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Is this a terrible financial plan or not so uncommon
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amother




Seashell


Post  Sat, Apr 14 2018, 11:37 pm
We are going to contract on a fixer upper house later this week. We plan on fixing up the first floor right away and my parents will loan us money and we will end around 40k in debt. It should take us around 4 years to pay back. Once that loan is paid back we will either have to take out a home equity loan or borrow the same money again to fix up the second floor. My oldest kid is five. We will be out of debt with a fixed up house around the time of his bar mitzva. This house is a an up and coming area where the real estate is quickly rising. I am basically going to be relying on the equity in my home as a savings account....is that a terrible plan or pretty common in today’s time in the tri state area
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Kiwi13









  


Post  Sat, Apr 14 2018, 11:43 pm
It’s risky but doesn't sound too crazy, as long as what you are putting off fixing is cosmetic and not structural/something that will deteriorate and lead to more damage/debt.

In an up and coming area you might be wise to get in while you can, and while I can’t soeak for the NYC area specifically, yes I think people do still rely on the equity of their homes.
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amother




Coffee


Post  Sat, Apr 14 2018, 11:48 pm
It's both common and a bad idea. However, it might be better than your other options and at least you'll be home owners.

You will need more money for tuition and other expenses as your kids get older. There will be house related expenses. You need some cushion for unforeseen circumstances.

The question is how much fixing up the house really needs. You have to get wiring up to code and make sure the roof doesn't leak and that the heating/cooling and hot water systems work. You DON'T need a brand new kitchen. You DON'T need to rip up the flooring and install new hardwood floors etc. If you can push off the esthetic renovations until you have the funds, you should be ok.
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amother




Periwinkle


Post  Sat, Apr 14 2018, 11:50 pm
You won’t be out of debt - you’ll still have your mortgage to pay.
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amother




Cyan


Post  Sat, Apr 14 2018, 11:53 pm
We had a similar plan. We bought an old, structurally sound house when our oldest was three. It is now almost a decade later and we are tapping into our significant home equity to build our dream home. For us, it was worth living in less than ideal conditions until now.
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amother




Denim


Post  Sun, Apr 15 2018, 12:12 am
I have a similar dilemma now. Trying to figure out how much is minimum amount of money we have to put into the house so that it’s comfortable and nice enough to live in - but not a penny more. We will paint and scrape, but getting stuck deciding if we should enlarge kitchen? Winterize 3 season room? Etc.
good luck!
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amother




Seashell


Post  Sun, Apr 15 2018, 12:16 am
Op. This is a two family house that we are converting to a one. I am not putting in new kitchens and bathrooms but I am moving two walls which basically means painting and redoing the floors of the entire first floor and some floors and ceiling will need to be leveled...we are doing the least work as possible but it’s still a big job....
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Mommyg8









  


Post  Sun, Apr 15 2018, 12:22 am
It's really a good idea, and honestly, for most Jewish neighborhoods, it's the only way to live.

As long as you have the expenses/mortgage figured out and you're sure that you can swing it.
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amother




Slategray


Post  Sun, Apr 15 2018, 12:22 am
Why is this a bad plan? Your basically borrowing money to buy a house. You're obviously buying it on the lower end if its a fixer upper with the intention of putting the work in over the years. Why is this so crazy? Like any other prospective homeowner, it really comes down to your income and if you can afford it. Hatslacha!
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amother




Mistyrose


Post  Sun, Apr 15 2018, 12:31 am
amother wrote:
We are going to contract on a fixer upper house later this week. We plan on fixing up the first floor right away and my parents will loan us money and we will end around 40k in debt. It should take us around 4 years to pay back. Once that loan is paid back we will either have to take out a home equity loan or borrow the same money again to fix up the second floor. My oldest kid is five. We will be out of debt with a fixed up house around the time of his bar mitzva. This house is a an up and coming area where the real estate is quickly rising. I am basically going to be relying on the equity in my home as a savings account....is that a terrible plan or pretty common in today’s time in the tri state area


What do you mean that you are relying on home equity as a savings account?

Will you have at least 6 months of savings in case (Chas v’shalom) someone loses a job, there is an accident, or additional home repairs are needed?

Will you have savings for simchas?

Are you saving towards retirement?
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amother




Seashell


Post  Sun, Apr 15 2018, 12:32 am
amother wrote:
Why is this a bad plan? Your basically borrowing money to buy a house. You're obviously buying it on the lower end if its a fixer upper with the intention of putting the work in over the years. Why is this so crazy? Like any other prospective homeowner, it really comes down to your income and if you can afford it. Hatslacha!


It’s a scary plan because I will barely have any money in the bank for the next ten or so years. Right now I have close to 150k. When I needed a new shaitel or a dental implant it was no problem. Now I’m gonna have a home worth over 600k but nothing in the bank. Also I know it’s many years away but if I’m basically not putting any money in the bank for the next ten years When it comes time to marry my kids off I will be forced to use my home equity to pay for weddings...I’m hearing it’s not so uncommon to do that but I don’t love the idea that I’m setting myself up for that.
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amother




Coffee


Post  Sun, Apr 15 2018, 12:33 am
amother wrote:
Op. This is a two family house that we are converting to a one. I am not putting in new kitchens and bathrooms but I am moving two walls which basically means painting and redoing the floors of the entire first floor and some floors and ceiling will need to be leveled...we are doing the least work as possible but it’s still a big job....


Why not keep it a two family house and rent out the other unit for a few years, until you can afford to do what you want to do? You're getting the benefits of owning real estate and you'll be on much firmer ground when you do make the improvements.

ETA: I just saw your post. If you won't be putting away any money at all, then you really ought to keep the rental unit for income.
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amother




Seashell


Post  Sun, Apr 15 2018, 12:35 am
amother wrote:
What do you mean that you are relying on home equity as a savings account?

Will you have at least 6 months of savings in case (Chas v’shalom) someone loses a job, there is an accident, or additional home repairs are needed?

Will you have savings for simchas?

Are you saving towards retirement?


I mean I will have no savings left. When this is done I will have 10k in the bank and owe my parents 40k.
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amother




Seashell


Post  Sun, Apr 15 2018, 12:38 am
amother wrote:
Why not keep it a two family house and rent out the other unit for a few years, until you can afford to do what you want to do? You're getting the benefits of owning real estate and you'll be on much firmer ground when you do make the improvements.


It’s a small two family with just two bedrooms on each floor and one floor is not big enough for my family.
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Amarante









  


Post  Sun, Apr 15 2018, 12:42 am
It doesn't appear that you can afford to fix up the house.

Just because others do it, doesn't mean it's a prudent economic move and it's a terrible idea to view your home's equity as an ATM machine.

It appears you can buy that house - Mazel Tov but you can't afford to fix it up. I assume it's in livable condition but you just want to make it nicer. Why can't you live in the house as is and just make minor cosmetic changes and hold off on more expensive structural remodeling.

Save until you can afford to make changes - $10,000 in a bank account for a family buying an older home is nothing. And remodeling is always going to cost more than you think it will.
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amother




Coffee


Post  Sun, Apr 15 2018, 12:47 am
amother wrote:
It’s a small two family with just two bedrooms on each floor and one floor is not big enough for my family.


The question is, do you want more physical space or more financial breathing room? I know it's a bummer to put down a lot of money and still be living in a small place but that's a lot smarter than being on the brink financially. A house is not a liquid asset and it really sounds like you need the cash flow you'd get from rental income.
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amother




Violet


Post  Sun, Apr 15 2018, 1:00 am
We did the same exact thing 3 years ago. Remodeled the basement and first and second floor we just painted. We just relied on Hashem hoping for the best, year after we moved in we had a leak in our room turned out our roof was in terrible condition and we decided we needed a brand new roof with new wood paneling etc... my husband decided if we are changing it must be new etc and it was very very expensive so Bh luckily I was allowed to borrow from my retirement 403B plan. Now I’m paying back the loan we took from my mom for renovating basement and for 5 years my salary is slashed because I’m paying back the loan I took.

Things always happen at home and sometimes it’s very hard to come up with monthly bills but we needed to move to a house so no regrets at all.
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Mommyg8









  


Post  Sun, Apr 15 2018, 1:05 am
amother wrote:
It’s a scary plan because I will barely have any money in the bank for the next ten or so years. Right now I have close to 150k. When I needed a new shaitel or a dental implant it was no problem. Now I’m gonna have a home worth over 600k but nothing in the bank. Also I know it’s many years away but if I’m basically not putting any money in the bank for the next ten years When it comes time to marry my kids off I will be forced to use my home equity to pay for weddings...I’m hearing it’s not so uncommon to do that but I don’t love the idea that I’m setting myself up for that.


It's not the best plan, but it's not the worst either. And it sounds as if marrying off your kids is a long way off - while it's good to plan, you do have the house to fall back on. And economic situations change all the time - hopefully yours will be EVEN better by then, and you won't have a problem at all.

When I bought my first home, I did not want to spend an extra penny so I moved in "as is". And I regretted it. We did not fix up for many years, and I regretted every second of it.

I know that this is not a popular stance to take on imamother, but sometimes life is about "living". If you can handle living in a small space and renting out part of it - kol hakovod. But if you know that it would not work for you - you know yourself best.
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amother




Coffee


Post  Sun, Apr 15 2018, 2:20 am
Mommyg8 wrote:
It's not the best plan, but it's not the worst either. And it sounds as if marrying off your kids is a long way off - while it's good to plan, you do have the house to fall back on. And economic situations change all the time - hopefully yours will be EVEN better by then, and you won't have a problem at all.

When I bought my first home, I did not want to spend an extra penny so I moved in "as is". And I regretted it. We did not fix up for many years, and I regretted every second of it.

I know that this is not a popular stance to take on imamother, but sometimes life is about "living". If you can handle living in a small space and renting out part of it - kol hakovod. But if you know that it would not work for you - you know yourself best.


We bought a rundown house and lived in it for a very long time before fixing it up. It was hard not having a dishwasher and sometimes I was embarrassed to have company over. But the financial prudence was part of the reason that we were ultimately able to retire early. I know that's a long way off for the op, but thinking about long term plans can make short term discomfort more bearable.
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rachel0615









  


Post  Sun, Apr 15 2018, 9:38 am
We are buying a fixer upper later this month Iyh. I had been so excited to renovate it but after calculating down payment, structural repairs inspector suggested and clising costs, we are holding off on doing any remodeling at all. I hope each year we will be able to do 1 room at a time. I refuse to borrow money to redo cosmetics of a house. We really struggled with this decision but its the only one that lets me sleep st night. If ur plan allows u to sleep at night and u feel confident, go for it. Trust ur gut.
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