Q: We live in a very desirable neighborhood filled with1960s ranch homes. Many of our neighbors are doing major renovations or are even tearing down their homes and rebuilding much larger, fancier houses.
We are not in the financial position to do either right now, but are concerned about making even minor cosmetic investments in our home. We feel anyone that might want to purchase in the next couple of years would be looking more at the land than the actual house.
I am a home decorating fanatic so this is very difficult for me since I want to repaint, replace hardware, and make a house look better.
Should we sell this house now (we do like the neighborhood a lot) and move to a neighborhood that is not as transitional? Or should we just do what we want to the house and not worry about wasting our money?
A: Here’s the question I have for you: Are you a decorator or a fixer-upper?
When you buy a home as a fixer-upper, you’re specifically looking to get a great deal on a neighborhood you might not otherwise have been able to afford. Once you’ve renovated, added on to, and fixed-up the home, you may want to stay in that home for the rest of your life. Or, you may want to eventually flip the property, and pocket the profits before moving onto the next property.
You’re in a tough situation because your neighborhood’s housing stock is being torn down, house by house, to make way for the next generation of homes. As you have correctly surmised, if your house is destined to be torn down because the land value has outstripped the value of the home (no matter what you do to it), then any cash you spend on the home will be wasted.
That doesn’t mean you can’t decorate to your heart’s content. It’s just that whatever you spend most likely won’t be reflected in the sales price of the home. If your heart will be broken knowing that someone will tear down what you’ve created, then you should sell your home now and find something else that will improve in value because of what you’ve done — rather than because of the size and location.
By the way, your house could still be a great investment. In some neighborhoods, land values have tripled in the past ten years. But if someone is going to purchase your property for its highest and best use that might mean you will be the last person to live in your home.