Backing up three years, we found ourselves at a crossroads when it came to the decision of what to do about our living situation.
We were in a two-bedroom, two-bathroom house (with an office) with a two-year-old son, a six-month-old son and plans for more children in the not so distant future. Suffice it to say, we were at capacity.
Listing photo from our first house; can't beat that curb appeal! The house was super cute but unfortunately no longer met our needs...
To further complicate things, the house was built in 1951, and the plumbing and wiring were original. That meant if we added onto the house or renovated the kitchen (which desperately needed to happen), we would need to update everything - a "Pandora's Box" situation for sure.
Also at this time, we had purchased one rental property with another under contract, so we had some experience with real estate transactions, the local market and how to leverage equity.
That got us thinking and weighing the pros and cons of renovating and adding on to our existing house or selling our house and buying a house that met our needs space-wise but needed work and could be bought for a price that allowed us to have equity going into the renovation.
We decided to go with option two, sell our house and purchase a project, so we set about getting the house ready for market. Most of the work was cosmetic: touching up paint, installing new light fixtures and refreshing the landscaping. We did get a little creative, though, when we framed in a closet in the office to create a third bedroom. Adding to a house's bedroom count like this is a great way to add value with relatively little investment!
The third bedroom we created by framing in a closet (just to the right of the frame)
We also weighed the pros and cons of listing for sale by owner vs listing with an agent, and we ultimately deciced to list with an agent. This will be the subject of a future post, but long story short yes, most people are capable of handling the mechanics of a real estate transaction. However, value a good agent (and there are agents out there that are not good) will bring market knowledge and marketing capabilities that frankly the vast majority of homeowners cannot match.
A great agent will be able to bring you value on the sale of your home that will exceed their commission. Our agent originally gave us the idea of creating a third bedroon out of the office, which probably paid for her commission in the increased sale price.
She also gave us advice on where to focus our efforts in the mad dash to get the house to showable condition. More to come in future posts about where to focus your efforts when getting a house ready to put on the market.
Most importantly our agent gave us pricing guidance and marketed the property for us, leading to multiple offers within the first 36 hours, one of which had an escalation clause in it - a new concept to those of us outside the California real estate market.
Contact Sally if you would like assistance with buying or selling in the Baton Rouge market. She definitely falls in the “great” category of agents!
During the process of sprucing up our house to list, we decided to kick things up a notch on the next one and buy it with the goal of "flipping" it for a profit. The beauty of this is that the IRS exempts capital gains (in other words profits) from the sale of a house if you live in it as a primary residence for two out of the last five years (disclaimer: I am not a CPA or authorized to give tax advice, so please consult your accountant or financial advisor before making any decisions).
Long story short, due to the work we put into our house and the desirability of our neighborhood, we were able to sell it for a modest profit. Not bad but nothing to write home about.
The exciting part is the fact that we were able to buy the next house which was only a couple of streets over (and which was ~750 sqft and two bedrooms larger) for significantly less than the sale price of our first house. Yes, the next house needed a lot of work, but so did the first house if we wanted to make it fit our needs. Most importanly, we created built-in equity at the closing table - before even picking up a hammer.
Next time we will get back to the Camellia Project and the part everyone enjoys (according to HGTV, anyway): Demo, and we will uncover a few surprises, good and bad, in the process.
In the meantime, if you would like help buying or selling your next home or investment property, get in touch with Sally or check our SoldWithSalBR on Facebook. Or if you'd like to talk to us about real estate questions, renovations, Baton Rouge or pretty much anything else, feel free to reach out at info@thecamelliaproject.com.