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Old 09-04-2013, 10:39 AM
 
4 posts, read 5,828 times
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I'd like some info on the costs of building on an empty lot vs. purchasing a home to rennovate in Fairview. I want to build a U shaped home. Lot is approx $180k and will need a septic tank, etc. Home is approx $280k and is an appropriate shape (rectangle) but will require a second floor and two wings to be added, the home will also have to be completely gutted. Final build on both would be approx 3100 sqft. Any thoughts would be appreciated.
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Old 09-04-2013, 11:38 AM
 
Location: Dallas, TX
2,828 posts, read 3,387,228 times
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I too wonder about this. There are a ton of shows out there that show people buying cheaper houses and using the extra money to renovate. Is this all cash, or do bank usually give large loans like this that allow this sort of thing. We would love to buy the home we currently rent, but I would think it would need anywhere from 50-100K in renovations for us to make it completely livable for an expanding family.
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Old 09-04-2013, 12:15 PM
 
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There are a variety of options out there, but if you're looking at $50-100k in renovations, your best bet is probably a home improvement loan. They typically carry higher interest rates (6-7%) and have 15 year max terms. But no, if you qualify for say $400k and end up purchasing for $300k, most mortgage companies only fund the $300k and you'll be on your own to obtain the home improvement financing. Some of the larger banks might be able to package these kinds of deals, not sure on that one.

One thing you'll have to watch is your "add back". Your interest rate is usually calculated based on your LTV%. So say you buy a house for $300k and put down 20% for a mortgage of $240,000. You then get a $100k home improvement loan, the add back refers to how much credit you get for that $100k towards the value of your home. Some companies will only do 50%, leaving you with a LTV of 97% (($240k mortgage + $100k home improvement loan) / ($300k market price + $100k x 50%)). That will carry a higher interest rate than a company that will give you back 100% of your loan value, which would result in a LTV of 85%.

Just something to watch out for. Some will give back 50% on bathrooms and kitchens, but 100% on everything else, some will give you 100% up to $75k, etc.
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Old 09-04-2013, 01:39 PM
 
Location: garland
1,595 posts, read 1,570,930 times
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A. never believe what you see on 'reality' shows
B. $460k on what amounts to a teardown (if you build new on that existing lot) in Fairview is rather reckless spending.
C. Adding a second story to a home that is considered only to be livable if gutted completely would likely require substantial structural modification making it cost prohibitive.

Unless you also negotiate mineral rights and know for a fact there is oil under the parcel, I'd continue looking. Nothing about this sounds like a good idea especially if you will be going through a divorce at the same time (referring to your other post today).
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Old 09-04-2013, 01:40 PM
 
Location: Earth
794 posts, read 1,350,308 times
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Best option is to save some money and do it with cash. You add instant equity and pay no interest. You come out with way more profit then buying new or remodeling on interest. It takes patience but imho best route to go if you want to live in neighborhood of your choice.
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Old 09-04-2013, 03:16 PM
 
27,466 posts, read 44,959,956 times
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two points--
when you buy house that is constructed and requires lot of remodeling to meet your parameters--you need to ask where are my comps?
what houses in the area support you doing what you want to do to that house?
if there are no comps then you are really going out on a limb to drop that money into a massive rennovation -- it might not appraise at the money you are putting into it and you might not ever get it out when you go to sell...

new house--new houses usually always meet an appraisal for value cause you have the receipts...
and new houses usually go over the budget that people set when they start a build process...
so you should be prepared to wind up paying more than what you anticipate now...

no way to tell which is the better choice since there are not enough specifics--especially informed assessment of either the new build or the renno...
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Old 09-04-2013, 03:37 PM
 
Location: Dallas, TX
2,828 posts, read 3,387,228 times
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Quote:
Originally Posted by loves2read View Post
two points--
when you buy house that is constructed and requires lot of remodeling to meet your parameters--you need to ask where are my comps?
what houses in the area support you doing what you want to do to that house?
if there are no comps then you are really going out on a limb to drop that money into a massive rennovation -- it might not appraise at the money you are putting into it and you might not ever get it out when you go to sell...
For my case, the house next door is almost the same sqft. but on the DCAD is twice the listing of the house we rent. Due to an added bed/bath and interior and exterior upgrades.
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Old 09-04-2013, 05:49 PM
 
27,466 posts, read 44,959,956 times
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but was your next door house that way originally -- not with higher priced renovations...or were the additions done recently, or 10 yrs ago???

if I buy a house with 2/1 configuration that has maybe 1000 sq ft and I add 1000 sq ft to it--and redo the older portion
that house will have a higher priced per sq ft than similar original house built when my house was--even if you put money into a house you have to be very careful you will get that value BACK either if you want to re-fi in future or sell...

that it is why it doesn't make sense in an established neighborhood with homes that sell at 150K to buy one and add 80K of rennovation to it...
you won't get 80K of improved value if you try to sell it...
you probably would have a hard time getting the full value of 30K in rennovations in many neighborhoods...

In Colleyville people will buy a house on a lot that is an acre and tear down the house to build a new house that is 800K+ because the value is there in the other houses to be used for comps...
Colleyville has lot of homes that are on acre lots scattered around and NOT in an HOA neighborhood...

in Bedford or Hurst where there are relatively few homes on acre lots it makes no sense to buy a house on 1/4 acre lot in a neighborhood, tear it down, and built a more expensive new home even if it is not a McMansion--because the comps come from homes in THAT neighborhood and they would never match what that new house cost...
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