We answered this question after the sale of our first house (spoiler: we bought in the bubble and sold in the recession), so now we’re back to do it again – but this time the coins stacked a bit more favorably, thanks both to selling in a slightly better market and by not sinking as much into this house’s improvements (it helped that we didn’t need expensive upgrades like a new roof and windows this time around).
We managed to sell this latest house for $23,000 more than we bought it for back in 2010. And our best estimate is that we put around $14,500 into improvements that stay with the house (i.e. not furniture or other decor that moves with us). That means we made a net gain of about $8,500. Here’s an estimated breakdown of where the money went:
- Kitchen renovation (including appliances, new flooring, backsplash, lighting, counters, opening the wall, etc): $6,955
- Deck building/staining/sealing: $1,783
- New patio: $1,252
- Built-in desk in the office (it conveys with the house since it was custom-built for that area): $124
- Laundry appliances & built-in shelves: $712
- Hall bathroom update: $168
- Guest bathroom update: $51
- Crown molding that we added throughout the house: $218
- Fireplace upgrade with new tile/mantel: $147
- Board & batten in hallway: $57
- Pergola over carport: $214
- Column update for porch: $198
- Window boxes/plants for them: $132
- Paint/stain for every room, built-in, and outdoor area (this doesn’t include furniture paint/stain since that comes with us): $800
- Landscaping, light fixtures, curtains, and miscellaneous other items that stay (like new border tile & toilet in the main bath): $1,700
- Total: $14,511*
*some of these prices are total costs for projects, including some items that won’t convey with the house – for example the bathroom makeover costs include art and accessories that came with us. So this isn’t a perfect tally.
But regardless of how meticulous our math is, we’re incredibly grateful that in just a few years we were able to increase the value of this house so much – especially given our experience with our first house (to which we barely boosted the sale price at all – stupid market!). But of course, we owe a 3% fee at closing to pay the buyer’s agent commission (but we would have owed twice that amount if we used a seller’s agent, so we’re thankful for that as well).
In the end, we probably broke about even on this house. House flippers we’re not. But house lovers? You betcha. The thing we’re most excited about is finally getting to roll all of the equity that we’ve built over seven years of paying the mortgage on our first two homes into this new house – nearly cutting our mortgage balance in half. Yeehaw! That was definitely worth the wait.
What about you guys? Have you added up what you’ve spent on a house and compared it to what you got back? We always hear kitchens, bathrooms, and outdoor “square footage” (decks, patios, etc) tend to up the resale value of a house. Has that rung true for you? One thing we haven’t really heard much about are built-ins, but we think they’re such a nice feature (like the built-in desk we made for the office, the ones in the dining room that we inherited, and the one that we added to the laundry room).
So built-ins will definitely be making an appearance at the new house (especially since we’re already starting to notice a lack of built-in storage here). They add a nice feeling of function + customization, and both of the built-ins that we added were under $125, so that’s definitely some nice bang for your buck!
Kristin says
Congratulations! Thank you for sharing the details. The market is just starting to bounce back so any profit you can make is well, a profit. I have not bought and sold but I recently refinanced on my house which I moved into 5 years ago. After itemizing everything for the appraiser (to show him I was prepared and very knowledgable about every upgrade in the house to help in my final appraisal cost) I estimate that the total spent on upgrades in 5 years was about $26,000. This includes a combination of hired labor/sweat equity and major upgrades (new furnace, oil tank, attic mold remediation, new sewer line, etc.). The house appraised for $34,500 above my purchase price. While owning a home is a huge responsibility and more expensive than renting, the tax return you get to roll into those upgrades is well worth it. :)
Kathy says
Did you include the cost to open the wall in the dining/living room? I think that was your number one improvementin your old house.
I can’t wait to see what you do with your new home. It’s absolutely perfect for your family.
YoungHouseLove says
Yes, that was included in the kitchen reno :)
xo
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Angela says
Can’t believe the housing market in the US. You did such a big improvement on the house. We sold our first house and made $30,000 then We just sold our second house and made a $150,000 profit (South western Ontario, Canada). Just brought the dream home and are hoping to sell in ten years and make a huge profit. All new builds though.
YoungHouseLove says
Woah! That’s awesome! I think it’s all about housing costs (homes are extremely affordable here, so they don’t double or triple when you do improvements like they do in areas with high house prices (for example, in DC a house could be worth 700,000 and then you redo that kitchen and bathroom and it’s worth $900,000 since it starts so high, but in our area things are much more affordable so even if they increase their value at the same percentage, the actual amount of profit is much lower to match the lower housing costs :)
xo
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Delighted for you! says
Thanks so much for your openness & honesty! Looking forward to new adventures in the new house!
cd says
Regarding your built-ins – I’m so curious whether the new owners will use the spaces the same way you did. Your layout made perfect sense for you (though I didn’t see as much dinner-partying as I’d expect with that gorgeous giant table! That’s okay, we also have a gorgeous giant table and we use it like twice a year. Maybe). I wonder if the new owners will turn the front room back into a reception space/formal living room. Can you make friends with them to find out – or is that too weird? ;)
YoungHouseLove says
Haha, that’s totally my plan (she says while grinning like a maniac). I want to befriend them and then I want to house crash them…
xo
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Tasha gammon says
Kinda off topic, but did you guys leave your refrigerator and washer and dryer at the old place or take it with you? Here in Oklahoma the standard is to take the washer, dryer and refrigerator with you and leave all the other appliances. Just curious. :)
YoungHouseLove says
Here you typically leave them (especially when selling a move-in-ready house). I think it’s regional though!
xo
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Amy says
You also have to take into account that essentially your house is your source of income and (I’m no expert) but you probably wrote off every single item that makes any type of appearance in the blog! That is worth something too! Excited to see what you do with this next house- as we have “moved” with you (in a non-stalker way) through 3 houses now :) We are in the process of buying new construction soon (in Boise, Idaho) and as much as I love DIY, I’m excited to have a house that is just DONE, for once! :)
YoungHouseLove says
Oh no, we actually can’t write off a single thing that we do to our primary residence, because then the gov would get a chunk of our home sale! So nothing is a write off and we pay for everything from our own pocket just like any DIYer would. We just write off things like printer paper in the office. Hahahaha!
xo
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Jana says
Glad you made this point Amy! You put a lot of sweat equity into this house that you technically ‘lost money’ on. But, all of that sweat equity provides material for your blog which earns you money for your family SO, you really didn’t lose any money. So yeah for you guys – we all have to spend money on our houses but you profit from it. Love it!
Ali B. says
I think if you DIY built-ins, you can perhaps make a bit of money, but if you hire someone, I’m not so sure you’re going to be getting that back. I worked for a place that did built-ins and given the cost of those, there’s no way they were increasing the equity enough to make them worth it from that perspective. And once I even heard a realtor suggested they be taken out in a bedroom that the current owners were using as an office.
YoungHouseLove says
Great point! Never thought of that!
xo
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Erin says
We are currently just starting to think about selling our home, and unfortunately it’s still quite a sad market. We bought to get out of a horrible apartment situation so we jumped at the first one that ‘looked’ good. It was not so good. When we did our refi 2 years ago our house appraised for 20k less than what we paid for it and with the addition of 3 kids plus necessary home improvements we don’t have a lot of savings. We also realized pretty quickly how bad our neighborhood is with a murder just down the block right when we moved in, being robbed last November, SWAT situation one block over last summer. And now that we have school aged children, no good schools in our area. I cannot believe this is where we are right now. Cue the mini violins.
YoungHouseLove says
Oh no Erin! Hope the market comes back soon!
xo
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Ginny @ Goofy Monkeys says
I’m a numbers gal, so seeing the breakdown is really great. Congrats on the 50% reduction in mortgage balance!
Emma says
I think a very overlooked financial figure here is the income you are able to generate from your blog about… fixing up your house! If you didn’t have any home improvement projects there wouldn’t be a whole lot for us to read. I think all in all you did VERY well. I am so excited to see what you do with the next house!
YoungHouseLove says
Amen! The fact that we get to support our family doing what we love, which just started out as a little hobby of ours is what blows us away the most. Never could have guessed that first post back in 2007 would lead to this!
xo
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sara says
Its nice to come out a bit ahead! I’m very curious about my own house and whats its now worth (after kitchen reno and bathroom reno, landscaping…etc) Last year an agent walked through but couldn’t give me a value because the kitchen was gutted ha, I told her not to come!)
I watch the listings all the time and a house around the corner just sold for $$$ALOT (after the owners had it for 10 years (bought for 85,000 sold for 177,000)) … the interest rates and lack of houses for sale are inflating the prices. Although that house gave me some hope for my own, I can’t imagine who would have paid that much…it seems a bit too high for the area. And although I love the work I have done on my house, there is no way I would put that kind of price on mine (I would be happy for results similar to yours.)
Rachel says
Awesome job, guys!
We bought our home in 2008 and if we sold it today would probably lose about 20%, and that’s doesn’t account for the improvements we’ve made, particularly the $15k we spent finishing the basement.
I look at it this way though. Unless you are permanently leaving the homeowner scene (i.e. going back to renting or living with someone else) you are not really “losing” since you are likely purchasing your next home at a significantly lower price as well. Of course, first time homebuyers are wise to enter the market when prices are low (read: get in NOW before the market really gets hot again), but in the end you have to do what is best for you and your family, regardless of what the market is doing.
I sometimes find myself thinking we would have been better off (financially) continuing to rent for a few more years, but I also think I would have gone crazy staying any longer in a 600 SF apartment. I love our house and our beautiful yard. I wouldn’t trade it for anything (well, except maybe a bigger house in our dream neighborhood…someday :) )
The 15-year mortgage? I’m a huge fan! We started with a 30-year and barely made a dent in equity until we refinanced to the 15-year. And the payments are only slightly more. We’ll never do a 30-year again!
Kathy says
That’s great! And considering that DIY home projects are your jobs now, your home sale led to higher returns than most.
Crystal says
So happy to hear you were able to make a profit. We also bought during the bubble and unfortunately are still living in the house because of it. We have added a sprinkling system, grass, landscaping, garden, huge shed, finished the basement, added a second bathroom, play room/ living room, craft room, stone countertops, undermounted sinks, and new faucets in the bathrooms, 5ft more cabinets/countertops in the kitchen, and board and batton in the dining room/hallways. All that said we could maybe sell our house for what we paid for it over 6 years ago but after we pay the fees that come along with selling we will be lucky if we don’t have to bring money to the closing………depressing. If I only knew than what I know now
YoungHouseLove says
Sounds like your house is lovely from all the improvements you made Crystal! And maybe once the market comes back it’ll even turn you a profit. Here’s hoping!
xo
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Lori says
Even sounds pretty fantastic since you’ve also been able to both work from home with the blog, do what you love, and roll over all that equity into what may very well be a forever home! Such a dork thing to say, but I’m so darn proud of you guys!!!
YoungHouseLove says
Aw thanks Lori :)
xo
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Julie K says
I think the lesson I’m learning here is that I need to move to a more affordable area. I live in the Bay Area (not SF proper) and a two bedroom house in my not-so-nice neighborhood just sold for well over $500,000. I couldn’t even imagine purchasing a house as nice as yours in the $300,000 range. Seriously, incredible.
Rebecca says
We bought our little townhouse as a foreclosure (no major inspection issues so a major plus there) and updated it. New flooring and paint everywhere. Updated master bath and half bath by getting rid of builder grade cabinets and got all new appliances, granite counters, and a backsplash in the kitchen. Total spent around $15,000 and we made approximately $5,000 when we sold. We only owned two years but with the extra we put on princical (which was still less than we would pay rent) the sale price gave us enough to make a downpayment on our new forever home. No professional house flippers here but it helped us reach our forever home with more confidence in what we’d be paying.
YoungHouseLove says
That’s awesome!
xo
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Lauren @ The Highlands Life says
I’d say you did pretty awesome! I’m hoping we’ll make a profit when we sell our house (hopefully way down the road!). The housing market here in Louisville has proven to be really pretty great around our neighborhood so here’s to hoping it only gets better.
Laura says
Thanks so much for sharing this perspective. It’s interesting to see how you kept an eye on the cost of the improvements versus their value. You didn’t “over-improve” the house, but the updates you did make had an overall impact greater than the individual efforts, I think. We’re starting updates on our new-to-us old house, and it’s helpful to keep in mind the cost versus the value – it makes us stay grounded (most of the time!).
GreenInOC says
Admittedly, I’m pretty dense when it comes to these things but I don’t understand how you just about broke even on both homes but have 7 years of equity from paying your mortgage that allowed you to cut your mortgage payment on this house in about 1/2?
On another note, I agree – I swoon when I see built-ins!!
YoungHouseLove says
We paid the mortgage for 7 years (along with putting a down payment on our first and second house, which is in that “pot” too) – so that money is sitting like a little nest egg that gets rolled over into the new house (which brings the mortgage amount down by nearly 50% since we didn’t get to apply that money when we bought the new house, since we bought it before we sold our second house). Does that make sense? So this post tallies up what we spent on improvements vs. what we made back at the sale – but doesn’t include all of the money we paid down over 7 years of owning this house and our first house along with those down payments, which now gets dumped into the new house mortgage :)
xo
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GreenInOC says
Duh! Told I you I was dense!
YoungHouseLove says
No way, I need a little more explanation when it comes to house stuff too! Don’t even worry about it :)
xo
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Amy says
So did you refinance the new house and put the money back in? Sorry if this is too personal, I am always interested to see why people choose to do things financially as I feel like I am still learning. It may be beyond the scope of the blog but perhaps an interesting idea might be a post on the decision process for keeping the money outside the mortgage vs paying down the mortgage (when interest rates are this low).
YoungHouseLove says
We talked to our lender since there are a lot of options (something called a recast where they just rerun the loan with a large payment applied from the sale but use the same interest rate, one lump payment applied towards the mortgage without any recasting of the loan, a refinance where the interest rate changes and you pay larger fees, etc) and just went with the best one for us. I think the “best one” varies depending on what type of loan you have, what’s offered, how much you put down, etc. Hope it helps!
xo
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Yulia says
Sherry, thanks for explaining the recast/refinance option. I had that same question! An important note is that some financial institutions don’t allow recasting. Several years after we bought our house, interest rates dropped, so we recast. It had only cost us $2000 to recast and drop the interest rate. Then, our lender, (a bank) was bought out by another bank and when we wanted to recast again, they said they don’t offer that option. Our only option was refinancing, which would cost over $5000 and we would have to go through the hassle of getting upraised, inspected… :(
Also, since I’m a big math geek (literally! I’m a high school math teacher), I teach mortgage stuff to my seniors and they are always shocked to see the huge difference in the principal/interest ratio of the 15 vs. 30 year loan. With a 15 year loan, the principal amount of the monthly payment is always greater than the interest. With a 30 year loan, the principal portion is less than the interest portion of the monthly payment for roughly the first 13-14 years.
YoungHouseLove says
So interesting about the recast not always being an option! And I love that you teach morgage stuff to seniors! That’s awesome!
xo
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Katy says
We bought during the bubble as well, and in a bad neighborhood….real bad! We will never get back our investment (new floors, roof, heating system, security system, and private school tuition for our daughter), but at this point we would be happy to get out before the next drive by (joking of course, but only sort of).
We bought when I was a stay-at-home mom. We now make more than double what we made 10 years ago, but still not enough to abandon the house we have had on the market twice with no bites.
It saddens me greatly that my daughter cannot play outside, but she is getting a far better education then she would have.
In short, we made a mistake…a big one. We got caught up in the fear we had to buy, and the hope we could just flip it one day like everyone else was doing. I am sure we are not alone.
I hope young people read your post about saving for the right neighborhood, and living below your means. I wish we would have known better.
YoungHouseLove says
Oh Katy, I’m sending you lots of house selling mojo! I hope the market bounces back and you can hopefully sell it a lot easier (and for more). Good luck with everything!
xo
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Constance says
You are not alone! We didn’t have your exact experience, but did feel after the market tanked that we had made a well-intentioned mistake rooted in the idea that it was smart to buy something we could afford and we would only be rewarded (not punished) for doing so. Good thoughts to you!
Lindsey d. says
Well, you could always live where I live — a town where even if you live in the nicest neighborhood in town, you STILL have to send your kids to private/parochial school to get a decent education!
christina @ homemade ocean says
Gahhhhh I am just so excited to see what you do with this house!!!
Jessica says
About built ins: I love them, but depending on how you do them the return on investment when selling is not going to be good. When we bought our house two years ago the sellers had the bill from the company who installed built in shelving in all the closets. They spent $6,000 dollars. although i liked them, that added nothing to the value of the house to me. I laughed when i saw how much they spent. We ended up buying the house for $12,000 less than they paid for it 5 years before.
YoungHouseLove says
Oh no! Maybe the key to built-ins are bang for your buck ones (ex: ours were $150-ish) instead of 6K ones?
xo
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Jessica says
I agree. Seeing you guys do it for cheape,r and with great results, perhaps will help someone else not overpay to have a contractor do it.
Jen says
I agree that the bang-for-your buck approach is best because built-ins are sort of hit-or-miss in terms of whether they add value. You can do a built-in desk in a room, but if the people who buy your home don’t want to use that particular room as an office, or want to use their great-grandfather’s heirloom desk, then the built-ins aren’t going to mean much (even if you spent $$$ on them). I personally dislike a lot of built-ins because we have quite a few pieces of large art. So something like a large built-in shelving and entertainment center in a living room taking up precious wall space would be a disincentive for me.
Katie says
I am so grateful that you guys share this. I think it’s important to remember that you do this because you love it, and not necessarily because it it a huge money-maker. It helps me be realistic about the improvements we make, and to remember that in the end, it’s about making a house our home!
YoungHouseLove says
Aw thanks Katie!
xo
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Laura says
Wow, such interesting information! Glad that you made a profit, and hooray for a much lower mortgage balance. I think I expected more for how much labor you put into it, and such a serious upgrade to the kitchen, but it’s nice to know the actual numbers.
We bought a foreclosure about 2 years ago, so our timing was right. We’ve probably put $15,000 into it, and I imagine we could sell it today for about what we bought it for plus the $15,000 we put into it, but who really knows. We have no current plan to sell. The way I look at it, I’m happy to be able to live in it and enjoy it, and we’re also building up some equity as we make payments. (15 year mortgages are great for building equity in a short period of time.) Property taxes are the part I hate – almost as much as the mortgage payment itself!
YoungHouseLove says
Eeks! My mom and dad have those too in NY/NJ. Richmond property taxes are crazy low in case you’re looking to move… haha! :)
xo
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lauren says
that’s crazy. We’re somewhat diy’ers too (well hubby does most of the work himself) and we are onto house number two. Where i live, we are having a huge housing boom and isn’t following the same pace as the rest of the country. we bought our house 3 years ago for 250k, did 50 in renos and it’s now appraised at 360k. where we are getting stuck is that a new build can cost 400k, so the question comes into mind – why buy old when you can buy new?? someone will have to really love our neighbourhood, and huge property to want to buy our house.
Kathi says
Location would be one reason why I’d go with an older v. newer house (especially in MI, where we live). Also, older homes tend to have larger lots and more established/bigger trees – 2 things we think make them more valuable over cookie cutter, newly built subdivisions with postage stamp lots and no trees)….
Steph Nelson says
I too would rather buy older rahter than newer for the reasons stated AND I think in some ways, the homes were built better. There are houses here (central Florida) built during the boom that seem to be literally falling apart. No thanks.
Mckenzie says
Yesterday I posted that our house was going live on the market (and having two-2 year olds). It was posted ten minutes before someone called to look at it. We’ve had three showings so far. I cannot believe the traffic already. How many times did you show your house? How fast did it start? As far as I am concerned this is bananas!
YoungHouseLove says
Wahoo! We showed ours three times this time (the very first people to look at it bought it). Last time (in 2010) we had 14 showings. Good luck with everything Mckenzie!
xo
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Stacy says
The market you’re selling in sounds like the North Shore market in Boston. There’s nothing on the market, so with inventory being so low, as soon as a house goes on the market people want to go see it if it seems to “fit the bill.” Our house had a showing every single day for 2 weeks and one open house before we got a house for just under asking. We could have waited longer to see if we got asking or higher but we just want out of here and the new owner is planning on renting the property anyways – we are actually going to rent the property from the new owner until we find something we like. Good luck in your house selling – sounds like it’s gonna go quick!
Constance says
Thank you for sharing these details. We bought in the bubble and were fortunately able to sell our supposed-to-be starter home 5 years later at NOT a profit, but comfortable enough for us to leave the nice, but too small space. We paid our mortgage dilligently, but only experienced about 6 month of equity (at the beginning of home ownership) before the market tanked – then it was all gone a never recovered. We are fortunate that we had financial options that enabled us to move, but that experience has certainly soured us. It makes homes that need DIY-love (as opposed to more turn-key) look MUCH more appealing.
Whitney Dupuis says
You guys are so blessed to be able to do what you love, and do it successfully! Good for you for carving a niche for yourselves and working your butts off to make it work. Inspiring!
MelissaS says
Did you also have to pay the buyers realtor fees? I read your post on selling FSBO because we are considering it for our house. We’d like to try and and avoid paying the realtor commissions, but are a little nervous doing it all ourselves. You said you got a closing attorney, that is not the same as just going through the title or escrow company right?
Congrats again! :-)
YoungHouseLove says
Oh yes, that’s in this post. We paid 3% instead of the 6% we would have paid had we hired a seller’s agent so we factored that in a few paragraphs under the breakdown. And yes, in VA you have to hire a closing attorney, but it’s usually only a few hundred bucks :)
xo
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Christy Niebaum says
Wow! That’s a great profit. I actually assumed it would have been more given all the work you guys have done, but that’s still awesome. Congrats! High fives! Pats on the back!
feep says
According to that image, you made a cool $3.25. Don’t spend it all in one place.
YoungHouseLove says
We rollin’ in quarters, yo.
xo
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Krystle @ Color Transformed Family says
We bought in the bubble and know when we decide to sell our house in the next year or so we will loses. Every home renovation at this point is purely for our pleasure and in holes that at least the house will sell a little quicker. Congrats on breaking even though and for a new lower mortgage payment.
Catherine says
Good job, you guys! :)
My husband and I were lucky enough to sell our first condo with a 30K profit four years ago, which we put down to purchase a townhouse. We DIYed everything (deck, kitchen, bathrooms, laundry, etc.) in that townhouse and sold it two years later for a 50K profit. Which in turn allowed us to buy our forever home and reduce the length of our mortgage.
BTW, we are in Montreal, which wasn’t as affected by the market crash. So that might explain it, in addition to the DIY.
We used a lot of your tutorials for the improvements we made, thanks for the inspiration! And I can’t wait to see all the transformations in your brand new house!
YoungHouseLove says
That’s awesome!
xo
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heather says
Before we started the addition we decided to refinance to lower our mortgage payments and get a lower percentage (both awesome things which were already low to begin with). We had done a lot of land improvements and had two new buildings on the property (garage and barn) and only a deck on the house with no other items done to the house itself. Even with just wood heat and a monitor heater (no oil, no electric heat) it was worth about $50,000 more than we paid for it! We’re well aware that down the line if we ever decide to sell (with no plans to) we’ll likely be well over what we paid for it!
YoungHouseLove says
That’s amazing Heather! Your lot is such an awesome chunk of land!
xo
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heather says
Haha funny you say that, because land is the only reason we would ever consider selling! But it would have to be pretty unreal, because we absolutely LOVE the details going into our home and we don’t want to renovate again. We only have 1.1 but a 40 acre hayfield owned by the farm is our backyard attached to it, plus a couple hundred acres of woods including private trails, behind that. That said, we keep our eyes out for lots of land nearby we could manage versus moving to a plot of land! We love our little nugget in the country. :)
YoungHouseLove says
Your photos are just breathtaking! I love seeing your view!
xo
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Marcy says
Thanks from me too for sharing all this info. I feel like you’re a great example of living within your means when there are so many counter-examples out there.
We bought at the end of the housing recession for our area – and we bought a fixer and we made a generous estimate on how much improvements would cost, and considered we’d still come out ahead based on the cost of the turnkey houses in the neighborhood.
Surprisingly, the value of our home has already jumped based just on the land, not even including our repairs and updates, so after closing costs we’d at least break if we decided to sell.
I am one of those people who don’t think houses are a good investment, yet I wanted my own home, so we just tried to be as conservative as possible and it feels better knowing we’d at least not lose money on the deal.
All the sweat equity goes into not only making the house nicer than we could afford turnkey, but you have the pride and control in the end product.
YoungHouseLove says
That’s awesome Marcy!
xo
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Mary | lemongroveblog says
After buying and selling two homes, I’m of the mentality that if you gain some equity you can sink into the next place, you’re overall ahead! Plus, if you can create a place you love calling home – that is worth it in itself!
Alix K says
I’m an appraiser and I can tell you you never completely “get back” the amount of money you put in a house, simply because the new buyers are not ready to pay that amount in comparison to another house that does not have these features. They are probably going for the cheapest one. Extra features like built-ins, granite counter tops, marble tile, new stainless appliances, central vacuums,etc. will not get you anything except getting your house to sell faster. But nothing in term of money.
Anything below grade (like the first floor of a raised ranch for example) does not get nearly as much value as anything above grade, even if there is plenty daylight. It will not be counted as living area. This means that if you live in a raised ranch (or split entry/split level type of house), any bedroom or bathroom that’s even partially below grade will not be considered. Let’s say you have 2 bedrooms and one bathroom in the “basement”, and one bedroom one bathroom “upstairs”, then your house is legally a one bedroom/one bathroom and that’s the market it will be competing with even though it has the same utility as a 3 bedrooms/2 bathrooms house.
On the good side, anything above grade that’s heated gets included in the square footage: if you have an enclosed porch and put in a small electric heater like a Rinnai or similar, then that’s square footage. The same enclosed porch without heat is just an enclosed porch. Patios, deck, etc. had value as well but not as much. Garages definitely help, even better if they are attached.
Basically, anything cosmetic will not bring you much in term of value. Just do what you like and embrace it, or save it for your forever home. Also keep in mind that it all comes down to LOCATION: a super updated fancy house in a blah neighborhood will NEVER get the same value than the same house in a better neighborhood. So if you are thinking resale value, keep an eye on what your neighbors are selling for. The market is definitely coming back but it is still tough, with still a lot of foreclosures in some areas.
YoungHouseLove says
So interesting!
xo
s
Riva says
Man, I hate that above-grade rule for the appraisal system. Our house is a split-entry so the lower level is half “below grade” so the big bedroom and bathroom down there don’t count even though the house is a walk-out on one side and it’s really not like a basement at all. Why is the system this way? It’s so dumb!
Nichole K says
We don’t have the same “below grade means it doesn’t count” rule in Washington State, or really anywhere in the Northwest. Maybe this is regional? Basement rooms with a closet and egress window still count as a bedroom. Bathrooms too. Strange…
lala117 says
Having been through the buying process recently, we were FASCINATED to learn more about appraisers and how houses get appraised. It was so interesting to see which houses the appraiser used as “comps” to our new house (and whether we agreed or not). For example, our new house got marked down in value for backing up to a commercial building parking lot, rather than other houses. This was good for us, since we were the buyers — but the parking lot behind out house was actually a selling feature for us, as it lets extra light to the back of our house, you aren’t so close to neighbors, and in the evenings the local kids take the now-empty lot over and play basketball and roller hockey!
At the end of the day, it all depends on your hyper-local market. In the the DC suburbs, for example, there are many neighborhoods where people have finished their below grade basements and installed a small full bathroom as a way to eke out extra living space. In real estate listings, they ALWAYS count those as an extra bedroom and extra bathroom, even if those rooms would not be counted by an appraiser. These bedrooms and bathrooms definitely are reflected in the list price, because space is at such a premium here so a 3 bedroom is more valuable than a 2 bedroom, even if one “bedroom” is in the basement.
The DC market is really expensive and therefor perhaps weird — we actually stopped watching House Hunters (especially the episodes in Texas and the South) because it was just depressing us.
Just reiterating: location, location, location – it make a difference, and not just in price!
Riva says
The “below grade” rule is just for the appraised value of your house – which is mostly of concern to the mortgage provider. Our house is “appraised” as being 2 bedrooms, 1 bathroom, but if we listed it on the MLS for sale we would still count it as “3 bedrooms, 2 bathrooms.” I don’t know why it is this way and like I said before, I don’t like it!!
Nichole K says
Sorry to hijack the comment section but I have a question then. Our old house had 3 bedrooms and 1 bathroom below grade. Those rooms were included in the property tax assessment and, correspondingly, taxed by our county.
Is the assessed value different from the appraised value? I think our county uses the same number for both. Interesting that we might have paid taxes on a rooms that that shouldn’t “count” as appraised rooms.
maddy says
soooooo, I promise I’m not stupid, but I am a student with no homeowning experience….what is equity? I don’t think I’ve ever heard of it?
p.s so happy for you guys! I was painting a room white today to set up for an art exhibition, I kept saying ‘thin and even coats guys’ from what I’ve learned here haha :)
YoungHouseLove says
Haha, you’re so sweet Maddy! Equity is basically the money you put down as a downpayment and all of those monthly mortgage payments you make. Since you’re not renting, the money goes into a pot that you actually get back when you sell the house – so since we paid the mortgage for 7 years (along with putting a down payment on our first and second house, which is in that “pot” too) that money sat like a little nest egg and then finally got rolled over into the new house (we didn’t get to apply that money when we bought the new house since we hadn’t sold our second one yet, but now we do- and it brings down the mortgage amount by nearly 50%!). Does that make sense? So this post tallies up what we spent on improvements vs. what we made back at the sale – but doesn’t include all of the money we paid down over 7 years of owning this house and our first house along with those down payments, which now gets dumped into the new house mortgage :)
xo
s
maddy says
okay, so i have no idea if this will show up in the right place, but thank you!
I had to read it twice, but that does make a lot of sense! so looking forward to new house projects! best of luck!xo
YoungHouseLove says
So glad!
xo
s
Lee says
Congratulations on such a quick, easy (and profitable!) sale of your gorgeous home. Can’t wait to see the transformation of your new place.
We’ve seen both sides of the real estate coin. We bought our first house (a 1,200-square-foot bungalow) in 2003 for $165K (a steal in our little Pacific Northwest college town) and did extensive remodeling (mostly ourselves, but with a $40K kitchen remodel done by the professionals). My husband had a job change in 2008 and we had to move from the house we thought we’d raise our kids in. Best thing we could have done? Listing it with a realtor who encouraged us to list it a bit under the fair market price. We were in a very desirable neighborhood and that got folks’ attention; we had FIVE offers on the first day, a bidding war ensued, and we sold it for $347K. Wha??? Crazytown.
But. (Isn’t there always a but when something so seemingly crazy good happens??)
We bought our next house in the new city for $320K (it was twice as big as our much-loved little bungalow had been). But the market went south and when my husband got an amazing job offer back at our original city five years later, we had to put it on the market for $285K — a painful loss on our initial investment (though we were lucky to be able to walk away from it, having put most of that profit from the first house into our downpayment on the second). We got an offer for $280K in a few weeks and were happy to be able to move on, even at a loss. And then — karma, maybe? — the appraisal on the house came in at only $261K! That’s how much the market had tanked in just five years. Well, we ended up going through with the sale, because at this point my husband was already working in his new job and commuting to see us on the weekends — we just wanted to all be together again. But man, it STUNG to have lost nearly $60K on that second house.
Yesterday we closed on our third home (moving in next week! can ‘t wait!) and although our little Pacific Northwest town has pretty high real estate prices, even when the market is soft, we think we got a great deal and we KNOW we landed a great house for us. This time we plan to be here for 15-20 years. Can’t wait to continue reading your blog and watch the transformation of your new place as we start making this new place our own, as well.
Yvonne @ Dress This Nest says
I wish I had found your blog before we bought our first home. Those “major upgrades” (i.e. new roof, concrete work and windows) are killing our budget! Next time I will look for a house that just needs a new “look” instead of a new “body.”
Lesley says
The other thing to factor in is that when you “break even” you really ended up living somewhere for 3-1/2 years for only the cost of utilities. If you were renting you’d also be out $1-3k per month (providing a broad range for your previous house to account for regional variations), so really you saved $42,000 to $126,000 which could be added to what you MADE on the house.
YoungHouseLove says
Woah!
xo
s
Amy says
Good point!
Alan Green says
We’re moving in the beginning of July. Quick Question- did you leave the leftover paint cans for the new owners? We aren’t sure if we should take them or leave them? Also, did you fill in nail holes for the new owners?
YoungHouseLove says
Oh yes, we fill all holes and touch up the paint and then leave the cans (labeled with a Sharpie) in the basement. We usually also have a little letter full of info that we leave and we list the rooms and color names so they know which ones go with which.
xo
s
Alan Green says
awesome Idea! Thanks guys!
Shawn says
We gave our master bath a makeover two years ago – mainly for us, not so much for resale (although I would assume we’d probably recoup some of the money we put into it when we sell). The bottom line, though, was that we did it for us – not thinking about resale necessarily. I think it’s really important for people to do improvements for themselves, and to enjoy the fruits of their (or their contractor’s) labor.
Pam the Goatherd says
Regarding built-ins, in my experience they do not add to the value of the home. My first house (built in the 50s as a vacation home) had teeny-tiny closets (3ftx2ft) in the bedrooms so I built an entire wall of built-in closet with a window seat with storage underneath in the master bedroom. When it sold, the new owners said the first thing they were going to do was tear out the built-ins. I guess they didn’t have more clothes than what would go into six square feet of closet!
Not everyone wants to use rooms in the same way as the previous owner, so things like a built in desk in a room that might be used as a dining room by someone else wouldn’t necessarily be a good thing. While it worked well for you, it probably wouldn’t work for other people. (Although I think I recall you posting recently that the new owners of your house really liked the double desk in the office/dining room/den/study.)
I’m really looking forward to pictures of your furniture in the new house and the Listy McListerson of what you plan to do to make this place fit your family!
YoungHouseLove says
So interesting!
xo
s
Sarah S says
Random, unrelated comment – do you guys read Design*Sponge? Saw this today and even though I totally have my own life (I promise!), I immediately thought John might like it and it kind of worked for your style: http://www.designsponge.com/2013/06/oak-wood-bike-hanger.html
Plus, you have a whole new house to decorate!
YoungHouseLove says
Um, amazing!
xo
s
Jen @ RamblingRenovators says
Thanks for sharing the details. I’m always amazed at the differences in housing prices (dang House Hunters International making me want to buy a house in Charlotte, NC for 1/3 the price of my house!) but the cost of living differences are significant too. I’m impressed you could do so much for only $14K.
As for built-ins, we’ve never met one we didn’t like. Our house is small (only 1400 sq ft + basement), so we like to maximize utility by putting built-ins everywhere. I think we’ve maxed out though. We just put in a window bench + bookcase + side table all-in-one in Chloe’s bedroom. There’s no more room in the house for built-ins! Hmm, maybe we’ll have to sell ;)
Whitney says
Once you factor in interest, taxes, etc paid, though – didn’t you actually lose money? It always confuses me (as a first time buyer myself) when people quote a profit. Even at 3.3% APR on our $475k (steal for the Bay Area) townhome, we pay almost $1000/mo in interest in the beginning of the loan. Unless our home appreciates at $12k+ a year (not unheard of at this price point in this market, but still a lot!) we wouldn’t technically “make a profit”, even though we will almost certainly sell at an escalated price compared to our purchase price.
YoungHouseLove says
Oh yes, when you calculate in taxes and interest paid on a loan, those certainly are an “expense.” And if you’re a house flipper, you call those things “carrying costs” – but when you factor in that you got to live in a home for years instead of renting or rushing to sell it right away, therein lies the benefit. Having a home = value. And if you build equity as you pay the mortgage (we love 15 year mortgages since there’s less interest & more money goes towards principal), that money gets rolled over into a new house, so it’s pretty awesome that after 7 years we are able to cut the mortgage amount for our new house nearly in half by applying that money. But yes, it all depends on how you look at it and what you factor in. Since we’re not flippers, we don’t look at those as carrying costs, but just as living costs to have a home (we’d pay something comparable if we rented but wouldn’t have the equity in the end). :)
xo,
s
Constance says
I think this is a very important point to bring up, particularly for first time home buyers – while there can be value to owning, if you are doing a straight cost-per-month/year of renting vs. owning, renting can actually come out in your favor or be neutral due to these other fees/taxes. Where owning excels is building equity – however, while YHL is an awesome example of that working well, it doesn’t always due to your personal housing market, the type of loan or interest rate you have, personal budgeting/savings, etc. I’m with you that this is beyond important to consider.
Constance says
I think this is such an imporant point to raise, particularly for first time homebuyers. When you do a straight per-month/year comparison of renting vs. buying, renting can actually come out less expensive or neutral when considering these costs. Where home owning excels is building equity – YHL is an awesome example of this working well, but it doesn’t always due to your personal housing market, type of loan or intersted rate you have, personal budgeting and savings, etc. This is beyond important to consider frankly against your personal circumstances.
Tiffany S. says
First of all, kudos for discussing MONEY which so many people shy away from which is probably the number one reason why people remain so ignorant.
We joke that we’re the slowest, not-very-successful, flippers. We bought our house in 2006 (almost the height of the market here in the PNW) for $511k after a bidding war. We spent about $30k over asking. Because we were flush with cash from our previous sale in NY (bought at $297k, sold 4 years later at $420k) we sunk a big chunk of cash into our “new” house because it was over 50 years old. I’d guess we probably spent over $100k in 7 years. Anyway, we just sold it for $44k over what we bought it for, which was $30k over asking. It’s also $20k over what we bought our new place for so we’re thrilled (we do a lot of math gymnastics to make it sound the most favorable for us).
While I would never count on real estate as a fool-proof investment, it can generate a lot of equity while putting a roof over your head. Well done you guys!
Tiffany S. says
PS Sooooo FUN to see you in Family Circle this month. I was like “Yay!”
YoungHouseLove says
Oh man we haven’t seen it yet! Can’t wait to check it out!
xo
s