The TV show The Jefferson’s opened up with a theme song singing of how they are “Movin’ on up,
to the east side
to a Dee-luxe apartment
in the sky”
The song is about how they worked hard and made money, so they moved to a better apartment.
This is not the 1500’s way of thinking, although it used to be. When Mr. and Mrs. 1500 first met, Mr. 1500 was living in a 1300 sq. ft. house that his grandparents had owned before they passed away. It sat on a very nice, half-acre lot about an hour away from Chicago. Mrs. 1500 lived in a 700 sq. ft. condo. We got married, sold the condo and moved into the house. We both worked in or near Chicago, so we rented out the house and bought a 405 sq. ft. condo in the city. We started flipping houses soon after selling that condo, working toward our goal of buying a house on Lake Monona, in Wisconsin.
House #1: Sold for $715,000
We found a great fixer-upper in Wisconsin, and fixed it up over 5 years. The house cost $535,000, but we were convinced that we’d be able to sell it for $1,000,000 down the road. Then the economy took a dump and the million dollar dreams evaporated.
We persevered with our plans though, adding a second story and gutting the rest. Pretty much new everything. Our taxes went up from $10,000 a year when we bought it to $14,000 a year when we sold it. That is a lot of money to pay every year, just in property taxes. We sold it for $715,000 and moved west, buying a house slightly smaller for $399,000. That is a huge price difference. The underwriters at the bank where we got our mortgage questioned why we were doing this, thinking we were going to rent it out, which is apparently a no-no.
House #2: Sold for $405,000
Last week I told you about how we happily lost $13,000 when we sold our Douglas County house. It was everything we thought we wanted when we were looking for. Nice-sized master suite, jack-and-Jill bathroom between the girls’ rooms, and a guest room with its own bath. Office for Mr. 1500, huge kitchen, large yard and a nice deck with a walk-out basement on a corner lot near the elementary school. We couldn’t take the crazy-ass neighbors though, so it was time to move on.
House #3: $176,000
This week, we are buying a bank owned house from Fannie Mae for a princely sum of $176,000. You heard that right. We went from 715K to 405K to 176K. The monthly mortgage/taxes/insurance on house #3 is less than what we were paying in monthly property taxes in Wisconsin. Wisconsin, we love you, but your taxes are not so great.
Of course, we’re not comparing apples to apples. Our lakefront house had gorgeous views, and on one side, the best neighbors ever. This new house looks condemned from the street, and has the absolute ugliest kitchen I have ever seen.
Make no little plans. -Daniel Burnham
The important thing about house #3 is that its in a really great neighborhood. We’ve been exploring this area for about 6 months now and are convinced that its a good fit for us. As for the street we bought on, our new home is one of the uglier ducks on the block. Someone at the end of the street is building a million dolllar home. We see lots of room for price appreciation.
Little ugly house, we have big plans for you.
But our new home is in rough shape (more on that soon). However, it is structurally strong. New siding, landscaping, and roof line will make the outside look amazing. Adding a bedroom, bathroom and remodeling the kitchen and existing bath will make the inside look amazing. Best of all, it is mostly work that Mr. 1500 can do himself. Instant equity. By the end of the year, our $176,000 ugly duckling will be a $250,000 house, and it will have taken less than $25,000 to do it.
These are actually our favorite kind of homes to buy. Most people want a home with nice granite and minimal issues. No one, except for us, wants the one with brown tile and 70’s decor. As a result, the latter will sell at a steep discount. We’ll spend a bit of time bringing it up to date and making it our own.
We’ll document everything here and show you how to do it. 10 years ago, Mr. 1500 didn’t know how to do any of this stuff. While home repair can be intimidating, it’s not hard. Just prepare well, take your time and you’ll be blown away at the results. Its incredibly gratifying.
All of that is a story for another day though. I am just looking forward to feeling comfortable in my own house and neighborhood.
Mr. 1500 note: Nick had a really great post about popping your housing bubble. This post describes just what we did. Be sure to stop by and say “Hi!” to Nick.
Join the 10s who have signed up already!
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*Only if your life is pretty bad to begin with.
How fitting! I wrote a similar article on downsizing today too! I enjoyed seeing the progression, and the third is definitely your finest pick yet. Congrats on being wise and making a little money in the process.
Jacob @ Cash Cow Couple recently posted…A Minimalist House for Maximum Freedom
I just read your post – how fitting! I could have used that information when I first started buying properties in 1998.
I think we will be much happier in our new house. Much more time to be able to spend with the little 1500’s.
Thanks for the mention!!
I love this story and this place is going to be an awesome money-maker! Well played!
Pretired Nick recently posted…Pretirement fun from last week
Yeah, we close tomorrow and we’ll start renovating it on Thursday. No time to rest!
Sounds awesome! For our next house, we think we might want a fixer upper. Just need to find the perfect one now 🙂
Michelle recently posted…I’m no longer anonymous – Blogging Anonymously or Publicly
Find a real estate agent who knows the area, and don’t get into a bidding war. There will always be another house to flip.
Wowee! Incredible story and I very much look forward to tracking along with the transformation. Deep down I wish I could take on a project like this but being quite possibly the most un-handy person in my time zone doesn’t bode well.
That house on Lake Monona does look pretty awesome, though 🙂
Buck recently posted…Staying Away From the Joneses
I think it is possible to make money on flipping houses even if you don’t do the work yourself. I know two very competent, super-reliable people in your neck of the woods, if you ever need work done, or want to jump into the flipping business.
Good to know. I may just take you up on this. I’ve learned that I prefer to be on the ‘funding’ side of these projects and out of the way of the actual handy work.
Buck recently posted…Staying Away From the Joneses
All these home purchasing stories lately make me really want to buy a house of my own! Blast my nomadic lifestyle and insane NYC prices!
Having the know-how to fix up a house yourself seems like such a great investment. My mom is the handyman in my house so I was raised being taught I could learn to fix anything instead of thinking, “it’s a man’s job.” Next to my Dad’s financial literacy training it’s one of the best gifts my parents gave me. I’m always insanely stubborn about trying to figure out how to fix something myself before calling anyone.
Recently, our landlord dropped by to ask if he could check our toilet. The row-house my roommate and I live in is older and the toilets are a bit finicky. Apparently, the three men who live upstairs couldn’t figure out how to jiggle the handle and if that fails just take the lid of the tank and fiddle around a bit (clearly I know all the technical terms). Needless to say I felt very smug about my incredibly basic toilet fixing knowledge.
#Broke Millennial recently posted…What’s Your Price Tag On Health?
Now that is a beautiful first house! Nice backyard and view! Any idea how much it’s valued at now? Can you remind us again about your job during this time period?
I like how you guys have really downshifted and can fix things up. I’m afraid to slice my fingers off so I find someone to do the remodeling for me.
Hope you sell for a pretty penny!
Financial Samurai recently posted…How A Structured Note Can Save You From A Bad Trade
Hi Sam-
The house has about the same value as it did when we sold it. Dane County Wisconsin has a pretty healthy economy, but the luxury market lags the rest. Well that isn’t totally true. The super luxury homes $2,000,000+ fly off the shelves.
My jobs was the same as it is now; software development. I work out of my house, so that gives me a little more time. Despite this, it still took me 4 years to finish the project. I paid someone to put a second story on the home. I then finished off the interior myself (2 bathrooms, hardwood flooring, paint, etc.). We gutted the whole first floor and started from scratch. The whole thing probably consumed 2000 hours of my time.
All that and we made 0 money on the home. I think we could have sold it for a bit more had we waited five years, but it would have been hard to stay ahead of the property taxes.
House #3 definitely sounds like our style. Our house was $130K when we bought it and te ugliest house in an adorable neighborhood. Some new siding, new roofing, new AC, and a lot of other smaller projects, but now the neighbors call our house the adorable cottage on the block. =).
Do you guys have restrictions on what you can add to it before your property taxes reset higher? That’s one of the things that we’ll have to weigh carefully if we ever want to put an addition on our house since we’ve got a lock on our base rate at $130K and don’t want to reset that to market rate and double our property taxes!
Mrs PoP @ Planting Our Pennies recently posted…An Update To A Horror Story
Nice, you guys are my type of people. It’s all about being able to see a creampuff through the cobwebs and dirt.
In Colorado, property taxes are so low, I don’t really care that much. Taxes on this home are $1,100/year.
In Wisconsin, they are insane. The city would send people out every year to come into your home and reassess it for tax purposes.
We also lived in Illinois and most cities had a great policy. For as long as you lived in the home, they wouldn’t increase your taxes if you made improvements. I thought this was awesome! It encourages people to fix up their homes without worry of an insane tax increase.
Wow, House #1 was gorgeous! Talk about a view – it seems so relaxing. Congrats on downsizing and getting a fixer-upper. I can’t wait for all the DIY posts! You guys seem to have great taste so I’m sure this house will turn out fabulously.
E.M. recently posted…How Do You View Bonuses?
Like the others, I love seeing the progression you guys made. It really looks like you’re set up for some good potential there with #3 and, more importantly, in a happier place. That view with #1 though – very nice. 🙂
John S @ Frugal Rules recently posted…Answers To Challenging Credit Score Questions
Great progress! Looking forward to seeing the new place once you are done! I was just telling my husband that if you are a person/couple who can do many things on your own (or have the intelligence to figure out how to do something if you don’t know how!) – you can save boatloads of money. Which, thankfully, my husband has always been able to do – as he actually built the home we are living in now. Cost him about $98K to build it 20 years ago, and today it’s worth close to $300K. And it’s a really great quality home – all oak trim/doors, triple insulation (so it’s always warm in the winter/cool in the summer), all electric home. The neighbors are already fighting over who is going to buy this house from us when we decide to finally down size. But my point is that when he went to lay the hardwood floors – he wasn’t exactly sure about the whole process, so he talked with the guys at the flooring store, got out a few books from the library, did some research on his own, then laid the floor. When someone is able to “seek & find” – they are also able to save tons of money. Which is what you guys do! Hopefully you are encouraging more people to take on some of the projects themselves. Start small, and build your confidence. There’s so much money to be saved if you become a DIYer!
House #3 sounds like it has a lot of potential and most importantly it’s in a nice neighbourhood. Your last neighbourhood sounded a bit over the top cray cray 😛 I can’t wait to read about and see pics of the renos! 🙂
Girl Meets Debt recently posted…Planning for the Future, but Living for the Present
House #3 is ugly as sin, but has really great bones. But it is Ugly. As. Sin.
Congratulations! Houses are really just chewing gum and lipstick after all. Better to pay a low price and add your own lipstick!
I was shocked when I had my little house re piped and the bathroom redone. Nothing is clean behind the drywall or up in the attic. There’s dirt, and God knows what, in there…I’m wiggling just thinking about it.
Nothing is square, it was all just slapped together. When you really think about it we pay a ton for a few sticks and paint. A tent is starting to look more reasonable!
Can’t wait for updates…
Ree
Ree Klein recently posted…Ree’s Favorite Things: June 2013
I really liked hearing about how you did it. We have a hard time screwing in a light bulb correctly, but hearing you say you didn’t know any of this ten years ago gives me hope. CJ did use a nail file to file down the sliding glass door thingy (no idea what it’s called – the part where the lock clicks over and fastens…oh boy, I need help). Now it opens and closes like butter. Thank you for the pictures to go along with your story.
Tammy R recently posted…Knowing When to Pop the Bubbly
Jake, if you want to put some sweat equity into a house, you will not regret it. Make sure you know all the defects before you purchase, and do not bite off more than you can chew. Find a reputable contractor to handle anything you do not feel comfortable with. That is probably the hardest part, finding a reliable person to do the work…
Oh this hits close to home – since home is in Wisconsin! I’m in a house that is bigger (and eating up more expenses, and property taxes,) than I need at this point. My ideal time frame to downsize is still 5 to 8 years away – mainly due to close family in the area. Its worth the extra expense to stay in this neighborhood and very near to family, plus I really enjoy the yard, patio, and garden. My plan is to move into a condo which may limit (or end) my yard and garden enjoyment. The condo is the right next step for a number of things that I’m planning for. I’m not ready to move yet. And the nice thing is, since I’ve made up my mind about it – it also has set me a mission to downsize what I have in my house now. Gives me plenty of time to get through my stuff – and the overall reduction will positively help in both the ‘showing’ the house once it on the market and also make the moving easier.
Nice! We really did enjoy Wisconsin. Great people and beautiful country! Oh, good beer and cheese too! The Dane County Farmers’ Market was the best. If only the taxes weren’t so miserable and the winters weren’t so friggin’ cold.
Family is everything and if you’re close to them, that is a gift. I often get a bit down because my family is scattered all over the place. We hardly ever get to see each other. So, don’t ever take it for granted, especially if your family is sane!
Amazing properties, on the whole. The second home looks lovely, as you point out.
I’m really interested in reading this series. I just closed on my first real estate investment yesterday. Like you I have a lot of work ahead of me, but unlike you guys I don’t have ten years of experience behind me! I may be hitting both of you up for advice in the coming weeks! 😉
The Stoic
The Stoic recently posted…It’s Official!! The Stoic Enters Real Estate Investing
We moved in today and I’m feeling a bit overwhelmed at this very moment. This is a big project and I don’t want to sacrifice time with my children. Something will have to give. I may outsource a little bit more than I previously planned. Stay tuned,; I’ll update at least monthly.
Looks like its just taken a few tries to figure out exactly what you need. Sure a beach front view would be nice, but id rather be retired in a nice house than still working in an amazing house.
CashRebel recently posted…The World’s Greatest $1 Ice Cream Sandwich
The crazy neighbors just kill everything, don’t they? My first house had awesome neighbors….in fact, I’d made sure of this by interviewing them briefly before we moved in. I didn’t want a house that had horrible neighbors. So, that worked out….until those people moved and the absolutely most horrible neighbors ever moved into the place!
Average Joe recently posted…The Stack – James Gandolfini Edition
Great idea to interview neighbors!
Regarding out latest purchase, we checked out the area for 6 months prior to moving there.
I love it, Mr. 1500. Again, we’re totally in the same line of thinking. Our first home that we purchased was closer to $400,000. It’s a beautiful house with all the fixins’: Granite, hardwood, jacuzzi tub, etc. We recently close on our 2nd house, while not as impressive of a difference as yours, it’s $150,000 less than our first mortgage. It definitely needs a little DIY and TLC to become a great house, but it definitely has the bones for it. We’re moving in late July and letting some sucker pay our too-high mortgage on our first house.
Johnny Moneyseed recently posted…Open you mind, and throw out your budget
This is great — it’s my absolute dream to downsize to a smaller house someday after my kids grow up. Every single housing related cost will drop dramatically for me, from utilities to taxes, just straight across the board.
We have a modest sized house now, so it’s certainly no McMansion, but it will be nice to have less to deal with eventually.
It’s amazing how much value you can put into a house with a little sweat equity! You’re looking at $49,000 of instant equity for some hard work — that’s tough to beat.
Brad @ RichmondSavers.com recently posted…Planning our Free Family Trip to Disney World
Congrats on the big move!!! This kind of mindset is exactly why you’ll be retiring in your early 40’s, while most of the rest of the country will be living in mini-mansions and working at the drive thru at McDonald’s during retirement. Great job, 1500 family!
Laurie @thefrugalfarmer recently posted…Recipe of the Week: Beans and Rice
I think that the house is gorgeous! In my opinion the important things are other than the tiles and the decor! These are things easy to fix! You will even have the chance to make the interior your way! Congrats! 🙂
Thanks Harriet! House is almost done now. Stay tuned…