addendum to "the future of oak park, and buying a house now"

[wburg]

Of course, a lot of hip people are also poor or very poor, which means that the same neighborhood aspects that draw the population zen_klown is describing will also draw edgy kids looking for cheap rents, and close access to things like public transit, thrift stores, inexpensive markets (or food lockers.) And, to be perfectly honest, drug dealers and inattentive landlords (who don't care how loud your parties get) are something of a neighborhood benefit for that population.

Until the early 1990s, there was an independent coffee shop where the Starbucks on Broadway is now--the Guild Coffeehouse. Musicians played there, and also in the Guild Theatre next door.

And yeah, Southside Park was fairly notorious for prostitution through the mid-1980s. "I saw your mama at 4th and T!" was a common insult exchanged between Sacramento area kids in those days.

[edwardius]

I didn't price this out, so the numbers are probably wrong, but I think its illustrative of the types of issues you face in doing something in Oak Park. Lets say you have two identical homes, one in Oak Park and one in Midtown and neither of them have a garage. It might also cost 40 grand to have someone else build the garage in either location or 8 grand to buy the materials and try to do it yourself. In Midtown a garage might also increase the value of your property by 30k but a garage in Oak Park might only increase the value of your home in by 5 grand.

Lastly in a place like Oak Park, you might value the garage a lot more than in East Sac. In Oak Park, your car and your personal possessions are probably more at risk of theft so there probably is a bigger need for a garage than in Midtown.

Now if you look at the effective cost of adding a garage. In Oak Park even if you do the work yourself, you are going to be worse off by 3 grand (8k in materials less 5 grand in the increased value of your home) to add a garage and if you don't do the work yourself, the transaction is probably cost prohibitive. In Midtown if you add the garage yourself you are going to increase the value of your home by 30 grand for something that only cost you 8k to do yourself, so you come out ahead on the deal by 22K.

You may say, you have no intention of selling the house immediately so you don't care about how much an improvement adds to the value to the house. But when you don't have much money, your ability to fix things up is limited by both how much cash you have and how much credit you can get. Your ability to get a home equity loan to fix up your place is directly related to how much your home is worth. So even if you aren't intending to sell the place immediately, how much the improvement adds to the appraised value of your home still really does matter.

The other factor that all of you are ignoring is that circumstances change. When you don't have much cash, you don't have money to help solve other emergencies. If your mom gets sick and you have money, you can hire a nurse or put her in a nursing home. But when you don't have money and there is a family crisis, it falls upon you to go pick up the pieces. Maybe you have to sell your current place to move back to Ohio to take care of your mom or maybe she comes out to California and you no longer can work on the house.

If you have to sell quicker than you originally intended, its nice to be able to get a return for your efforts.

People can say flipping is evil and a lot of other claptrap, but if you don't understand the economics of the transaction, and you don't have much capital its incredibly easy to work really hard and end up with very little to show for all of your efforts.