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Add on or Buy?

Posted by EMC2011 (My Page) on
Thu, Jul 14, 11 at 15:17

Hi
Not sure if this is the right forum but here's my question. My husband and I currently own a small cape house in NJ. Bought it 4 yrs ago and put 30k into it. B/c of the market, it would sell for the same price we paid for it (345k) so we'd lose 30k we put in cash for upgrades plus 4% realtor selling fee + 8-10k in closing costs if we decide to sell and buy a bigger house. We'd walk away with 62k plus some savings we have.
We might be able to find the kind of house I'd want, for $360 give or take. With the $ we'd have this could be doable but we'd have nothing left for home improvements, even minor stuff.
The other option which we're leaving towards, is to add on a family room which i think might cost around 40k. Since we already paid off 20k of our existing mortgage, we wouldn't go over our original mortgage amount considering paying for half the addition with our own savings (the other half would be a loan). I think it would increase the value of the house 20k in this market.
Which option do you think is best? I know, might be hard to say, but would like thoughts.
thank you!!


Follow-Up Postings:

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RE: Add on or Buy?

I know others will disagree, but do you love your home? Are you likely to need to move in the next 5-7 years for any other reason? Are you the type of person who wants their house to "fit" you or one who views it as an investment? Is this a home you view as a "starter home" with a need to move up in a few years?

I've probably "over-improved" my house per some people's views, but I've customized it for me, and wouldn't move for the world. That said, I only owe about 50% of the current market value on it, so have the luxury of knowing that even if I had to sell, I wouldn't be walking away from $$$ invested. I'd do the family room.

If you love your home and location, I say do what you want as long as you can afford it and wouldn't take a complete bath if you needed to move in the future. If housing is simply an investment, you're possibly better off moving.


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RE: Add on or Buy?

it really dpeends on whether you're happy with the location, Schools, etc. Also, whether you have a nice remodeled cape, or an older one that needs a lot and may or may not have the best layout.

family rooms are nice. is that going to fix all the problems wiht your current house? or is it one nice room attached to a house you're not happy with?

I'm from long island, which is similar to NJ, but everything is very location specific, but I think you're underestimating 2 things and possibly overestimating 1:

-I think you're over estimating what you can get for your house. in my area the market is more than 10% down from 4 years ago, closer to 20-30%.

- I think you're under estimating the cost of the upgrade house. youre essentually saying that the bigger nicer house is only about 20K more than your existing. at least in my area 20K doesn't buy a bigger nicer house. a real upgrade from a 345K house is probably closer to 400k.

-having been through construction recently, I'd say you might be underestimating the cost of the family room. can you do a family room for 40k? yes. by the time you're done, it is more likely to creep up, especially if you have older siding and want to reside the house so everything matches nicely, same thing wiht the roof, whether you want a small breakthrough to the family room, or open the whole room up to the house...

I personally like projects, if everything is great about your house, but you need a family room, I'd say go for it. if everything is a size too small, 1 large room isn't going to solve your problems.

we had a similar issue with our first house,also a cape. We made it really nice. Some things were perfect, some things were too small, the kitchen, the lot, the basement height.

We were planning on doing a full second floor to fix the bedroom problem (there were only 2) The too small things couldn't reasonably be fixed in doing this addition, the house would be really nice, but still have a handful of real problems that I couldn't fix. We sold, bought a new house in a better location, with a bigger lot, and did the additon to that house. it is expensive, timeconsuming and possibly a bad decision, but it is really nice and exactly what I wanted.


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RE: Add on or Buy?

thanks chrisk!

yes, many similarities between our locations. 20k more would get us a bigger house, but not nicer. it would need upgrades which i don't think we'd have the $ for. and not sure if i want to live in a very outdated home.

you make some very good points...it is a small house so not sure if adding one nice size room would make it the dream house for me. i don't think we need the big, dream house right now though...just some more usable space to get us through the next few years. just depends on how much we're willing to spend for the additional usable space.


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RE: Add on or Buy?

In most current markets you can buy existing for less per sq ft than you can build new (including additions). That also means that you won't recoup your remodeling expenses in the near future. Look at what you wrote: You'd spend $40K, and the house would be worth $20K more. Hmmm?


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RE: Add on or Buy?

yes i agree definitely ...but selling would cost about 14k in realtor fees plus approx. 8k in closing costs. and not sure i can afford high maintenance costs/taxes on a much bigger house...


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RE: Add on or Buy?

We aren't in a similar area, but we've made a couple of large additions to our home in a bog standard 1980's Atlanta uber traditional subdivision , so I can give you our experience in retrospect.

In 1993, after a bit of a fight with the HOA and against their "expert" advice that we were overbuilding, we enclosed a garage, added a pair of Palladian windows where the garage doors were, and added a wall of twelve foot bookcases, windowseats, and desk. We also added a breezeway and a separate 2 car garage, and added a rocking chair front porch.

Three years ago, we totally gutted and redid our kitchen, in the British "unfitted" style. One wall has a large custom built Welsh dresser, with shelves and dishracks on the other two, and a massive Whitehaus sink. My stove backsplash is a set of tiles my daughter painted in HS, with cartoonish drawings of our pets at the time.

Right now homes in our neighborhood are selling at or less than what we paid new in 1987. Have we made a mistake putting $100k in renovations in a house that's now worth little more than twice that?

In the cold financial light of day, yes. But....

Our additions have been for our pleasure, and pleasureable they have been. We love our "Big Room, and use it more than any other room in the house. My one of a kind kitchen is my pride and joy, and I've easily recouped what I put in it just in convenience (I will never, ever have wall cabinets again!!!!), and enjoying people's faces when they see that fabulous backsplash and all our other little much loved oddities for the first time.

The only serious regret I have is that when the last of the kids move out, we will be left with a lot of house, but I like to think its homey enough tempt them to come back again and again. I also think that it would be one that they'd consider living in with their families someday.

When you renovate, and you pour yourself into it, regardless of budget, you can create a very personal connection, even in the most cookiecutter of homes. There's no placing a value on that.

So basically, echoing what others have said, do you plan to stay there? Does it warm your cockles when you pull up in the driveway? Do you see your future there? Importantly, do your neighbors seem to see a future there? Over half of our neighborhood have been here since the place was built. Can you build something creative and satisfying within your budget? Then have at it.

If you are looking at it as a place to tread water til your next promotion, don't waste the money or effort. Wait til you find such a house.

BTW, after seeing how successful our reno was, our HOA president was the next to do one. Ha!!!!


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RE: Add on or Buy?

springlering your house sounds wonderful---will you post some pictures please?
as for the op, yeah, i'm in a similar position as you. in my case location is everything, and am adding on to get my dream kitchen and extra space since i know i have to live here until the market improves. i am also overbuilding, but given the waterfront location i know i'll get it back when i sell.
i like it here well enough to wait until the right buyer comes along, and will love it even more after my kitchen is done.
hth!


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RE: Add on or Buy?

I have to chime in with Springlering. After 11 years of waffling--do we move, do we add on--we've finally decided to stay put and finally pull the trigger on an addition. For us, though it may seem more fiscally responsible on paper to move, how can you put a price on lot size, location, neighbors, friends, and schools? We don't have the means to tear our house down (like many on our street) but we can afford to modestly add-on and rennovate. So that is what we have started the process to do. Thank heavens for the forums! We'll probably look back and think, "Why did we wait so long?"
In the end, only you can make this determination. For us, it became less about the numbers, and more about the intagibles. Good luck!


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