Value in improving a house? (Pittsburgh, Lebanon: real estate, how much, houses)

[DomerJen]

So we're talking about a house we liked, but it needs new heating (26 years old), A/C (age unknown), roof (18 years old), and windows (original - 85 years old). The kitchen could really use a facelift, too. We think all together it'd be about a $35k investment on a house listed for $235 in Mt. Lebanon.

I know that when looking at houses, WE check the Allegheny tax website to see what the last person paid (they pd $224 in 2006, incidentally, so not sure we could get much of a discount on list), but I'm interested in hearing from people who might know if those kind of improvements would see a "return" (i.e. not take a $35k loss) in 5-7 years? We could probably put the roof off a few years, but not much longer, even if they are 25 yr shingles (which I'd doubt).

It's not a fancy looking house - it's a four square about 4 blocks from uptown and the high school. We love the proximity to things in the area, but I don't think it's one of the fancier areas of Mt. Lebo.

Any insights?

[gg]

All the homes I buy need work. I invest in real estate. That is all fine and well, but what is the home value when in great condition? That is the question. One nice thing about redoing a home is you can do it to your own standard. If you need to resell, I hope you have good taste. No offense.

[Justin Time]

Originally Posted by DomerJen

So we're talking about a house we liked, but it needs new heating (26 years old), A/C (age unknown), roof (18 years old), and windows (original - 85 years old). The kitchen could really use a facelift, too. We think all together it'd be about a $35k investment on a house listed for $235 in Mt. Lebanon.

I know that when looking at houses, WE check the Allegheny tax website to see what the last person paid (they pd $224 in 2006, incidentally, so not sure we could get much of a discount on list), but I'm interested in hearing from people who might know if those kind of improvements would see a "return" (i.e. not take a $35k loss) in 5-7 years? We could probably put the roof off a few years, but not much longer, even if they are 25 yr shingles (which I'd doubt).

It's not a fancy looking house - it's a four square about 4 blocks from uptown and the high school. We love the proximity to things in the area, but I don't think it's one of the fancier areas of Mt. Lebo.

Any insights?

Houses are worth less in 2011 than they were in 2006. So, if they bought it for $224K and made no improvements. . . Then, it has only depreciated and is not worth $235 now. The A/C , roof and windows were "newer" and more valuable (more life left in them) five years ago. Check out 2006 vs 2011 prices all over the nation.

It looks like the sellers are trying to make a little profit to cover most of the realtors' commissions (typically 6%). That said, it would be a waste to pump money into it and expect to recoup it in 5-7 years.

I would use the depreciated value, and depreciated A/C , roof, and windows as justification for a MUCH lower offer than the list price or make an offer with a request for money to offset the repairs or replacement of those items. You might get lucky.

[greg42]

A lot of houses around the Pittsburgh area are probably not worth less than in 2006, but I wouldn't use the cost in 2006 as your basis; you can still offer lower than that. Nothing says they absolutely need to make their money back. If they don't, that is their problem, not yours.

Big question as h_curtis says is how much more is it worth if you do those things? As far as roof goes, that's quite variable. I bought mine with a 20-year-old roof (the original roof) and 8 years later it's still sound, though I probably need to replace it soon. At this point I wouldn't try to sell it with a 28-year-old roof that's made of probably 20-year guarantee shingles. You can use the heating and A/C as long as it still works, although you may gain some efficiency over a 26-year-old unit. Windows are tricky. In some of those houses it doesn't look as nice if you replace the windows unless you get really expensive custom ones. I looked at such a house where they made a conscious decision not to replace them. Kitchen should up the value; the others really just make it par (which means right now you should argue that it's below par). But 5-7 years is a tight timeframe to get a return. And if you're not careful, it can cost a lot.

Right now I'm doing a new patio out back. We removed an old deck, and I think the patio will be a better selling point, more interesting than deck. But it's also what we're more interested in. And the way I'm keeping the cost reasonable given the cheapness of this house (in 2003 I paid half of the price range you're talking) is to do the labor myself. That's probably not the best idea for roofs and HVAC unless you know some things about them, but you might be able to do some of the kitchen work. Kitchens can be crazy expensive. I'm sitting on the same kitchen problem and also want to make sure that I get to enjoy any such reno rather than renovating quick at sell time just for better chance at sale. This house is cheap, though, so I can reasonably try things like cabinets from Ikea, etc. Not sure if you get away with that in twice as high price range, maybe if they're chosen well and installed well.

In this market, and the housing market as a whole, betting that you'll get appreciation enough to cover that in 5-7 years is pretty iffy seems to me. It might work, but it could just as easily swing the wrong way for you.

[DomerJen]

Funny, the kitchen reno is the part I wouldn't mind losing on, since it'd be more for us.

Thanks for your opinions. I agree it's a gamble. I guess I wasn't sure if potential buyers generally consider new systems worth paying for, or if it's more like what we're doing - where old systems are just a deterrent to buying.

[gg]

Originally Posted by Justin Time

[color="DarkSlateGray"]Houses are worth less in 2011 than they were in 2006.

This isn't true across the board. Pittsburgh under $300k has been pretty strong.

I agree that the home may be overpriced, but it is hard to say.

[gg]

If you want an honest opinion, PM me the MLS number or post it on here. I will have a quick look and check out prior sales. That area isn't in my wheelhouse, but I can get a pretty good feel by having a look. Mt. Lebo is pretty popular and that price sounds like a popular price range in general. That doesn't mean a lot without knowing more however.

[DomerJen]

Originally Posted by h_curtis

If you want an honest opinion, PM me the MLS number or post it on here. I will have a quick look and check out prior sales. That area isn't in my wheelhouse, but I can get a pretty good feel by having a look. Mt. Lebo is pretty popular and that price sounds like a popular price range in general. That doesn't mean a lot without knowing more however.

Thanks! I actually emailed my realtor and she doesn't think it'd be worth it (our initial thought). Patience, I guess! It's hard to wait for the right one.

[gg]

Originally Posted by DomerJen

Thanks! I actually emailed my realtor and she doesn't think it'd be worth it (our initial thought). Patience, I guess! It's hard to wait for the right one.

Good for you and you might have a good agent. That being said, see if you can get the value of the home from the agent and if an offer can be made and you like the place, make it. You never know. Nothing wrong with a low ball offer.

[PreservationPioneer]

Originally Posted by DomerJen

So we're talking about a house we liked, but it needs new heating (26 years old), A/C (age unknown), roof (18 years old), and windows (original - 85 years old). The kitchen could really use a facelift, too. We think all together it'd be about a $35k investment on a house listed for $235 in Mt. Lebanon.

Some of these items may not need to be replaced, and I think 35k is a very high estimate for the work.