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Upgrading – strategies and advice?

Posted by Brewbeer (My Page) on
Wed, Feb 4, 04 at 12:26

This is a cross-post on the buying/selling forum.

Some recent posts here, including several from Dave, have got me thinking about what HAD been a back-burner issue for me – and a front burner issue for my wife – the eventual upgrade of the family house, which I would like to do in about 3 to 5 years, and my wife would like to do now. Given the spiraling house prices in my community, we need to come up with a workable plan if we are gonna make this happen.

The plan I’ve been following so far more or less consists of two components – a small, lower priced house enabling us to carry a shorter-term mortgage (15 yr) to minimize interest payments and maximize principal payments, and buying houses that are grossly outdated and using DIY sweat equity to make improvements with an eye on selling the house once it’s in “turn-key” condition. Around these parts, houses that require no work sell for top dollar in almost no time, whereas the out-of-date houses tend to sit around.

One thing I’ve thought about doing is making additional payments to the principal of the mortgage. I’ve also considered liquidating my 457 deferred compensation plan. We are in a low tax bracket, so if we were to liquidate over several years, we wouldn’t take a huge tax hit. I don’t really like this option that much, but my wife is really pushing it (she's eager to get a larger house).

The other thing I've been kicking around is trying to find someone it town who would like to downgrade their home (perhaps for retirement), and working out some sort of "house for house+cash" swap. I don't really know the feasibility of such possibility, I'm just trying to brainstorm ideas.

Please share your advice/recommendations/experiences/number crunching that you all have had at making headway toward this goal. Thankx !!

Follow-Up Postings:

RE: Upgrading – strategies and advice?

I'm not sure what kind of 457 you have, or how old you are, but I HATE to see anyone liquidate that kind of asset given that it's really a retirement nest egg.

How about building onto the house that you have now?

Use the equity that you have to finance an addition and thorough remodeling.

RE: Upgrading – strategies and advice?

Thankx kframe. I agree completely with you. It's my wife who's wondering ;-)

I'd like to put up an addition, but the wife doesn't want it. She'd rather move. With home prices climbing sooo quickly in this town, we'll have to wait and see.

RE: Upgrading – strategies and advice?

While it's no guarantee of future performance, an addition can mean LOTS of return on investment.

4 years ago friend spent about $50,000 on an addition to their home here in the DC metro area (where home prices are skyrocketing, too).

Their return on that part of the house earlier this year? It brought them an addition $132,000.

RE: Upgrading – strategies and advice?

I an not knowledgeable about housing costs and return on improvements but I like the addition idea and hate the touching the 457 idea. Your wife needs a "Sell This House" moment. Have you seen that show? A house that isn't selling is given a facelift in 36 hours by a no-nonsense contractor. The house generally looks so much better that the original homeowners begin waffling on selling. Your wife has new on the brain, unless you know there are really valid reasons for moving.

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