Why we decided to sell our money pit and downsize; Plus a tour of our new house
If you listen to the podcast or subscribe to my mailing list, you will know that my family and I have recently made a big change. After about 12 and a half years of living in a house that was butchered by the previous owner, and after spending over $100,000 to restore compromised structure and undo bad DIY and renovate the house to suit our tastes and lifestyle, and with another 6-figure construction project looming over us to tear down and rebuild the family room addition (thus removing the last trace of the previous owner’s handiwork from the house), we finally waved the white flag and gave up the fight.
I did the math and the math wasn’t pretty. So rather than tying up another hundred grand in that house, we decided to cut our losses and start fresh in a house more suitable for us.
Here’s how the numbers worked
If we stayed:
- $200,000 purchase price
- $100,000 in renovations and improvements
- $100,000 to $130,000 or more for the addition
- Total investment of more than $400,000 for a house that would be valued at about $300,000
- Total “loss”: about $100,000
- With the existing mortgage added to the cost of the renovation we would have a total debt of about $200,000
If we sold and downsized
- We still have $300,000 tied up in the old house
- Sale price $175,000
- Total “loss” of approximately $125,000, BUT
- Frees up about $100,000 in equity once the balance of the mortgage is factored in.
- Purchase price of new house $200,000
- Leaves us with about $100,000 in total debt.
Once I was able to wrap my head around the fact that over $100,000 would never be recovered no matter what we did, it made better financial sense to live in a $200,000 house instead of a $300,000 house.
It’s all about freeing up capital.
We sold our house and bought our new house in November and we closed on those transactions earlier this month. If you would like to know how all that went, listen to Episode 13 of the Thumb and Hammer Home Improvement Podcast.
Our new house is about 37 years old. While it has been updated, it has not been heavily renovated. There have been no alterations to the structure. It has, as they say, good bones. That is not to say that it doesn’t need some work. There are plenty of DIY projects for a weekend handyman to tackle– enough to keep me busy for a while– but nothing so overwhelming as to cause stress or financial hardship.
Allow me to show you around:
This is going to be a difficult adjustment. The kitchen in our money pit was completely remodeled in 2009 and had loads of counter space and tons of storage. The kitchen in our new house is much, much smaller. We are definitely going to have to edit our kitchen wares and resist “stocking up” on groceries. There is room for a pantry in the laundry room area in the basement, so items like canned good can be stored down there along with larger cookware that only gets occasional use.
This is the other side of the kitchen. Yup. That’s it. Now you’ve seen the whole thing. The cabinets are in acceptable shape, but I may eventually try my hand at building new ones. For now, though, these are functional. I would have preferred to have our fridge with the bottom mount freezer, and our gas stove, but appliances were included in both real estate transactions. At least the appliances aren’t stainless steel. I don’t like stainless steel.
The kitchen has a nice eat-in area overlooking the family room. While that space may have been better used for more cabinets, I actually like the idea of having a small bistro table in this spot.
The one thing I do miss is having in-floor heat. The ceramic tile, and there is a lot of it, is pretty cold under foot. The house has a forced air gas furnace so in-floor heat is not an option.
The Dining Room
For the first time since I became a homeowner in 1996, I own a house with the space for a formal dining room. Sure, it will only get used a couple times a year when we have dinner guests or holiday meals, but it makes the house feel complete. Behind the curtains are the patio doors leading to the patio in the back yard.
The Living Room
AKA the wife’s Reading Room. There is room for a love seat and a couple of chairs and our old 37 inch TV in the corner. The hardwood floor and trim are new. There is nothing to do in this room except hang a couple of pictures.
The main floor bathroom is pretty basic but it’s a comfortable size. The vanity is a candidate for replacement some time in the future. The bathtub was recently refinished, but the wall tiles have a hairline crack the length of the tub that was likely caused by someone falling against the built-in soap dish. At least that was the home inspector’s theory. There are no other wall tiles in the bathroom, something I think I would like to change down the road, especially around the toilet which is tucked into an alcove opposite the tub. As it stands right now, the bathroom is perfectly functional but it is on the “someday” wish list for an update.
The Master Bedroom
The master bedroom is a good size with plenty of room for our queen size bed. This room is my current project room and is undergoing a minor renovation as I write this.
The closet is over 6 feet wide but has a 4 foot wide opening offset to one side, leaving 2 feet of closet space difficult to access. I am in the process of widening the doorway to 6 feet so that the entire space is usable. In addition, I have scraped the popcorn ceiling, stripped the wallpaper border and removed the trim and laminate floor. When completed, the master bedroom will have all new laminate floor, new trim, new closet doors and a closet organizer.
Our daughter is going to take over the other two bedrooms. The plan is for the larger dark blue room to be her bedroom, while the smaller light blue room will be her study. She is heading into high school next year, so we want her to have a dedicated space for doing homework, Both rooms have bamboo flooring, and there is little else to do other than paint.
What’s not to love about a fireplace ready for a flat panel television to be mounted above? Laminate floor and oak trim complete the look. The only thing to do here is paint but painting is a priority. None of us like the salmon. At some point in the future, I intend to make some built-in bookshelves to flank the fireplace.
This bonus area just off the family room has a tile floor and only three walls. The plan for the future is to add a fourth wall and door and install laminate flooring over the cold tile to create a fourth bedroom which will serve as a guest room.
The lower level bathroom features a tiled shower with glass door, a pedestal sink and a dual flush toilet. Unfortunately, it also has a suspended ceiling and the panels are not holding up well, probably due to the moisture created in this room. I will be looking for a better solution.
The location of the bathroom is ideal– with easy access to the family room, bonus room/future guest room, and the back yard via the nearby grade entrance.
Basement, or the lowest level
In addition to the furnace room, the basement of the house features a second family room, which I will use as my home office. And there is also the laundry room, which is unfinished.
I will use one side of the room for my desk and podcasting equipment. There should be enough room to spread out a bit. Our old kitchen table will hold the “studio” equipment which will give me back about a third of my desk space. I hated the claustrophobic feeling I had when recording the podcast in the other house.
The other side of the room has space for book shelves and possibly some other storage. The only downside is that one must walk through this room to get to the laundry room, so it isn’t going to be entirely private. But it is a step above the office/guest room setup that we had in the money pit.
The Laundry Room
I am definitely going to miss the convenience of the main floor laundry room in our old house, but this much larger room will offer more flexibility. The room is unfinished, but will be an ongoing project as time allows. The washer and dryer were supposed to be included but the previous owner got our offer mixed up with another one and removed them. Rather than move them back in, we have invested in a new high efficiency laundry team similar to the one we had in the other house.
Similar in size to the garage of my first house, the attached garage will become my workshop. There is no entry to the house from the garage, so I won’t have to worry about sawdust getting inside. It will be a little tight so I will have to be super organized and use the space efficiently, but I can finally get my tools out of storage and start building stuff.
There is also a large tool shed in the back yard so my woodworking tools will not be competing for space with the lawn mower, garden tools and bikes.
I would have liked a larger garage for my workshop, but given that my tools have been in storage for more than a decade, I am excited just to have a workshop at all.
As you can see, there is a lot to like about this house. There is work to do, but no heavy-duty renovations are needed. I’m looking forward to unpacking our boxes of stuff. That will give us the opportunity to see exactly what we have so we can downsize our possessions.
Best part of this move, from my (lazy) perspective is that we have gone from two thirds of an acre down to a more modest 50×120 lot size. Lawn cutting in the summer will be a breeze.