Here is my situation. I bought my current house in 2008 for 119k. About 3 years ago I refinanced to a 10 year loan, at 3.65% interest and am down to owing just under 75k. I had planned on paying this the rest of the way off and then, well, I don't know exactly, short term goals I guess.
I just had an opportunity to purchase a home that was built and sold in 2014 for 230k originally. The owner paid for it with cash, and has allowed her son to live in it for the last 5 years. He's moving out, and the owner decided that she is willing to walk away from it for 238k (the extra 8k covering her costs) if I want to buy it as is, without her needing to have it fixed up, or dealing with realitors. Zillow and Truvalia say its worth 280-300k, so depending on that accuracy, I could essentially be walking into it with 50-60k equity day one.
I went to the house yesterday to walk through it (The son, girlfriend, and room mate are still living there currently) and first impression from the street was great, house is really nice, in a really nice neighborhood, super nice front yard. Walk up to the door and can smell the weed from outside. They let me in and yeah, they are heavy, heavy pot smokers, the whole place just reeks. That's probably a good thing though, because they also have 5 little dogs, who apparently just piss against the baseboards whenever they need to go, and no one cleans that up, so the weed is probably masking a piss smell. The rest of the house is filthy but intact, no holes in the walls or anything, and while I can tell the backyard was at one time landscaped, its just completely overgrown with weeds.
The bones are good, and the price is good, but there is a lot of work to be done. Remove carpet and add tile, not even sure if baseboards are cleanable or if that's another remove/replace thing, whole place will need super cleaned and painted, I'm guessing a total cleaning of the AC/heater and duct work due to all smoke? So, while that's a lot... I still think its probably a screaming deal right? It has the potential to be a much nicer house than the one I am currently in.
Now, that being said, my next door neighbors identical house to my current home sold about 6 months ago for 165k within hours, and it was trashed. It took the new owners 3 months of gutting it and rebuilding it to move in. My house is nice, I'm thinking I can pretty easily get 180k or more, potentially leaving me with around 100k in hand. I also currently have just over 25k in my checking account.
My thought is to take out a home equity loan against my current house, for as much as they will let me, lets say 80K (My credit score is currently 821 if it matters). I put that 80k down on this new house, taking it from 238k to 158k. Ideally, I will still be able to swing a 10 year loan, with a sub 4% interest rate, so I'm not just throwing money away on interest. I will then have a couple months of double house payments while I use my 25k fixing up the new house, moving, and then selling the old house. At that point, I pay back the loan, and any extra over 80k can go back into my bank replenishing my drained funds from the new house renovation.
Does that sound like a solid plan? Any thoughts or advice? I've got a reputation for making bad decisions *cough car cough* so I've come to the wisdom of the forums first
