Selling a home: Repair first or not

15 years ago

I'm trying to sell a rental property. It's an entry level home $54,000 price, 1250 sq feet, 3 bed 1.5 baths.

It is older (50's) and needs some updates. Some of which include:

Foundation-addition has settled and needs leveling:quote $1800

Kitchen Cabinets-old steel cabinets, functional but ugly

Heat/Air-currently has window unit for a/c. Heat is provided by a gas furnace which needs replacing: Cost to replace just the furnace $250. Put in central heat/air prob $4k

Electrical: Is 1950's wiring but all works

Improvements made:

Changed out most of the windows

New bathroom flooring and vanity

Will put in a fresh coat of paint on most rooms and do low maintenance flower garden in front.

Currently the house is the lowest priced 3 bedroom in the city. One on the road for sale is 60k but does have central heat and air.

Do you think doing any of the above improvements would make financial sense? We will probably be renting this out and then leaving the house on the market. It'd be more convenient to updates now while it is empty then when it is rented.

Thoughts?

Thanks

carolyn

Comments (10)

triciae
15 years ago
Carolyn,

At that price point you've got to be careful about putting too much into the property. Guess you already knew that, huh? :)

My recommendation would be to address the foundation issue because that will flat scare most buyers away.

I would NOT replace the metal cabinets. But, can they possibly be spray painted so not as "ugly"? They've got some great spray paints available today.

Leave the window A/C unit & REPLACE THE FURNACE. No central A/C. I know it's hot in Texas...but at that price point the window unit is fine.

If the wiring is safe...leave it alone.

Definitely do a fresh coat of paint. Paint is a wonderful thing.

The flower garden sounds good but is it really? Will renters maintain the garden? A dead ugly garden is worse than no garden...especially in the summer heat of Texas. If you think there will be a maintenance issue...I'd weed, put down some Preen, lay some clean rocks or slate, & call it a day.

It's hard to sell a house with tenants living in the property. Seems either they won't make the house available for showings, don't keep it picked-up & clean, or are in some other way negative on the process. Afterall, it's not in their best interests to have it sell. So, if you can do without the rental income I'd recommend an empty house over the tenants.

Best wishes for a successful sale.

/tricia
Happyladi
15 years ago
I suggest repairing the foundation and replacing the furnace but not spending 4K to put in central air since the house is so low priced. If you need to you can buy another window unit if the one isn't enough. You can buy decent ones for $150.00.

Yes, paint and clean but leave the cabinets. Maybe a fresh coat of paint on them but that's it.
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You need to call a couple of local realtors and have them do a fair market value on the house as it exists, and a guess as to what it might bring when repaired. If the location is a good one, it might make more sense to market it as a teardown rather than as a residence. If the home is in poor repair in a low dollar area, then you're really not going to recuperate much in the way of repair expenses, and need to do the absolute minimal required to maintain a certificate of occupancy. That may mean that you "give" the home away at a very low price to account for it's defects. If the home is in a higher priced market and is considered an interesting style with many original features, then it may appeal to the old home lovers crowd, and you may be able to get by with just fixing the foundation and doing the roof because the new owners would want to do much of the work themselves. There are a lot of variables here, so you need the blunt opinion of several realtors as to whether or not it's worth putting any money into. After you get the realtors opinions, call several home improvement contractors. Ask them what the home needs besides the obvious defects you've mentioned. (Is the electric panel too small, what about rusted out galvanized plumbing, termite infestations, etc.) There are some structural things that will need to be done in order to even put a home on the market, vs making it "remodeled" with cosmetic changes like painting the whole place. Get ready for sticker shock. After you have both sides of the coin on the repairs vs current market value, then you can decide which route you want to take. If you have family here in this country that can help to deal with your mother on the downsizing/sentimental clutter issue that would be extremely helpful. If she's lived there a long time, she's apt to resist any changes to the home, and it might be more helpful if you were to relocate her to the end residence before you began any of the projects at the house.
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The answer is it depends. If you have the extra cash and can find affordable contractors to do the work at good price it might make sense to make the repairs. Keep in mind there is not a "one size fits all" renovation that will satisfy all potential buyers either. I've seen sellers spend way too much on renovations only to find out potential buyers didn't care for the upgrades that were made. Also, the repair costs could add up quick especially if you are replacing windows and siding too. But if you do decide to move forward with the cosmetic improvements I would suggest a luxury Vinyl tile flooring. This is a very durable floor that looks like real hardwood. Neutral colors work best for paint and if the cabinets are in good shape but need paint/finish Rustoleum is a great solution for cabinet refinishing. When you say bathrooms does the entire bathroom need work? From the kitchen picture I would suggest new countertops (granite /quartz), SS appliances, a new backsplash and a big money saver would be to paint or refinish the cabinets. Selling "as is" is another good option if you don't want to spend the money. There are a ton of investors out there who buy houses for cash, or claim to anyway. Just beware because there are some that either don't have much experience or are not local to your community and they end up partnering with other investors to get a deal done. In many cases the deal could fall apart. But there are GOOD investors out there who make fair deals. Here is an example of a quality "We Buy Houses" company. Hope this helps. Best of luck!
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kec01
15 years ago
I would NOT touch the cabinets if the paint isn't peeling/chipping. Metal cabinets are coming back into popularity and cabinets in their original condition are great.

I agree about fixing the foundation issue. That's a biggie.
xamsx
15 years ago
At that price range, unless you have a lot of competition that looks a whole lot better, do nothing except possibly fix the foundation and if that $250 on the furnace is truly $250 maybe that. I had an entry level house that I sold very quickly with a 50 year old furnace, ugly, dated cabinets, and a garage that was falling down. I did paint the downstairs and refinished those wood floors (but not the upstairs), and my ex-husband repainted the basement floor.

The most important thing for you is to know what your competition looks like and how your house stacks up compared to those, and if you are selling as an investment property, what the cap rate is.

I would leave it empty to sell OR rent it. Do not try and sell while renting.
equinecpa
Original Author
15 years ago
I'd love to leave empty to sell..but it will be easy to rent (shortage of rentals in the area). We've had it for sale for about 6 weeks so far and seems every one in the area has bad credit and can't get a loan. I could leave it empty for 6 months and see no revenue or rented and see $6500...With the little we have in it I'm figuring if we rent we'll at least be getting something out of it. I know it'll be harder to show and might not show so well but I fear that is a necessary risk at this point. It doesn't make financial sense to leave it empty...hoping.

We'll have to do the furnace if we rent, and will probably wait until we have a buyer before we do foundation.

Cool on the cabinets coming back in to style...maybe if I wait long enought old houses will be in!
jojoco
15 years ago
I just sent a listing to a client and told him that the foundation on the addition had settled, making the walls out of square (disclosed by owner). My client said "no thanks, we'll pass" because of that. Please consider that the settling foundation can and probably will cause further problems if left unaddressed. Plus, you will have to disclose it when you list the property. For many, it will be the red flag that will make buyers skip your home.
Jo
Jeff
15 years ago
IÂll disagree with most here. Your goal right now is to get an offer on the house and I would do as much low cost cosmetic work as reasonable to get one. This might mean painting the walls and cabinets, carpet cleaning, gardening, etc. Unless there is substantial bulging in the foundation or a safety issue, in which case $1800 is low, few prospective homebuyers are going to notice the damage and none will know the furnace needs to be replaced or any of the other functional issues.

I might put a cheap window mounted air conditioner in so that your MLS listing says "air conditioned."

Once you get an offer you should disclose these issues and can then negotiate how much additional you need to spend or split with the buyer. For $54k, no one expects a pristine home. This is not the Taj Mahal and all buyers know this. Depending upon how low their offer is and their expectations, some of these issues, including a settled foundation, are livable.

Where in the world can you buy a furnace for $250?
jojoco
15 years ago
If you are aware of an issue, then you have an obligation to disclose it. If you aren't exactly sure, you can check "unknown", but since you have had a quote, you are clearly aware of the nature of the problem with the foundation.
Yes, people hide things all the time, but that doesn't make it right.
Jo
Jeff
15 years ago
I pretty clearly said to "disclose these issues." However, I advocate getting an offer first, for fear of scaring off those that don't understand the severity of problems that might not be a big deal to them, once explained.
jojoco
15 years ago
Jeff,
I did see where you said you would disclose it. I just disagree with your timetable, that's all.
Tomato, tomahto.

Jo

Selling a home: Repair first or not

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