WWYD? Updates to sell

numbersjunkieJuly 3, 2013

We bought a 3 bedroom single family home in 2009 for our son to live in while in college. Paid $132K. It was a nice house, very clean, but the kitchen had (original) built in white cabinets that were not very functional (almost no drawers). It had a white smoothtop cooktop that was very stained and we always figured we would have to replace it before we sold. It had no venting and a large open space above the cooktop so we installed a hood that ducts outside and cost about $300 before they moved in.

Fast forward 4 years - he stayed for graduate school and has another year to go. The house was a good investment - the rent he got from others paid for the expenses and a good chunk of his tuition. But now the wall oven doesn't work. We're trying to decide if we should replace the wall oven now, and then the cooktop before we sell. I think it will cost us $1500 for both, And we will still have very dated cabinets that are not functional. Plus a trash compactor that does not open or work.

The other option is to redo the kitchen using Ikea cabinets that are now on sale. I'm estimating that all new cabinets will be $3K. And we could buy a decent smoothtop range (oven/cooktop) for about $600-$700. I think an updated kitchen will make the house sell quickly and for more $$ than it would if we just replace the cooktop and wall oven.

I should also mention that my husband is now retired (actually laid off at age 61, so same thing), and he is an engineer who is more than capable of doing the work himself. We have the money to do the updates.

I have mixed feelings. I don't think we could get what we paid for the house today, but maybe we could if we re-did the kitchen, and hopefully prices will be higher a year from now when we have to sell. And I think the updates would really help the house sell faster which would be a blessing once my son finishes school since we live 6 hours away and I don't want him to be tied down babysitting the house until it sells. I would not want to rent it if he was not going to be there to watch over it.

What would you do?

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I'd check with a good local realtor to see what advice you get--if it's in a college town and the buyers are typically parents making an investment in income property while their kid is in college, you may not need to do much to it. College kids (I have one) aren't nearly as picky as we are. Maybe a new oven and cooktop (scratch and dent or Craigs list) would suffice? On the other hand, if there is a market there for families, you might get a better return for the investment in new cabs. the IKEA sale is great, and as long as you and your husband can build and install them, it can be a very reasonable option!

Good luck--and I sure hope your DH doesn't have to stay retired if he doesn't want to.

    Bookmark   July 3, 2013 at 8:45PM
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Holly- Kay

I would rent the house out for now without doing anything but painting and cleaning it. The rent that you receive will pay for taxes and insurance with some leftover that you can squirrel away towards a kitchen upgrade. Eventually the housing market will correct itself and then you can sell without taking a loss.

    Bookmark   July 3, 2013 at 8:48PM
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I would talk to realtors, and then probably do the upgrades. Given that you are savvy enough to read this board and know about the value of Ikea cabinets, you would probably get a good return on the investment. But I'm inferring that going through the remodel would fit comfortably into your lifestyle, and holding the real estate after your son leaves school would not. For others, remodeling is painful and being absentee landlords is comfortable.

    Bookmark   July 3, 2013 at 9:52PM
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I would update it, especially if you can DIY the areas you described. For minimal investment, it will look nice and clean and will sell quicker when the time comes. Doesn't sound like this is an area where you'd ever get a return on your investment if you went all out, so don't get carried away.

    Bookmark   July 3, 2013 at 9:56PM
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Sophie Wheeler

If you can keep it under 10K, do it. But, it will be difficult to do, even if you do the labor and go Ikea and address everything that actually needs to be touched. You've only mentioned cabinets and appliances. There's also flooring. Counters. Lighting. Updating the electrical. New plumbing fixtures. Then, there's how that spiffy new kitchen makes the rest of the home look----older and dingier. You'll want to paint the whole house fresh at a minimum. But you will also want to do a few other projects that will be more glaring after the freshness of the kitchen makes them more obvious.

Do an actual assessment of the projects. Will your son and any of his friends help with the labor? If so, that's a bonus if any of them have decent skills to add to the mix.

As mentioned, have a realtor do a cost/benefit analysis of leaving it pretty much as is, or just replacing the broken stuff, or going further. The answer will be different in different markets.

    Bookmark   July 3, 2013 at 10:23PM
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Thanks for all of your input. I realize there will be things I will need that that i haven't thought of and it will cost more than I estimate. I have contacted the agent who we used when we bought the house to see what he thinks, and what type of buyer he thinks our home will attract.

Maybe I'm just KO since I re-did our kitchen a few years ago (with much help from this forum) and was planning to re-do the kitchen in our vacation home which is also very dated and non-functional. But I also think I would have been more critical of the kitchen when we purchased if I was the one who was planning to live there. I figured it didn't matter for a bunch of college guys - and it hasn't. But I don't think we can count on a buyer who is just looking for college housing. I hope my Realtor will have some insight.

    Bookmark   July 3, 2013 at 11:03PM
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If you have a good Craigslist in your area or in a fairly nearby city, I would recommend getting the appliances from CL. Save the money and don't buy new just to sell. Anyone buying an existing house (rather than new construction) is getting used appliances anyway, so what's the difference.

If it was me buying your house, I would not want the kitchen to have already been updated. I would want to do it to my taste. But that's just me. My recommendation is to do just enough to make it look fresh and clean and move in ready. Most people have no idea they need drawers and don't understand or care if the kitchen does not function well. All of us around GW are not typical !!

    Bookmark   July 4, 2013 at 7:49AM
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I think if you choose NOT to do anything, then the house may sell only to a flipper who will do those cosmetic changes and turn it for more money.

Having recently been in the real estate market, it is apparent, at all price points, that existing homes are in direct competition with what buyers see as new home. In existing markets, this means you are competing against the New Flip home. Since you have the means and time to do this for little financial investment, I think you would come out ahead doing that type of update.

    Bookmark   July 4, 2013 at 7:50AM
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Good tip on used appliances from Angela. You might also check Restore (Habitat for Humanity). My GC told me another client donated his Sub Zero appliances, he got a great tax credit and someone else got a great bargain.

    Bookmark   July 4, 2013 at 7:58AM
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I wouldn't redo the cabinets unless they look chipped, don't open well, etc. Even then, I would try to repair, paint them, add new hardware if possible. I would replace the appliances with something along the lines of Frigidaire so they match and maybe stick a beverage fridge where the trash compactor is now. A good cleaning and painting will do wonders.

My guess is that the market there attracts rental owner types who want a good value to rent to college kids and are mainly concerned with the integrity of the structure and mechanical rather than the aesthetics. Otherwise, folks will probably find something else they need to replace even if the kitchen is done such as flooring, baths, etc. I agree with hollysprings on that.

One thing to remember in the numbers game is the added costs of closing, realtor commissions, etc that will make it harder to break even when you resell. Also, there may be something to pops up during the home inspection. To me, that would make investing in cabinets a much less attractive proposition. I don't believe cabinets and appliances alone will give you the push to pay for themselves, make up a market decline, and cover selling costs.

I know you are 6 hours away, but if your son is still going to live in the area would it be feasible to continue renting and to pay him a small management fee out of the rent for checking on the property, etc? It seems like it is bringing in good income for you, even if it's resale value is lower.

Good luck! HTH

    Bookmark   July 4, 2013 at 9:20AM
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Assuming that (a) you could do the kitchen for under 5K, including the new range and (b) can't replace the old appliances for less than 1500, you'd basically be looking at a difference of about 3.5K for a new kitchen. That sounds like a pretty good investment. Someone here posted that IKEA Adel Beech is being discontinued and is being sold as "last chance" sale, which means the kitchen cabs may cost you even less.

    Bookmark   July 4, 2013 at 9:40AM
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I do realize there will be selling costs, and I may not get back what I paid, but I'm not sure those factors should be a factor in this decision. Those things are what they are. My concerns are (a) will an investment of 3.5K increase the sale price by at least 3.5K (over what it would be with no updates), and (b) will the updates help sell the house faster, given that there are holding costs to be considered, both monetary and otherwise.

I did look for used appliances, but low end built-in appliances (cooktop and wall ovens) rare and the ones I saw looked like they belonged in the dump.

I think it may well be the case that we will be competing with homes that were flipped. I stayed away from those when we were buying because I had concerns about the quality (and safety) of those updates. But not sure everyone shares my concerns.

I don't think the neighborhood is primarily rental properties for college kids. In fact I think most neighbors are owners. There are county restrictions about the number of unrelated people living in a house but they are not enforced unless the neighbors complain - even then I'm not sure what the authorities would do. We didn't know about the restrictions when we purchased and fortunately have never had issues with the neighbors.

Still waiting for measurements from my son so I can get a better estimate of the cabinet costs, and still waiting to see what our real estate agent has to say. Will keep you posted!

    Bookmark   July 4, 2013 at 11:40AM
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What are your thoughts on continuing to own the house as a rental? Grad students that your son knows might be likely tenants. My brother and father have rentals in towns they don't live in. It's quite feasible, especially if your son remains in the area, but even if he doesn't.

    Bookmark   July 4, 2013 at 4:10PM
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I'm prejudiced towards Ikea in the moderate price range home. I just did a flip and the Ikea kitchen sold the house. The design skill I gained from being on this board and doing my previous house put me a leg up from all the competitors. My market is different- it was so crashed before and now it is correcting. I had 3 offers the first day an picked a strong one. Nearly anyone who saw the house said it was so much better than the competition. Being 6 hours away though, you would really want to make sure you had any extra parts and limit your trips to Ikea.

    Bookmark   July 4, 2013 at 10:27PM
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