger house you can have lots of space that is never used much,(if at all), and cost and lot of time and money to maintain.   

@Reynald Jean this is a retail question not related to investing. Most people only live in a house for 7 years. Buy what you want that fits your lifestyle. If you plan to invest one day, then buy the more beat up house because you can learn valuable skills. Today, you are just a home buyer. Use this experience to build transferable skills to help when you become an investor.

@Reynald Jean Hey Reynald, I am guessing that you want to buy an investment property, right? 

Take a quick look at this discussion:  Is buying a home for idiots ?

Now, if you are buying a Single Family Residence to live in with your family, then there is a lot of debate about that being classified "investment" (we don't have the luxury of time to go in detail here). 

However, one thing you want to do before exercising your decision muscle is to know what you want and why? After you write these pointers down, you can start thinking about the next phases:

  • Content Amalgation (consume all the content you can about real estate)
  • Determine your real estate investing strategy
  • Then make the investment decision 

I say all this because we shouldn't just do what everybody else is doing (buying a single family home) and expect a different outcome (expect to make a fantastic profit that would allow us to quit our day jobs). This is a general statement and not directed at anyone. 

Also, I know you may say, Ola, I don't have time I am looking for an answer like now, right now, and I can tell you the answer is within you.

Hope this helps. Goodluck. Thanks! - Ola 

Just to add my 2 cents. My personal investment strategy is to buy only performing assets, such as multi-family and commercial multi-family. I'd rather rent my home and own income producing property.

As for your home being an investment, I would say that it's never an investment.  If you think about the main bonuses of owning real estate: Cashflow, Principal Paydown, Tax Benefits, and Leverage, you're only getting 2 of the 4, and the bonus, Appreciation, is negligible due to costs of repairs over time. All the while, you're the one paying the mortgage, not someone else.

In all honesty, both of your options don't seem like a good investment to me. But, because it's your own home, it's a decision on what you need for your family, not really what makes a good investment. You've only had a single kid so far, so a 2 bed, 1 bath apartment sounds like a less expensive way to spend your money.

@Reynald Jean since you have a small child and will be living there, I would consider family friendly factors. These same factors make the home increase in value and make it desirable as a rental:

1. Quality and safety of neighborhood. Crime, sex offender, traffic, how far away are the bad neighborhoods, is the quality improving or degrading? General care of neighboring houses can be a sign too. 

2. Quality of schools is a big concern with a child. People buy houses specifically to be in a better school district.

3. How are the neighbors? It is nice if there are other young families and kids in the neighborhood. Look for minivans, swing sets, toys in the yard, etc. Or even knock on the neighbors doors and introduce yourself. Good neighbors make all the difference.

4. Suitability of the home for a family. Is the child's bedroom close to the master bedroom? Are there steps or other things that could a safety hazard for a child? Is the kitchen and living space good for a family?

Location is the one thing you can't change, so I would focus mostly on that. Floor covering or appliances can be easily upgraded.

@Aaron Miley it is our primary residence the reason why I talk about investment is for reselling value. both markets are different. the first house is in a cold market and that house is a move in ready but we still have to spend some money on fencing the yard and a driveway. yes, the school district is 8/10 (HS) safety 4.5/10 but the neighborhood is not the safest. the second one is in a better neighborhood safety 8/10 school district 5/10 (HS). when I say investment is because we are very frugal we don't like to waste money......lol. 

and we don't know what our first offer should be either one of them.

Originally posted by @Reynald Jean :

@Aaron Miley it is our primary residence the reason why I talk about investment is for reselling value. both markets are different. the first house is in a cold market and that house is a move in ready but we still have to spend some money on fencing the yard and a driveway. yes, the school district is 8/10 (HS) safety 4.5/10 but the neighborhood is not the safest. the second one is in a better neighborhood safety 8/10 school district 5/10 (HS). when I say investment is because we are very frugal we don't like to waste money......lol. 

Don't worry too much about what Aaron said about primaries never being an investment. Conversely: "All the while, Aaron's the one paying someone else's mortgage, not them". 

But I do agree with Aaron about neither of these shouting out: "good investment"! Cheers...

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