House rich and cash poor?

cooperyangJuly 13, 2006

I live near San Francisco area. The house price here has gone through the roof in the past 10 years.

People considered us lucky because we bought a house 10 years ago and it's price has tripled. But we sold it in 2004 and got another house in the neighborhood we really like and a big mortgage.

I retired last year, planning to stay home with our children (twin boys). It looked feasible until we started remodeling Jan. last year. The house we bought in this great area is a 50 years old, 2300sf, 3 bedrooms/3 bath, and ranch style home. All the bathrooms are original, windows are single pane aluminum. After settled in for 6 months. We started remodeling. We did our hallway bathroom first as a test run, then the master bedroom suite. This March we started our kitchen/family room combo which enclosed our back patio adding about 250sf. This gives us another 10x11 tiny guest bedroom.

Oh, man, our money drains so fast. Before I knew it we have spent 300k and I still don't have a kitchen today.

So I went back to work in May to make some extra cash to pay the remodeling.

After cooking in the kitchen for 4 months, I hope we'll have an average 4bed/3bath, 2500sf ranch home soon. The problem is we have no money left in the bank. I cannot see a day when I can retire at this moment.

I will never buy a house need so much work again.

Anyone is in the same boat? Any advice?


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Can you sell it and move into something that you can afford better? Can you sell it and rent and wait for prices to come down?

    Bookmark   July 13, 2006 at 7:19PM
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It's a sad truth of remodeling that it's virtually always more expensive than one thinks. It was my experience, too. Good thing I'm happy enough with the results that I won't be doing it again anytime soon (voluntarily, anyway).

I would suggest sitting down with your husband/partner/spouse and evaluating your finances -- especially outgo. You may choose to redefine your remodeling plans to something less expensive. You may find some other expenses you can shave or eliminate -- even for a little while. Maybe one of you can look for a better-paying job. You pretty much are in the boat that most people are starting out, except that you're kind of starting over. The same kind of "money-finding" strategies apply.

    Bookmark   July 14, 2006 at 10:39AM
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Thanks, steve and mark.

After have gone through so much to remodel this house, I won't even think about "sell and rent" in near future. We love this neighborehood. We bought this old house because that's all we can afford in this area.

    Bookmark   July 14, 2006 at 1:00PM
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Having done about three remodels on the same house over ten year period and having spent nearly $500k, I know exactly what you are talking about.

We also have another problem in that we have two small children. Our public schools in the city are terrible. We live in the city limit. This is not an inexpensive neighborhood. Our house would sell for $800K to $900K. The median house price for the city is about $500k. Just about all of our neighbor's kids go to private schools. Our boys are also going to private schools. We are having to decide whether to move to a better school district outside the city limit or stay put and send them to private schools k-12.

Yes house rich, but definitely cash poor when you consider the school tuition on top of the remodel cost!

    Bookmark   July 14, 2006 at 7:50PM
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We were always house rich and cash poor. Eventually it pays off, if the neighborhood continues to do well. Don't forget there are areas that get worse over time. The better school districts sometimes are an illusion. If your kids are doing well in private school that is a real plus. Private schools usually kick out the kids who hog the class's attention and the teacher's time with disturbances.
We've had to move out while our house is being remodeled and we miss the quiet and charm of our neighborhood and house. Yeah it is expensive to remodel especially in Ca.
Its actually a little like going to a Casino--throw the dice and watch what new surprise lurks in the walls. My husband just put in the new double doors and discovered he would have to raise the header and go into the walls to do it. He did and it looks terrific. but nothing is easy

    Bookmark   July 16, 2006 at 4:15AM
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