Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 15, 2019 8:07:01 GMT -5
going to try to make this super brief, as most know alot of the back story already.
Got a big raise with my shiny new job, but the money isn't going as far as I would like/thought it would. I had ignored a lot of the house upkeep/maintenance as I was in school, and it was an old house to begin (100+!!) that wasn't well updated through the decades, and I need to get on top of that.
income - salary/bonus for 2019 - 140k current mortgage - 252k @4.5, about 8 years into a 30. Value is 497k on refin. I have about 120k in other assorted debt, mostly student loans. 2k to IRS, 2k personal loan, then big student loans. This other debt should be paid off by Nov/Dec with what I'm planing currently.
Student loan payments are about 1450/month, mortgage 2450.
Despite the raise, I feel like I am treading water month to month. 10% to 401k, 100 to EF (new acct, balance 200) and then I have about 200-300 "extra" to put towards debts.
Visited the bank and here is the extremes of what is on the table.
refi existing mortgage to 3.75/30 years and reduce payment by about 450/month. That would be a really comfortable path - except for the maintenance stuff.
Could get nearly 150k out, 4.375%, and increase payment by about 500/month.
Could get everything done and more on the house, plus have a nice chunk to either pay down student loans, or invest. The catch is that I currently only have about 400/month wiggle room in month to month budget, but I could like squeeze out another 2-300 or so.
So - I was thinking, get the big cash out. Put about 100-120k into a whole house overhaul (sorry YM! it needs it! Likely about 40 or more years of deferred maintenance!! long before we bought it), put 20k or more into a taxable/EF account and then look to refinancing the student loans, reduce interest a bit, maybe on a 15 year rather than 10 year payback to free up the budget a bit.
My biggest financial worry is that the house would not sell quickly if I lost my job for any reason. We did just have a round of layoffs, so there that!
If I did lose my job, I'm not interested in scrambling to replace this income (I'd try, but I don't want to stress about it, take the first thing offered) I'd prefer to sell the house.
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raeoflyte
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Post by raeoflyte on Aug 15, 2019 9:04:33 GMT -5
I'd probably do the refi, but pay off the student loan debt. That would free up $900 a month to put towards emergency fund and house maintenance.
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tcu2003
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Post by tcu2003 on Aug 15, 2019 9:13:10 GMT -5
How much longer do you *plan* to work? (I know that can always change based on circumstances and life happenings, but what’s your plan for an ideal timeline. )
That would affect my decision.
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resolution
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Post by resolution on Aug 15, 2019 9:30:55 GMT -5
What are the specific items and costs on the house?
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Post by Deleted on Aug 15, 2019 9:32:43 GMT -5
I think I might unload the house before I sunk all that money into it. Isn't it quite large and aren't the kids gone or nearly so? Maybe get yourself a condo or smaller updated place?
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busymom
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Post by busymom on Aug 15, 2019 9:36:49 GMT -5
How much do you really love that house? If it's going to take $150,000 to fix what's wrong with it, I think I'd shop for a house that doesn't need so much "love". JMHO. (And yes, we put money into our previous house, but even with replacing flooring & carpet, didn't even come close to what you're looking at spending. And we put in some hardwood floors.)
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raeoflyte
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Post by raeoflyte on Aug 15, 2019 10:00:01 GMT -5
$100k in maintenance and upgrades isn't likely to net you another $100k on your listing or final selling price, so I'd do the upgrades you want to do for yourself to enjoy the house while you're there. I'd say talk to a realtor about prices, but I've seen too many of them push for big upgrades that didn't actually get a higher selling price that I'm leery these days.
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Tiny
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Post by Tiny on Aug 15, 2019 11:14:15 GMT -5
My biggest financial worry is that the house would not sell quickly if I lost my job for any reason. We did just have a round of layoffs, so there that! If your house is priced right it will sell in a reasonable amount of time. Are you concerned that your house is actually worth less than the amount you owe on your house? Or are you worried you won't get what you THINK your house is worth? If your house is worth less than you owe - throwing more money at it in the form of improvements might not be the best plan...
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Post by Deleted on Aug 15, 2019 11:20:31 GMT -5
Rukh O'Rorke, are you talking about $100-120K of maintenance or upgrades? If you need a new roof and the house needs painting, then, of course, you have to do that. But you don't have to have the latest and greatest. And don't I remember that you redid your kitchen in the time we have been posting on here? Or was that another poster? I'd sell the house before I put that much into it unless those are all truly maintenance items that will trip you up on inspection. If you watch shows like Love It or List It, you will notice that they spend $100k and improve the value of their home by $110k. It's good tv but not very practical. Sorry to be blunt, but with your finances and a round of layoffs already, I would not set myself up for a $3000 a month house payment. You could easily lose the house if things go bad.
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geenamercile
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Post by geenamercile on Aug 15, 2019 11:49:11 GMT -5
The amount for the house sounds more like a flip then maintenance. However, if you are replacing wires, plumbing, shoring up the foundation, roof, adding insulation I can see that adding up. When my aunt and uncle did their farm house that was over 200 years old back in the early 2000, I think they spend above 150k in updating it all. But they took it down room by room to the studs and replaced them where needed, new wiring, new plumbing the whole works. They felt it was worth it, but it was more of a flip then just maintenance and updating.
I think I would take the loan for the maintenance that needs to be done, I don't think I would pull out extra.
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giramomma
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Post by giramomma on Aug 15, 2019 12:31:51 GMT -5
Honestly, I would sell the house and move into an apartment or find a condo/townhouse somewhere. How realistic is it going to be that you'll be able to buckle down and make the calls to get all the maintenance done? In some respects, I think we are both a lot alike. We like to be super busy..but then are resistant to knowing our limits.
At least now, I've stop saying "Well, when Miss M goes into all day 4K...we'll have all the time for abc." Because it just isn't going to happen. Likely ever. Sure. I'll be done with school by the time Miss M is in 4K. And I'll be on the cusp of being down one kid I'm responsible for. But, the upshot is three kids in activities, spanning three different grade levels: a high schooler that can't drive yet (and DD1 needs to be in 345354 things), a kiddo old enough to start school sports, and a kiddo that I'll need STILL need to make sure is reading x minutes a night and filling out those damn reading logs. (Maybe. I gave up the reading logs with the peanut this year.) I also know myself well enough to admit if it's taking 15 minutes to call up one contractor vs taking 15 minutes to knit <or any other activity>..the other activity is going to win out.
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shanendoah
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Post by shanendoah on Aug 15, 2019 13:17:30 GMT -5
Rukh O'Rorke - Given that Redfin estimates assume the house is in good shape, not in need of any maintenance or repairs, how much do you think your house could sell for if you did nothing? If this house were listed "as is" how much would you be able to sell it for? How much would you need to discount that for a quick sale? I am assuming that if you had to sell the house due to job loss, you would be looking to rent. How much is rent in your area for a place that would meet your family's needs? If you lost your job, and sold the house, would you have enough money between the sale of the house and savings to cover six months of rent and deposit? If those numbers work, I say refi the mortgage to lower the payments, throw a bit more money a month at the student loans, and then prioritize the work that needs to be done on the house. Do stuff that an inspection would turn up and could cost a sale. (Not necessarily the roof. Roof is a big ticket item, but you can often disclose that needs to be replaced and give the buyer a "credit" toward replacing it. Check with a real estate professional about how that might work.) If you lose your job, you want your debt payments to be as low as possible.
Now, if the numbers don't work, if your real estate market is such that no one is going to be a fixer upper/as is property at the price you would need to sell the house at, then start the process of taking the money out and start the process of lining up your contractors. Get everything done ASAP, so that if you do need to sell the house, you're not "in process". Since you refer to the work that needs to be done as maintenance and upkeep, I am guessing it is not going to increase that Redfin value for your house, or if it does, maybe only $20k of the $100k you need to spend. Mostly what it does is increase the speed at which the house will sell, because the inspection isn't likely to come back with work that needs to be done for you and the buyer to negotiate that. But this does lower your equity in the house to $100k. After fees and taxes, you're probably not walking away from the sale of the house with more than $80k. How does that compare with what you would walk away with if you don't do anything to the house, and sell as is? Of course, you would then also have the ~$20k in an EF fund, so you're back to $100k. Does that, with other savings, keep your family afloat for 6 months in a rental property?
Can you start the process of refinancing the student loans to 15 year loans now? That might be the biggest win for lowering your monthly payments.
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Lizard Queen
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Post by Lizard Queen on Aug 15, 2019 16:30:33 GMT -5
I'd refi just to lower the payment, but maybe get money out to pay off loans that are high interest rates. Don't sink $100k+ into an old house. What exactly needs to be done for maintenance?
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justme
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Post by justme on Aug 15, 2019 17:39:10 GMT -5
$100k in anything to a house would be a time suck to manage - to say nothing of whether it would be monetarily worth it. You've just spent years busting your ass to get your degree while working full time. Don't you just want to relax some?
I'd sell it and either rent and invest the money or downgrade to lower maintenance place.
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Miss Tequila
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Post by Miss Tequila on Aug 15, 2019 18:44:28 GMT -5
I couldn’t sleep at night with that kind of debt. I would sell the house and take some stress off my finances. One thing I would do it $100k into the house.
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laterbloomer
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Post by laterbloomer on Aug 15, 2019 19:38:39 GMT -5
You must love that house.
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jelloshots4all
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Post by jelloshots4all on Aug 15, 2019 20:22:44 GMT -5
If you think the repairs upgrades are going to cost $100K in a 100 yr old house, double your estimate. Once you open walls and expose plumbing, electrical, maybe lead or asbestos your costs will rise exponentially. Sell
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CCL
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Post by CCL on Aug 15, 2019 21:03:04 GMT -5
Like someone else already said, I'd start with refinancing the student loans. That would free up some money right away.
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souldoubt
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Post by souldoubt on Aug 15, 2019 22:01:34 GMT -5
I can really only echo what others said. If your house needs at least 100K of work then I can't imagine the redfin estimate is accurate. If that work involves opening up any walls then the cost and and time involved will both increase while even just making some upgrades could result in more work such as new electric/plumbing to support kitchen and bathroom upgrades. Hypothetically even if your house is worth 400K you'd do pretty well selling given what you owe. I don't know enough about your personal situation but for me if I didn't need that house and I had the debt you'd do I'd be looking to sell and either buy something that's cheaper or rent for a while and get debt paid down. If it's your forever home then that's probably not an option and in your situation that's the only way I'd be putting 100K or more into that house.
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schildi
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Post by schildi on Aug 16, 2019 0:14:30 GMT -5
I would sell that house and either move into an apartment, or find a condo or small new house that does not require much maintenance. New is important - chances of needed repairs are much lower. I would NOT start dumping repair money into the old house.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 8:22:49 GMT -5
$100k in maintenance and upgrades isn't likely to net you another $100k on your listing or final selling price, so I'd do the upgrades you want to do for yourself to enjoy the house while you're there. I'd say talk to a realtor about prices, but I've seen too many of them push for big upgrades that didn't actually get a higher selling price that I'm leery these days. good point, but I am not expecting that at all. Mostly this is routine stuff that merely maintains the value. I'm thinking that the value afterwards might be 525-535k. But it might just be closer to the redfin numbers. Which - redfin is a couple thousand lower than last time I checked just a month or so ago, so I would definitely rather get the money out before rates go up or prices go down, and figure it out afterwards.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 8:25:27 GMT -5
I'd probably do the refi, but pay off the student loan debt. That would free up $900 a month to put towards emergency fund and house maintenance. wow - yeah. I knew I was posting here for a reason, Thanks!! I could actually pay them off and still potentially have around 30-40k for the most immediate needs - depending on final values for appraisal and terms, etc.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 8:40:51 GMT -5
How much longer do you *plan* to work? (I know that can always change based on circumstances and life happenings, but what’s your plan for an ideal timeline. ) That would affect my decision. I'm pretty all over the place at the moment! Loosely, I'm planning to work until 62 (7-7.5 years) - but as I said if this job craps, that might change things considerable. I think my spot is pretty secure, but you never know! If I lose this job, I would definitely look to replace it but I would also downsize immediately, explore rukh inc as a potential part time gig, and then see where the chips land. So for that emergency plan, I would like to be at a point where this is a super easy sale.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 8:54:58 GMT -5
What are the specific items and costs on the house? What am I looking to do? New slab and flood control in basement ~20k, would like to do a bit more down there if possible, nice laundry room semi-livable area - not totally finished but not a wilderness either, maybe 10-15k more. Would at least like hookup for a kitchen down there - gas for stove, electric and water, etc. Hookups for a bathroom. Front porch and deck - not sure if all or partial replace, paint, etc. ~10-15k. Maybe more here. Porch is about 10'X25', same for deck above that. back porch - 2k - very tiny, but needs replacement wood is rotting. garage needs a lot of work, roof and there is some rotting around the bottom, 5k? not a lot of roof there. new driveway, about 100'. no clue, but a lot of concrete Want some hardscaping of the back and side yards. walkways, patio area. Landscaping, but I would prefer to do myself over a couple of summers, once the hardscaping is completed. Need about 3k of tree removal on the property. New fence - tipped over in a big icey storm, shored up currently, neighbors have been very forgiving! Been that way for ~8 months. Windows are terrible. But I love the woodwork around them! Hard to open, with super cheap storms that are also hard to open. I don't want to lose the interior woodwork on them, but not sure which way to go. Have a large picture window in FR, it is just a single pane with no storm. Was totally terrified during last vortex when it was nearly 30 below, and inside 60 that it would just shatter. After all that - would like a few niceties, refinish some wood floors that are worn through in high traffic area, finish interior painting, final piece would be any kitchen or bath upgrades as funds allow. ETA: Siding replacement or restoration of old clapboard siding, depending on condition.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 9:01:28 GMT -5
I think I might unload the house before I sunk all that money into it. Isn't it quite large and aren't the kids gone or nearly so? Maybe get yourself a condo or smaller updated place? yes to all. And it was larger than we needed anyway, but that step would wait until kids leave, both are getting closer so it is only a matter of time. The thought of actually moving is too much at the moment, lol! Maybe going through the appraisal prep, and then all the work, would kind of clear the way for that step a bit?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 9:08:54 GMT -5
How much do you really love that house? If it's going to take $150,000 to fix what's wrong with it, I think I'd shop for a house that doesn't need so much "love". JMHO. (And yes, we put money into our previous house, but even with replacing flooring & carpet, didn't even come close to what you're looking at spending. And we put in some hardwood floors.) It's a nice house, on a lovely street, and I do like it! But I am AOK with selling it and moving on too. But - I'm not really wanting to do it just this moment, unless I lost my job.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 9:16:01 GMT -5
Rukh O'Rorke , are you talking about $100-120K of maintenance or upgrades? If you need a new roof and the house needs painting, then, of course, you have to do that. But you don't have to have the latest and greatest. And don't I remember that you redid your kitchen in the time we have been posting on here? Or was that another poster? I'd sell the house before I put that much into it unless those are all truly maintenance items that will trip you up on inspection. If you watch shows like Love It or List It, you will notice that they spend $100k and improve the value of their home by $110k. It's good tv but not very practical. Sorry to be blunt, but with your finances and a round of layoffs already, I would not set myself up for a $3000 a month house payment. You could easily lose the house if things go bad. Yes, to kitchen. The new kitchen was never a huge success, but I'm not going to redo, just perhaps a few tweaks. Added the open shelving I had planned on, replace the super cheap counter as I always intended, and just take care of some trimming, kickplate, baseboards, etc. I did a list of things previous post, and they are mainly maintenance, with a few extras. I do need to add the siding issue onto that list! Exterior needs either new siding, or remove old and restore the clapboard underneath. Will depend on state of the clapboard. And I am totally ok with losing the house if things go bad! But I'd prefer to get things done, and enjoy it more, before selling! And maybe everything will be ok and I don't sell.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 9:19:04 GMT -5
Also, I think I need to re-frame you all a little bit here. 100k in chicago is not a lot of money in terms of what you get. Labor is super expensive, and materials, etc are likely more expensive and come with a 10% sales tax.
100k in some area can buy a house. You can't get a vacant lot for that here.
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bean29
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Post by bean29 on Aug 16, 2019 9:20:50 GMT -5
Speaking as someone who has an actual second kitchen in my basement, I would not go there. Do you only have one full bath? I don't know if I would add the bath either. In a very short time you will be living alone. Your house most certainly will be more than you need. That house will generate more taxes, more cleaning and more upkeep too. I just read an article yesterday that a second refrigerator is a bad idea too - uses too much energy for the use you get out of it (Love my 2nd fridge, and I think we can afford it, so I am just saying to think carefully about how much you want to add to your house).
DH and I live in a 3 bedroom 3 full bath home. We have an extra bedroom and an office/kitchen/family room in the basement (also one of our full baths is in the basement). We have full windows in the basement and a separate entrance. We are being killed on property taxes. We had hoped to get one of the kids to transition from college to independence by living in the basement, but they are not interested at all. I could live with less house, but I don't think I will come out ahead on a sale/repurchase, and we have an interest rate close to 2%, so we will wait 8 years or so until the house is paid off to make any moves.
I would upgrade your laundry facilities, do any maintenance issues and possibly pay off the student loans. My sister-in-law used to say she wished she did not have 3 full baths, and I thought she was nuts - but now, I really am beginning to get where she was coming from. It is just more to clean when you are having company, and it is more maintenance to perform too.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Aug 16, 2019 9:37:13 GMT -5
I would sell that house and either move into an apartment, or find a condo or small new house that does not require much maintenance. New is important - chances of needed repairs are much lower. I would NOT start dumping repair money into the old house.
A comparable new construction in my area would be well over a million. This link is a 10 year old home, on an odd lot abutting a training line in back. The land these new houses are on was previously not considered desirable enough to build on. www.redfin.com/IL/Chicago/4151-N-Kilpatrick-Ave-60641/home/17458099Mine is older, but nicer setting - away from train and highway lines, most homes on wider lots, and I have a double lot compared to this one, with side driveway to garage in back. The interior of this one is shiny and new, but most of the rooms look cheap to me. No woodwork. My house has lovely woodwork, Thick, detailed baseboards and window trim, chair rail in dining room, and crown moldings throughout the first floor. There is also a number of stain glass and leaded windows. I would not trade mine for this one. Here is a new one that is one neighborhood over, that neighborhood is a little pricier. While I like my house, I would trade for this one! www.redfin.com/IL/Chicago/3922-N-Tripp-Ave-60641/unit-1/home/13458709
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