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.
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