We never intended to live on Spruce Avenue when we bought the home in 2012. We planned on fixing up the sad little home and then turning it into a rental. And sad is an understatement:
But then, something unexpected happened; we discovered that we liked the street…
Letting Loose On Spruce
The first thing we liked about Spruce Avenue was the location. It was a dead-end and backed to open space. Our young children would have low-traffic pavement to ride their bikes on:
And our evening family walk ritual would be much more enjoyable in the open space.
And then we discovered that we liked the people.
Three months after moving in, Longmont experienced epic flooding. The St. Vrain overflowed its banks and some folks’ homes were completely destroyed by the never-ending deluge. Bridges were washed out and the town was a dumpster fire. Except the opposite because everything was soaked. A dumpster flood? Halfway through the hellish week, the police knocked on our front door and told us that we had to evacuate. Scary:
But at one point in the middle of it all, we met many of our new neighbors. There was a spontaneous party one night and we all bonded over hardship. I liked the people. Even the unusual ones with the most interesting side hustle in the world.
Mindy and I made the decision to stay on Spruce Avenue. This is the place we’d live for at least the next 15 years while we raised our children. Or so we thought…
Plans Changed
Now, our plans had changed. Instead of just getting the house ready for renters, we’d gut much of it and even add on to accommodate our family of four (a home with one toilet wasn’t going to work for us). Over the next six years, we rehabbed the property. We didn’t go about it the right way, but you don’t get trade backs in life. The house turned out well though:
And something else happened; Longmont real estate went bonkers.
We bought our place for $176,000. That was cheap at the time, but the home was in poor condition. Since then, three homes on our street have sold for over $500,000. One sold for almost $600,000. And our home is just as good as those.
And then something else happened; our friends moved.
One of Mindy’s best friends was a neighbor a couple of doors down. Their relationship was casual and easy; our neighbor would just walk into our house if she needed eggs or milk and we would do the same. The neighbor had a young daughter that our children absolutely adored. Then, the husband took a job transfer out of state and that was the end of that. Mindy was quite sad and our children cried for a long time. Other neighbors who we liked moved on too. We had found a community, but then it left.
So, that brings us to the present day. Here we sit in a pricey home on a street that we don’t enjoy as much as we once did.
New House
The way to make money in real estate is to put time into understanding the market:
- Find an area you like.
- Review every home that comes on the market. Look at the pictures, price, condition, and square footage.
- Go to open houses and walk through homes.
- Keep track of home sale prices, price reductions, and market time.
After a couple of years of doing this, you’ll be able to analyze any home that comes on the market in less than a minute. You’ll know a good deal almost immediately. That’s exactly what we did.
First, we identified an area we wanted to be in. We had friends in this part of town and the homes are in the right time period to need some work, but still modern enough to have a good structure. I welcome pink toilets, but not knob and tube wiring.
A home came on the market in this area for $465,000. We went and looked at it almost immediately, but we thought it was too expensive. The home was dated, smelled like cigarettes, and had a pool (not a positive in Colorado). And, the pool was in rough shape. No thanks.
Then, the home price was reduced to $449,000. Still, no.
Then, it was reduced to $425,000. Now we’re talking.
We made an offer at $405,000 and let the other agent know that the seller could keep the commission.
Side note: Mindy has an agent license which is a must if you do a lot of real estate transactions. You save money (in Colorado, about 2.8%) on each side of the transaction.
The seller accepted the offer.
Then we had the home inspected and discovered radon and a clogged sewer line.
Then we had the pool inspected and discovered it was in need of very expensive repairs.
We thought the deal was dead, but then the seller agreed to lower the price by another $40,000. Done deal.
The Finances (How We Came Up With 365K)
One of the things that helped us get the home at a low cost is that we told the buyer we didn’t need a mortgage, so we could close quickly. Here is how we funded it:
- $199,000: We borrowed from our current home’s line of credit. We are currently paying 5.75% interest on this money.
- $166,000: We sold the Acura NSX for $45,000. We then used cash and stock sales to fund the rest.
We could have paid completely in cash without tapping the HELOC, but then we’d have to sell more stock and pay a load in capital gains taxes. Instead, we’ll sell about $100,000 in stock on 1/2/2020 and another $100,000 a year later to pay off the HELOC. Selling slowly will allow us to avoid all capital gains. There is also the chance we’ll sell our current home before 1/2/2021 which would pay off the HELOC too. (More on the fate of our current home later in the post.)
Live-In Flip
So, we’re going to fix up this home. I’ll:
- Install new windows (fall 2019)
- Remodel the office bathroom (fall 2019)
- Finish the basement including adding another bathroom (spring 2020)
- Install a new deck (spring 2020)
- Remodel the kitchen (fall 2020)
- Remodel the master bath (spring 2020)
- Remodel the other girls’ bathroom (spring 2020)
- Install new flooring throughout (spring 2020)
Sidenote: I’ll be documenting the home remodel on YouTube. For updates, subscribe here.
And then there is the pool. I’m not sure what we’ll do about it. I’ve actually owned a home with a pool before and enjoyed it. However, this one is in rough shape:
It will be expensive to fix, possibly $15,000 to $20,000. It needs to be replastered. If this same pool were in Florida or Las Vegas where pools are everywhere, the job would cost $5,000. Because no one has pools here in Colorado and contractors are scarce, I’ve been told that it will cost about $15,000.
Side note: Anyone know how to replaster a pool and want an all-expenses paid trip to Colorado for a side job?
Side note #2: While I’ll be doing the work myself, I’m looking to hire a skilled assistant to help out with replacing windows and finishing a basement. Anyone?
I may try to do the work myself. Others have done it and posted the videos on YouTube. What could possibly go wrong?
On the other hand, I could rent a jackhammer for two days and demo it too. $150 for the rental and $1,000 for dirt. Done.
For now, I’m going to assume that we’ll fix the pool. Here is my budget:
And Then There Is My Time
Of course, I have to account for my time too. However, I think about this a little differently than most because of this:
I really enjoy the work.
I think that it’s loads of fun to take an ugly space and make it beautiful. At heart, I’m a builder and the act of creating gives me deep satisfaction. I’ll do the work when the girls are in school and at a leisurely pace.
The Main Reason We’re Moving
I think we’ll make a lot of money from this home when we sell it. If my budget is correct, we’ll have about $465,000 into the home when it’s all done. I’ve seen a smaller version of this home sell for $600,000. Great! However, this isn’t the main reason we’re moving.
I have fond memories from my childhood and the neighborhood kids. We’d ride bikes or play baseball all day. I want my children to have the same memories. Perhaps I’m silly, but the happiness of my children is really why we’re moving. And that’s also why the pool may get a stay of execution.
Back To Spruce
There’s one more crazy part of the story and it’s this; our current home still needs some work. Also, fall isn’t the time to sell. Luckily, we have a solution.
Mindy and I have some good friends who need a place to stay for the next six months, so we are going to rent to them. After that, maybe we’ll sell the home. Or maybe not. A good friend who is an expert in Airbnb rentals let us know that we can make good money with our house. So, maybe we’ll hold on to it after all…
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.
Wow, congrats dude! I actually like that wood trimming in that one picture but I’m a child of the 80’s 🙂
Thanks Dave! You can have the trim after I yank it off! 🙂
Hi Carl, that looks like a great new project you’ve purchased there! It’ll be fun to watch your progress on the project.
Please post your numbers for the project, including hours worked. I’m curious how the ROI is going to work out vs. keeping the money in stocks.
With all that construction work planned, will your blogging slow down here?
Mr. Tako recently posted…The Lifecycle Of An Investment
“Please post your numbers for the project, including hours worked. I’m curious how the ROI is going to work out vs. keeping the money in stocks.”
This is a fantastic idea! I’ll definitely keep track of it all!
“With all that construction work planned, will your blogging slow down here?”
I hope not, I have to be better about time management. However it will change. Some blog posts will be replaced with YouTube videos.
Congratulations! This whole scenario gives you so many options! What an exciting adventure!
As we look at homes, my husband LOVES the exposed beams with the natural wood in houses, maybe it’s coming back?!
Maybe it’s crazy talk, but it seems like such a fun challenge to redo an entire house, including some things you’ve never done before. I’m excited to watch how it plays out and maybe someday I’ll use your videos for my own reference!
Financially Fit Mom recently posted…The Evolution of the Need
Thanks FFM! Next time you’re in town, we’ll pull out some windows together!
Any chance you can live in your current house and speed up the renos on the new house to get the big projects done before you move? Perhaps reread all of your old posts when you were living in the house while doing all of the repairs. That will remind you how tired you were all of the time. I remember reading one post and thinking that I hope their marriage survives.
I always think of home as a sanctuary. What is the point of being FIRE’d if you aren’t enjoying every day? Use some of the money you earned and saved to make your life easier now. Live in the current house and do the renos at the new place. Peace at home is priceless.
beth, you bring up some great points. The current home was a rough remodel and I had a full-time job most of the time I was working on it. This time, the home needs much less work and I’m jobless. I plan on taking it very slow and only doing the work when our girls are in school.
It won’t be that painful to live in the remodel either. For example, finishing the basement and doing the windows won’t put a cramp on living there. The kitchen will be a little tedious, but by the time we get to that, we’ll have a mini-kitchen in the basement. Plus, the Instantpot and air fryer are both miracles!
This is awesome, and congrats! As someone who has read your blog from almost the beginning, it’s been an amazing transformation to watch what you both have done with Uglyhouse. Looking forward to watching you remodel this home on Youtube this go around 🙂
Danny! I hope you come out to Colorado to stay with us sometime and see all of the work I’ve done in person!
I am so done for a long weekend yanking out windows and/or wood trim. Sounds therapeutic! My OS even comes pre-programmed with how to swap toilets, too. Feed me and house me and I’m there!
Gwen @ Fiery Millennials recently posted…A Weekend of Yes
Haha, come on down!
Super cool! I’m a fan of unique real-estate, projects that I can take my time on, and making money in the long term, and I know you are too. This looks like a win, win, win, win, win. Buying a new, good, financially smart property is always a fun high, so enjoy walking into your new home. We’re currently looking for our third house, and look forward to the day when we find the winner just like you found. Peace out brother.
Third house! Nice work! IMO, the hunt is 90% of the fun.
What a great new adventure! After our recent downsizing, we’re enjoying being renters. I expect I’ll get the itch again though, and a rehab project would fit with our financial goals and give me something to do. I look forward to following and learning from your journey here. Best of luck!
Having an excellent community is amazing! For kids and also for the adults. I have always credited my community with getting through my divorce 11 plus years ago in decent mental health. Every time I felt horrible or depressed, I just forced myself to get out and pull the kid around in her red wagon and the social interactions made me feel better every time. Do you have a feel for the new community with the new house yet?
And dude, your work on Spruce is outstanding. I like what you did with the place. I have taken on a new view on my personal real estate… I’m in the planning stages of putting on an over the garage apartment to rent out for AirBnB purposes (architect is currently pretty far along working with structural engineer). FI mentality has taught me how silly it is to have a huge “asset” just sitting around as an expense. So hopefully I’ll be changing that in the next 18 months.
Yep, community is soooo important. We already had friends here, so had an idea it would be pretty good. Then on Sunday, there was a neighborhood party and we got to meet a lot of folks. I think we’re going to like it!
We’re finding that AirBnb rentals are becoming tricker. Lots of cities/counties around the USA are tightening up on short term rental regulations (prob. lobbied by the hotel industry). In many places, there is a “distance from another short term rental” regulation or something similar that can get one into trouble. Just something to keep in mind.
We’re fortunate in that our Airbnb rules are defined already and they’re lenient. We plan on applying for the license this week.
I wonder how realistic your budget it, or how much of a slush fund you have. For example, no budget for paint, misc hardwear, things like that. $100 for new toilets are either pretty basic fixtures or not necessarily reasonable.
I know you have sufficient funds and income to support this, just curious if you feel that reno budget really is realistic.
Best of luck in your new place. You move seems like a good combination of the right thing for your family and pocketbook
Crap, that spreadsheet got cut off. I have $800 allocated for interior paint. I’ll update it when I get home tonight.
I already bought nice, dual flush toilets from Costco at the cost of $100 each. Best of all, my town gives me a $100 rebate per toilet when I upgrade, so my cost is $0 for htem
OK, I just updated post to show the entire spreadsheet of costs. Please check again now.
thanks for the update.
So Mr. I-Won’t-Pay-Off-My-Mortgage-Because-Math is going to (potentially, if you sell your old home) not have a mortgage? 😉
So, our situation is that we have a primary mortgage at 3.25% ($90,000) and a HELOC at 5.75% ($199,000). I’m good with 3.25, but not 5.75. So, we’ll pay the HELOC down in 16 months. After that, if rates are still low, I’ll get a mortgage on the place we just bought. I LOVE cheap debt baby!
Just do a refi for the entire loan to pay off the 2nd if the rate is similar to your current rate or get a 5 yr, 7 yrs or 10 yr arm if you think you will be able to pay it off.
Yep, we’re talking to the mortgage guy today actually.
Mr. 1500 Days recently posted…Stock Picking Experiment, Year 2 (Still Winning!)
NIce, NIce. Something about the split level is so comforting.. Being able to do a rehab without a major time constraint is huge in my humble opinion. Enjoy! Question, what is being done about the radon??
Would you mind sharing the Airbnb expert.. We are in the process of getting our Seattle home ready as we speak. Lastly, and I hope that I am not being too personal, but could you tell me how the bank gauges your loanability ( if you decide to take a mortgage) and given that you are retired and certain funds being non liquid.
Will be checking out the progress on youtube.. Thanks for sharing.
Radon is pretty easy to remedy. I’ll put in a subfloor suction system at some point. Problem solved.
Zeona is an awesome resource for Airbnb: https://www.zeonamcintyre.com/
Loanability! I’m lucky in that we still have income from Mindy’s job. Without that, we’d have to get an asset-based loan which is a huge pain in the ass.
I like the look of that new home! You’ve bought yourself a whole lot of work, and I look forward to seeing more amazing before and after pictures.
Cheers!
-PoF
p.s. does the new place have a guest bedroom. I think that was my favorite feature of the Spruce Ave. home. 🙂
Two guest bedrooms when I’m done with the remodel. Come on down PoF!
So interesting to do this. Where Im staying the capital appreciation part would scare me. We’ve had no real growth in 10 years, and in usd its probably down 50%. It does mean that foreigners could buy a palace for c.$500k though. We bought ours for $200k in 2009, is up abt 20% in local currency but worth around $115k. Also labour is super cheap here so no real uplift in value when renovating. Its amazing how important it is to know your location, but a lack of real capital appreciation does make property much harder… Good luck!
Cheap labor? The opposite of Colorado and also the reason I know how to build a home! Anyone want an all-expenses-paid trip to Colorado to swing a hammer?
I like how you have everything planned out and not just randomly buying a large asset and figuring out later what it will cost.
Ryan Schlomer recently posted…Seven Important Areas of Life
Congratulations! I think you’ll make good money with this one. Too bad about your neighbors moving away. I guess that’s life.
We have similar feelings about where we are, Carl. Our community and our friends are what keep us here. Take the people away, and we’d be very tempted to pull up stakes, too. In fact, one of our very best couple friends is moving to another part of the state and we’re already feeling the pull…
The pool can be a bit of a pain but in the summers, I think it’s great, and, yeah, loads of fun for the kids. Best of luck with all the remodels. If you delay your repairs by a couple years, I’ll be able to fly out and help. 😉
P.S. I’m above our 4 per week limit while abroad, but not TOO far off. Will buckle down when we get back.
Congratulations on the new House and good luck on the house projects. I don’t think your reason to move is that silly as my wife and I have discussed moving often and one of them is our memories of hanging out with neighborhood kids.
I really like the spreadsheet to view costs along the way. Never thought of breaking it down and doing it on one page for the whole house. Congratulations on the new home. It’s hard work to fix up a house but it feels so good to look at the changes afterward that you don’t even notice how much crud you had to put up with to get there. Looking forward to seeing the changes once you post them.
So interesting! Keep sharing 🙂
Short memories. What happened to being done with house projects? Ha.
Houses are like crack. My sister has a flip house she can’g work on until spring and bought another she can’t work on for 1+ years.
Such a “good deal” she can’t pass it up.
Cigarette smoke? Oh boy. Down the the studs and then the studs are “smoked”. Never get that smell out. Ouch.
Good luck!
Oh man, I really enjoy the work, as long as I can do it on my own terms. The way I see it, I have 8.5 years to finish up this house. That’s when my youngest will be done with school and leave the nest (hopefully!). So, I’m taking this one slow.
“Cigarette smoke? Oh boy. Down to the studs and then the studs are “smoked”. Never get that smell out. Ouch.”
Nope. The smell is gone already for the cost of $79.95: https://www.amazon.com/gp/product/B00JAP7388/ref=ppx_yo_dt_b_asin_title_o03_s00?ie=UTF8&psc=1
Hello! This sounds remarkably like the property we’re may get. We’re on the verge of buying a 4300 sq ft bi-level built in 1982 on 3 acres w/ extra 900 sq ft. apt/workshop (plan to refurb and rent) and an inground pool in Georgia. We are still negotiating the final contract. We love the property and the house itself, but everything is stuck in the 80’s, and it’s pretty beat up, all the cabinets are heavy dark wood, and the flooring is shot. But, it’s all brick, it has new windows, the hvac is 9 yrs old, water heater is new and the roof is 10 yrs old. Like you, this will be our home. We’ve been inside it 3 times, and it seems each time we uncover something new to fix/repair. We’ll have to gut the outbuilding due to a window a/c leak and mold and I think that will cost about 20K+ before we can rent it out.. From roof leak stains on the popcorn ceiling, to a toilet that almost overflows when you flush it (on septic), to a slight mildew smell seeping up from the crawlspace (might have to encapsulate it), it’s a lot to wrap our heads around. We’ve got the lady at $387K now w/ doing all our stipulations, but my husband and I are both scared of the unknown with it. I’m coming up with about 80K in repairs/renov if we do most of the work ourselves and with help of builder friends over a few years. How do you get over the fear of the unknown with a property like this? Is it just buyers remorse we’re feeling? What the worse that can happen? What’s the best that can happen? Of course we’re getting inspection(s), but what else could we do to make ourselves feel more confident about this purchase? Is there some checklist you guys use to decide if a house is a good fit for DIY rehab?
With all that home improvement spending, I hope you are using the Ibotta app. You get a percentage back via the app (varies from 1-4%) at Lowe’s and Home Depot. You can tie Ibotta to your fav cash/miles credit card too. So far I’ve gotten over $250 back myself. Use my referral code, djrsnrh, and you can start saving real cash. Sign up at https://ibotta.com/r/djrsnrh
Whoah, thank you for the recommendation!
Congratulations on the move! Sounds like you and Mindy knew what you two were doing and were ready to take the jump. I think you show such an important lesson – that you need to understand the value of something like you did with the house. Instead of buying it at the asking price, you waited because you knew that the home was not really worth as much as they were asking for. That’s when the price dropped and you were able to make such a fantastic purchase! Congrats again!
Cheers,
Fiona
Thanks!