Helping Parents Sell House (and potentially rehabbing)
Hi all,
My parents have asked my brother and me to help them to eventually sell their house, and because my brother and I are still fairly new to the real estate game (the extent of our experience is that we have bought one duplex and one 10-unit apartment complex, both in the past year), I figured our best move would be to enlist the help of the BP community. Because of the potential rehab involved I thought this was the most appropriate sub-forum, but I’m happy to move the post if any moderators think it belongs somewhere else. Thanks in advance for any advice you can provide.
For a little background on the house:
A little over a year ago my parents decided to sell their house in Hanover, New Hampshire and buy a house in the southern part of the state to be closer to Boston. They originally listed the house for 885k, after no action they continued to drop the price, eventually to a low of 749k, and after no action at that price and after the house had been listed for almost a year, they decided to take it off the market and re-evaluate their options.
The house was built in 1984 and is a beautiful post and beam construction. It is approximately 4,300 square feet and was listed as a 3br/3ba (but has two other rooms that could be, and are plenty big enough to, be used as bedrooms, but the size of the septic tank may prohibit listing the house as a 5br), and is situated on a 2.6 acre lot that sits well off the street.
However, the house is very outdated. No updates have been made to the house since it was built in 1984, so the countertops are all formica and the appliances are very old. However, although the house is outdated, it is in fantastic shape. My dad always had things professionally fixed when they broke or were in need of maintenance, and he never let things slide for the sake of saving money. He spent a lot of money on upkeep over the years.
In thinking about why they have struggled to sell the house, my brother and I have come up with a few potential reasons:
- The market – a lot of layoffs have been happening at the big organizations in the area, so demand just doesn’t seem to be where it has been in recent years.
- The house – although, as I said, the house is in fantastic shape, it is outdated. At this price point perhaps buyers want to be able to move in and not have to spend more time and money making updates.
- The real estate agent – we're not very confident that the agent my parents hired did very much hustling to sell the house. They used an agent that they have a long-standing relationship with who appears to have one foot out the door towards retirement. It seems as though the house was listed on the MLS and nothing much else was done to make it sell.
Given the above, the game plan we currently think would be best is as follows:
- Update the kitchen countertops and appliances and the countertops in all of the bathrooms. On the main floor there are two good sized rooms that our family used as an office and sewing room but that are plenty big enough to be bedrooms, already have closets, and have great natural light. However, there is only a half bath on this main floor right down the hall from these two rooms but the bathroom is plumbed to accommodate a shower, so we would also have a shower installed. Note that I’m not sure whether this would allow us to list the home as a 5 bedroom, because I think it would depend on the size of the septic tank, which we would need to confirm. Finally, most of the house is in need of new paint, so our plan would be to have the whole house painted. Our initial thought was that if we could do all of this for less than 50k that it would be a good investment at this price point, but we have little evidence to back this up. Any advice on how to determine whether such a rehab would make financial sense is welcome.
- Once the rehab is finished, we would look to rent the house out until the market rebounds. It’s obviously impossible to know how long this would take, but our aim would be to sell the house within about 3 years of first renting it. Given comparable rentals, we believe we could maintain a small bit of cash flow on the house as a rental, but it would be nothing near high enough to make the house a good “buy and hold” rental property long-term.
- When the market recovers, we would put the house back on the market and hopefully command a sale price close to what it was originally listed for.
What does everyone think of this strategy? We would love to hear thoughts from anyone and everyone, but obviously thoughts from those who have done something similar or have investing/rehab experience in this part of the country would be greatly appreciated.
If we were to go forward with this plan, we would of course need a contractor, but we also think it might make sense to hire what we called a “rehab consultant” – someone we could hire on a fixed fee basis to help us choose specific countertop materials and designs, appliances, and bathroom rehab layout. Does anyone have recommendations for either or both of these types of professionals in the area that we could get in contact with?
Thanks very much to everyone who is able to take the time to read such a long post!
Paul