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Updated 1 day ago on . Most recent reply

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

Edward Neuman
Posted

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.

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Robert Masucci
  • Real Estate Consultant
  • Remote
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Robert Masucci
  • Real Estate Consultant
  • Remote
Replied

Hey Edward, wow that's unfortunate and some of the risks that come with this industry if you're not 100% sure about the risk vs. reward up front. However, you can't go back so I would start exploring how you can manage this property from Chicago. Take a look at credible property managers in your area and start vetting them now. Have your broker start getting the property ready for leasing and start working with you legal team on putting together a thorough lease agreement. Also it wouldn't hurt to have your property reassessed every year going forward to see what it might sell for so that you know exactly what year you can finally recoup your investment based on that years market conditions. Hope this helps get you started in the right direction. 

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