Buying the Older Dream Home: Blessing or Just a Money Pit?
Friday, June 26, 2009 | Ethan RobertsRating:
This past week, I had the interesting experience of showing a young couple some very old homes in an area of town that has been around since the early 1900s. These homes were built with the best-quality construction and, as they are still standing today, they serve as living proof of days gone by when workers in the building industry performed their jobs with exacting care and skill.Today, as in previous years, many young, urban professional couples have a romantic vision of buying a quaint older home, and then rehabbing it over time with all the modern conveniences and luxuries they can afford.
You may recall the old film, "Mr. Blandings Builds His Dream House," in which a husband and wife buy an old home in the Connecticut countryside, then have to deal with a multitude of home repairs and other problems that they never expected.
Carey Grant carries Myrna Loy over the freshly stained threshold in "Mr. Blandings Builds His Dream House" (1948)...
A similar theme was revisited in the 1986 movie, "The Money Pit," in which Tom Hanks and Shelly Long bought an old dilapidated home that was supposedly a bargain, only to discover that it needed thousands of dollars' worth of work.
Everything that could possibly fall apart and go wrong, does within the next four months.
"Are We Done Yet" (2007) is the most-recent remake of the Blandings theme. Clearly, buying a "fixer-upper" is a theme that every new generation can relate to.
So, Why Do People Love Older Homes So Much?
They often featured large, formal dining rooms in which extended families would gather on a weekly basis. Bathrooms had pedestal sinks and claw foot tubs; family rooms had large brick fireplaces; and, every so often in a fancier home, the kitchen had a butler's pantry.
Beautiful knotty pine wood, rarely used today, but found abundantly in the homes of 1940-'60...
Victorian-style homes had wrap-around porches, where people sat in rocking chairs on warm summer evenings, drinking lemonade and talking with friends and neighbors. In addition, the size of the lots were often larger, because the land was less-expensive when these homes were built.
Savannah, Ga., home with wrap-around porch
However, all that is quaint is not always going to be practical for one's needs.
Is That Antique Too Unique?
One important point to realize about these older homes is that the type of rooms, room sizes and closet space may have worked just fine in 1909, but they do not provide the functionality needed for our 2009 lifestyles.
For example, this pink home below has six bedrooms -- great for the large family. But it has only one bathroom.
Can you imagine your family getting out to school or work in the morning with only one bathroom? Could be standing-room-only!
Lovely Victorian home, circa 1914: 6 bedrooms, but only 1 bath!
Many times I have had customers ask me to show them older homes, only to change their minds when they see the munchkin-sized closets, small master bedrooms, crowded bathrooms and an unusable, gigantic space in the formal living room.
They are also disappointed that the home does not have a garage or, if it does, that it is detached from the home and located in the rear yard.
They also wonder why the bedrooms are not "split" (i.e., master and kids' bedrooms located on opposite sides of the house) or why they don't have open floor plans in which you can see the family room from the kitchen.
BECAUSE THOSE ARE FLOORPLANS BUILT FROM 1980 to 2009!
Suppose, though, that the charm and uniqueness of the older home wins out over the convenience of a more-modern floorplan. In addition to the previous owner's taste in decorating or remodeling, you may inherit some other problems that might be more-urgent to fix.
Dream House ... or a Wes Craven 'Nightmare'?
Unfortunately, there are many challenges involved in buying some older homes. Electrical, plumbing, or heating and air systems may be outdated and in need of an upgrade. I have seen many of these homes sporting cheap metal roofs. Upgrading these systems are the most-expensive repairs one can make on a home.
Insurance companies may charge higher premiums on homes more than 50 years old, and the homeowner has to show proof through a "four-point inspection" that the roof, electrical system, heating and air system, and plumbing have all been updated.
Often, the floors sag on homes that were built above grade. This is from settling that takes place over decades, and may require a structural engineer to go under the home and "lift" the floors back into place.
On top of that, some of the attics have rodents or other pests that will require the services of a professional exterminator.
It is always recommended that homebuyers have inspections done, but this is even more vital with an older home. The general home inspection will cover most of the structural systems, roof, appliances, etc.
In some areas of the country there are radon gas inspections, lead-based-paint inspections, and termite and wood-destroying-organism inspections as well. The cost of inspections can run anywhere from $400 to $800, but the money saved by not buying a lemon of a house is well-worth the cost!
Ever had this experience?
In Love With a Historical Home? HUD Can Help
There are special programs available for homebuyers who want to buy that charming little fixer-upper. One of the best known is the FHA 203(k) program. The 203(k) is designed to give the borrower one mortgage loan to finance both the acquisition and the rehabilitation of the home.
The mortgage amount is based on the projected value of the home when the work is finished, and takes into account the cost of the repairs. More information on this program can be found at HUD.gov.
In many areas, the older homes were built in neighborhoods that are now designated as "historical districts," and these homes now require special permits before remodeling can occur.
Doors and windows often have to conform to other homes in the area, and must be specially ordered because the older home sizes are not standard inventory to be found in home improvement stores.
You might also have to get approval on the color you choose to paint the exterior. The purpose of these standards are to preserve the look and feel of the homes from the era in which they were built.
Some Quaint Homes Now Selling for Quite Cheap
But young couples and dreamers aren't the only ones who are drawn to the older homes. Investors are also intrigued with the lower sales prices, and good locations near the downtown areas where many of these homes were originally built.
During the boom years of 2003-'06, many of these homes became quite expensive. However, in a large number of cities today, you can buy some homes for less money than you would pay for a new car!
Once these homes are rehabbed, they are easily rented with excellent cash flows.
During the boom years of 2003-'06, many of these homes became quite expensive. However, in a large number of cities today, you can buy some homes for less money than you would pay for a new car!
Once these homes are rehabbed, they are easily rented with excellent cash flows.
"Shotgun" style home, built 1917, is on the market for only $3,000!
So, the reality is that there are both pros and cons involved in buying an older home. They are easy to fall in love with, but just as easy to break your heart later on when the pipes are backing up, there's no heat on a cold night, or when you hear the sounds of scurrying little feet in the attic at 3 a.m.
Now I am interested in hearing from Tycoon readers -- what are your feelings about buying older homes? Did you grow up in one? Have you ever bought one to restore and, if so, was it a huge mistake or a great financial decision? Let me know!
Now I am interested in hearing from Tycoon readers -- what are your feelings about buying older homes? Did you grow up in one? Have you ever bought one to restore and, if so, was it a huge mistake or a great financial decision? Let me know!
A gated community in N.E. Florida, with lovingly restored homes that were originally built in the early 1900s...
See you next week!
(Please let us know what you think about Ethan Roberts's article.)
Rate his article here »
Rate his article here »
Ethan Roberts
Contributing Editor
The Tycoon Report
