Ok so currently trying to decide between 2 options
Current home - Pleasanton
value $1-1.1M
bought for $600k in 2011
3 BR / 2 BA, no garage, updated kitchen and bathrooms, updates backyard, specific dog run built for our 2 dogs we would need at a new house, everything is turn key if we sold today
$500k left on mortgage balance
Option 1:
Add on 1 car garage, laundry room, improve kitchen (open up wall to have open concept, add island)
Cost to do so (estimates in the $200k range :-/ - I know we won’t get that return back), would do a cash out refi for this which would increase our mortgage payment $600 with the current rates (property tax, insurance stays the same), already have drawings for this, and a couple quotes from contractors so we can pull the trigger on this project whenever
We need these things to stay in the home long term
Option 2:
Sell home as is now for 1 - 1.1M, put gained ($400k) towards down payment on new home
Would be looking at something in the ~$1.3M range in Pleasanton/Danville
New payment would be $2k more than we’re paying now (due to higher mortgage balance and property taxes)
Would be wanting a 4BR/2BA with garage, updated but open to lower price with projects since we DIY a lot of stuff on current home
Do you think it’s worth it to improve our home and then still maybe sell in 5+ years? Or should we just get out now and find something that works for us without doing any renovations…having a really hard time justifying either decision
Maybe I haven’t had enough coffee yet, but why would the two options differ so much in monthly payment? Both options would land you in a house costing about the same 1.3M, and HELOC or cash-out refi usually have higher rates. Only difference should be property tax?
I think you forgot the principal you will be getting back when you sell your house.
Sell house for 1M with only 500K mortgage balance gets you 500K back, not just 400.
Anyway I like Option 2 better. Amateurs like us taking on big building project don’t really know what we are doing. We tend to overspend, or got robbed blind by contractors. And adding on stuff after houses have been built is terribly inefficient and so with much higher cost comparing to a greenfield newly built house. Upshot is you put in 200k but don’t really get 200k worth of upgrade in house value.
I wouldn’t put the whole 500k towards new house, would want to save some for improvements/savings, so that is why I only said 400k.
My dad built our family house so I would have him helping with overseeing the work but yeah I overall don’t trust contractors, every major house project we’ve done my dad and I have DIYd ourselves (bathroom, central air, etc.) so I just have an expectation of quality I don’t think I’d get - this project is too big for us to take on ourselves though
Selling house and moving isn’t easy either, we’d have to sell first and the idea of that just stresses me out. I don’t think we could hold the 2 mortgages and it’s not like sellers are accepting contingent offers these days.
I struggle that there’s only a $200-300k difference in what you can sell your current home for and pay for the bigger home. It seems like that difference should be bigger.
Would your current neighborhood support the value of the improvements? You don’t want to become the most expensive house in the neighborhood, since most people in the higher price range would go to a more expensive neighborhood.
How long do you plan to keep the 4 br house under Option 2? If you plan to live in Option 2 for 10+ years versus selling Option 1 in 5 years anyway might as well go with Option 2 now.
It’s not like we’re wanting to do a huge upgrade up - just one more bedroom and a garage. Our house is in the starter home neighborhood. Improvements would increase value some but definitely not a 200k return and not as much as we’d get by adding a bedroom. We definitely wouldn’t be the biggest/nicest house in the neighborhood, everyone is improving - right now all 3 homes across from us are under construction for improvements.
