Buy to live in "lot value" house?

[brian0123]

My wife and I have started house hunting inner loop single-family homes 300-350k and run across a lot of single-story 3/2 homes in areas like Linkwood/Bellaire/Meyerland that look great (built in the 50's), but are either for "lot value"... or if not lot value I assume will be bought for that if we decide to sell 10+ years from now.

We want a smaller single-story 3/2, not a McMansion. I know the Heights celebrates older homes... yet places like Bellaire seem to relish the thought of sticking up McMansions. We aren't interested in the Heights, so are we pretty much screwed if we buy something elsewhere (i.e. we buy an older mod house, fix it up... only to try and sell later and only can get lot value)?

Anyone have experience with this or opinions?

[RedScare]

If the houses are going for "lot value", it seems you are already too late to the party in that neighborhood. However, it really depends on what your plans are. Lot value 10 years from now will likely be quite a bit more than lot value today. So, if you do not plan major modifications, you will still make a little money, only the percentage will be lower. If you plan a rather major renovation, you may take the value of the home out of lot value range. However, the lowest priced house in a neighborhood keeps its value better than the highest priced one. So, a well renovated home surrounded by more expensive ones will still sell to those who want in the neighborhood, but cannot afford the McMansion across the street.

[TheNiche]

There are plenty of advantages to living in a house that is valued for its land, particularly if you've got the credit to get a low-interest loan. You have to acknowledge that what comes with the house is what you should learn to live with. And that's not a terrible compromise, really. The up-side is that you can "personalize" your house. You can do things that nobody in their right mind would do. Be outlandishly creative. Trash it. Whatever. Short of pumping motor oil through your sprinklers, you can do no wrong! Let your inner redneck shine through.

[brian0123]

I like both of your ideas. Ideally we want find one that is in good (original) condition and can do a nice renovation on. Something someone will want to buy later like RedScare mentioned.

However, let me throw one more hypothetical at you and see what you think. Let's suppose the house is "lot value" because it has foundation issues. Despite that, the house itself is nice and livable. Would you even attempt a repair or just run away and let a McMansion gobble it up?

[Marksmu]

If its lot value now, unless you make it bigger and more like its neighbors, its still going to be lot value later....Which is not a bad thing. If you are buying a house to live in and enjoy for lot value, then you are getting a great deal.

Buying a house I think is really more about your mental state....are you buying a house for you to live in and enjoy living in it, or are you buying a house in hopes of selling it for a huge profit later? If the house is for you and its what you want to spend to your money on, then who cares if you will get every penny back out later? If you just want something comfortable to live in for now, in hopes of making a big gain when you sell, then you need to realize you will not be able to take a small lot value house in area that is putting up newer, bigger, better, more modern homes and make a profit on the improvements. Whatever you spend on improvements need to be what you want for yourself - not for someone else or resale value.

Personally, I plan on moving one last time...I hate moving and so when I move this time, I am getting exactly what I want. I'm not unhappy with where I am now - so when I move, Im going to buy a house, or build one, that is everything I want. I am willing to wait, and I am willing to spend more to get what I want. Moving sucks, selling a house is very inconvenient with kids and dogs, so this last time I move, I'm getting it all exactly how I want. No compromise. If that ends up costing more - so be it...I'm willing to spend more to get what I want, and I'm willing to wait until I can afford, or find the right place.

[TheNiche]

I like both of your ideas. Ideally we want find one that is in good (original) condition and can do a nice renovation on. Something someone will want to buy later like RedScare mentioned.

However, let me throw one more hypothetical at you and see what you think. Let's suppose the house is "lot value" because it has foundation issues. Despite that, the house itself is nice and livable. Would you even attempt a repair or just run away and let a McMansion gobble it up?

Depends on the severity of the foundation problem, the type of foundation, and how susceptible you think the house is to collateral damage from repair. A worst-case scenario is that your brick facade crumbles, your large panes of glass shatter, your sheet rock tears, your pipes burst, and anything installed or repaired by the prior owner after the foundation became damaged becomes off-kilter in your level house.

If you're not feeling lucky, you might require that the seller effect leveling and the repair of collateral damage prior to sale. But understand that you'll pay more because the seller is performing an economically unnecessary function and is indemnifying you from risk. Few sellers are going to want to do this at all. If the deal were to get killed along the way then they'd be the ones getting stuck with the bill for repairs that didn't increase the value of their property.

[woolie]

You mean, like this?

http://www.har.com/H...5-M12005146.htm

I still have my heart set on 1121 Delano next time it shows up on the market, but something like this is a close second "backup plan." I drove by, and it looks better in person than pics. Really great curb appeal. I am unfortunately infected with a virus that causes unreasonable obsession with mid-century modern design.

Anyway, a relevant anecdote. A friend of mine is in your endgame. He bought a small, mostly original 1400sf house in Bellaire about 10 years ago at a reasonable price. Fast forward, and it is currently surrounded by $800+k new houses. Nearly every old house that is sold is torn down and replaced with something around 4000sf. The house is starting to need some real maintenance, and they want a little more space. If he sold it in the current state, it'd be lot value, maybe $300k. So over the past year, he's been through plans with a builder to knock it down and start from scratch, two different remodeling plans, moving to Pearland or Braes Heights, etc. etc. Anyway, nothing wrong in buying a simple house in a good neighborhood -- you might even get significant appreciation -- but you'll just be postponing the decision down the road The danger is that you get accustomed to a certain neighborhood and way of life, then realize that you're actually totally priced out of your own area when your housing needs change.

Edited April 25, 2012 by woolie

[brian0123]

You mean, like this? http://www.har.com/H...5-M12005146.htm

...

The danger is that you get accustomed to a certain neighborhood and way of life, then realize that you're actually totally priced out of your own area when your housing needs change.

Yes! That is an exact example of what we want. In fact, something like that would probably last us much longer than 10 yrs (our current place is 1700 sqft... so 2000 would be perfect).

Your final point is definitely a concern of ours. Guess we'll just cross that bridge when the time comes.

[RedScare]

Keep in mind that you will not likely lose money on a lot value home. By definition, that means it is in a desireable neighborhood. You just won't profit as much when selling as buying in a gentrifying neighborhood. As an example, I bought in Rice Military about 13 years ago. Fixed it up a little, sold at a $50,000 profit. Dumped all of that into a Heights house in 2004. Fixed it up a lot. I have enough equity in just two house purchases to buy my 3rd house for cash, though the recession has killed any appreciable price increases for the last couple of years. However, if I had purchased in the Heights just 3 or 4 years later, I would have little to no equity. The big increases occurred from 2004 to 2008. So, timing is critical on that approach.

[woolie]

Haha, yeah. I wish everyone who had told me "a house is an asset that can only appreciate" was behind a firing squad. I would probably get about what I paid for my house four years ago.