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I think there are a lot of factors that would come into play here. Would you rather have a better neighborhood to live in, or better schools? What kind of loan are you getting (FHA requires things to be done before you close)? Can you like in the cheaper house while its being renovated? Would you do the work yourself or have a pro come in? Would it honestly be cheaper to fix up that house?
These are all questions I would ask myself if I were in your situation
Thats a tough one.
We chose our house because it needed some work, but was in a great neighborhood. The school district isn't great though, so we plan on selling in 7-10 years (we don't have kids yet). However, who knows what the housing market will be like then.
Based on your description I would lean towards the second house, but the fact that you dont really like the neighborhood is a huge negative in my opinion.
Tough call!!
Honestly, the better school district would be the deciding factor for me. Plus, you could do the repairs on the cheaper house much cheaper than the $125,000 difference in price.
I'd buy the cheaper one that needs some love.
We would be able to do majority of the work ourselves.
We would be going conventional and most likely putting down 5% to 10%.
House #1 is in our current neighborhood which is a similar neighborhood to House #2. The difference is the school district, which for me is #1. The other difference is the yard size. House #1 has a huge yard and house #2 has a smallish yard.
I have a hard time letting go of this house that is sooooo cheap. DH just doesn't see my vision, lol.
Ususally the better neighborhood goes hand in hand with the better schools, so I'm a little confused on that point. But, I'd choose the better school and a house that needed some work. There is a TON more value to be made doing the work yourself.
If you're comfy with the work, I'd say go for the cheaper house in the better school district.
A lot of the things you're describing are repairs that could happen over time (like ripping up carpet, molding, basement, etc). If you could live with those things now, go for it. Also, how confident are YOU with doing the work? I mean you, not your hubs. Sounds like he's not sure he wants to, and so maybe you'll need to take the reigns. I've done the majority of the work on our home and have learned SO MUCH doing it! I think my Mr. appreciates it that I don't force him in to doing projects he doesn't want to do. I just do 'em!
Obviously get any house inspected. Things like a hole in the ceiling--you want to find out what that's from. It is so worth it to spend a few hundred bucks to have a pro take a look.
Hm. You said it's not in your favorite neighborhood but is it a good neighborhood?
Do you have kids now? If you don't I would be less concerned about the school district since you plan to flip in a couple years.
The biggest thing for me in your situation would be can you get it low enough to make it worth your time and money that you will put in the new house to fix it up?
My husband and I wanted a fixer upper in a great neighborhood and great school district. We don't plan on moving ever again. And to us no matter how fixed up a house is it won't be to our exact tastes. So remodeled or not we would be changing it. So for us a lower priced fixer upper was perfect for us. But then we'll be here for at least a good 20 years.
Do you have the money to do all these renovations to this house? How long are you planning on staying? If you aren't going to stay for 5+ years, it might be hard to get back that money that you put into renovations, especially since it's not the greatest neighborhood. You want to buy the worst house in the best neighborhood if that makes sense. Putting a bunch of money into a house in a not great neighborhood probably won't turn into money when you want to sell it later.
PS - Have you talked to a lender yet? It seems like a lot of them won't do 80/10 loans anymore.
@pinkshoes: The neighborhood is difficult to describe. Not that either is a bad neighborhood, but we live in a water oriented area. Both neighborhoods are "shore" neighborhoods without sidewalks. Some homes are not exactly kept up and others are. The houses on waterfront and either little cottages or completely re-done McMansions. It's really a plethora of home options. Both neighborhoods date back to the 1950's-1960's. Hope that helps!
I am totally confident that I can do the work...I just need to learn how. My dad and my FIL are both super handy. My dad used to do construction and can do anything but electrical work. My FIL has done a ton of projects on his house and has the ability to do electrical work. My FIL helped his son, my BIL, completely gut and renovate a Baltimore row home back in 1999.
@regberadaisy: Yes, both neighborhoods are good neighborhoods, just not our favorite. Our favorite neighborhood features homes that need work for $350k-$400k and completely finished homes for $400k++++++.
Yes, we have a 10 year old daughter going into middle school next year, so schools are a BIG concern for us. The current middle school is ok/good...but we don't want ok. We want the best.
We would have the money to do these renovations and live in the house too. We have money saved up plus the cheaper mortgage payment would give us room to invest in the home. This house, we could stay in forever...it's big enough. Or we could sell, it really doesn't matter.
Yes we have talked to a lender and there are plenty of banks doing 5% down conventional loans still.
If you aren't opposed to doing the work, then I think cheaper house in the better school district is the way to go, especially if you plan on staying for a substantial period of time. And the renovations you mentioned don't seem tooo bad. Furnance/AC will cost some money and so will the basement, but unless you need the basement right away, that can be done at a more leisurely pace. With a daughter going into middle school, I think the school district should be the biggest factor, and obviously a smaller mortgage is great! And all the renovations you mentioned can be done for much less than the $125k price difference.
I voted for the cheaper house because it's in the good school district. To me that was our top priority and we didn't even have kids yet when we were buying a house. Heck, we weren't even engaged yet. But it helps with the property value of the house as well.
I voted for the cheaper house that needs work in the better school district.
If you guys are willing to do the work thwn I say go for it! 99% of the time is you chose your renovations wisely your house will appraise for more than the renos, then you'll have a great house in a great schhol district.
Just don't let the work get you down. FI & I just started this process ourselves, except the house we bought needs everything, roof, windows, doors, ceilings, flooring, kicthen and baths. It's a little overwhelming sometimes, but when its done the $40k in renovations should bring our house to appraise for $300k minimum, which is $130k more than we paid. The key part to this is that we have a great big piece of land in a great neighborhhod, with great schools, the previous owners just never did ANYTHING to the place.
Good luck! It's very exciting!
We bought the cheaper one that needed some work. Two years (almost three) later and thousands of dollars and TONS of work, and we're still not done. I vote pay the extra money for the house that's complete.
I'm all about buying location and as long as most of the work that needs to be done on house #2 is either 'livable' (meaning doesn't need to be done before you move in) or at least somewhat cosmetic, I say go for house #2.
If the house is in a good location, it will be more likely to hold its value than a totally renovated house in a not as nice location.
However, if you come to realize that the work that needs to be done is extremely expensive and requires hiring a lot of contractors, I would think twice about the house. In this market, whoever does the remodeling loses because it's hard to get a return on your investment. But at least the upside is that if you can afford it, then that means you can do it to your specifications instead of accept what someone else did. Plus if you plan on living there for more than 5 years there's a chance you will get some return.
@irin997: Also, I know some people have said that if you get an FHA loan, the work has to be done beforehand. We got an FHA w/ rehab loan and we have 6 months to do the work, so i think there's a few options for you to look into. Our first place which we still have we have has a regular old smortagge on it and I have to say the FHA loan was waaaay more detailed and time consuming than our other mortgage, such pain but worth it in the end.
I am a parent of a middle schooler, and the school issue is my top priority. So for me, the house in the better school district wins, hands down. That said, make sure to check in with the school board about any near future re-districting plans that could change the school factor one way or another. Our county is still growing fairly rapidly, and re-districting can significantly alter the value of a house.
But if I were you, I'd keep looking. Holes in the ceiling are a big red flag to me, and I'm not interested in a house that requires a lot of work because we lead very busy lives and simply do not have the time to spend on big house projects, nor do we want to commit ourselve to spiffing up the house for years and years. That's not my cup of tea.
This is a tough call and FI and I had to make this same decision over the summer. We had started out looking at single family homes that needed work, but ultimately ended up buying a townhome that was move-in ready (we don't have kids).
Initially, we had thought we were up to the task of doing the work, but after we bought our townhouse we realized that we would have been in way over our heads. Our schedules are so busy and there always ends up being more work than you think there will be.
I can't say what's right for you, but I can say that it would be wise to think long and hard about remodeling because it's not hard for that stuff to get out of control or get put on the back burner. Just my $.02 and I hope it helps :)
There are a lot of factors here...schools, payments, work to be done...
If you are not afraid of work, then go for it. If you are doing most of the work, you can control how much to put into it, money wise.
Thanks guys, you gave a lot of great insight! I actually emailed our agent (my DH's uncle) a few of our concerns and hopefully he can get some answers from the listing agent.
School districts will be my DH's and my first priority. So I selected the 2nd option with the better school district.
Do you want to do the work on the fixer uppper house? If you do and you're both excited about that prospect, I'd say go for that one; however, if you're kind of dreading the thought of it, either due to money, time, inconvenience, etc, and you can afford it, I'd say go with the more expensive house. I know my DH loves to renovate things and is actually pretty good at it so when we buy, we'll be looking for a house that needs some love, but I think it totally depends on how you and your DH feel.
On the school issue, I may be going against the grain here, but unless the school in the first district is actually a low performing school, which is not the impression I got based on your description of the neighbourhood, it probably won't really matter. Whilst everyone thinks their child has to attend the BEST school, I don't think that necessarily dictates how successful a child is going to be - and this is coming from a teacher. So many factors that determine a child's academic success come from the home and if those essential skills are not learned at home, it doesn't matter if your child is at the Harvard of elementary schools, they're still not going to be massively successful. Kids who have supportive parents who work with them and have taught them the necessary attitudes/skills to be successful in life are going to succeed in most learning environments. Just something to think about.
I'd probably go for the fixxer-upper, only because I am a fan of good schools.
When FI and I were looking at houses, we found one that met just about all of our criteria, needed "a little TLC", and was 130k. We drove by, and found a sign posted on the door: "REALTORS ENTER AT YOUR OWN RISK, HOUSE HAS MOLD".
If by "a little TLC" they meant fire...
@Ree723: Funny enough I was just reading an article in the paper today about how important it is for parents to be involved in their kids' education and those kids with involved parents perform better.
If you were to go on greatschools.org, house #1 schools are 8/10 for the middle and high schools. House #2 schools are a 10/10.
Yes I kind of do want to do some work. I guess I need to see where DH stands. I have a feeling he thinks it will be more expensive than it really is.
I would say go for the second house and do the repairs, but you also never know what a house really needs until you're in it. Make sure you get a very very thorough home inspection and have your contract be one you can step back from if needed. A hole in a ceiling is one thing, but could it mean mold damage? A new roof? How much carpet is needed? We're currrently looking at carpets and it is certainly not cheap. Also with a basement refinish (depending on what you want done) it can range up to $20,000+ (in NJ at least). Also many things (at least with me) I don't feel comfortable with doing myself and have needed to hire professionals (replacing a roof, windows, finishing a basement, installing large scale appliances like an AC unit etc.)
As a person who has purchased a home that needs work, I love my house and would not change a single thing. But just be sure that you're ready for the work(like hours over the weekends or in the evenings after work kind of work) and what might be needed around the corner.
And P.S. be ready to share your home with messy, noisy, dusty, loud construction people for weeks at a time!
@irin997: What do the parent and student reviews on great schools tell you? I find them to often be more insightful than the great schools overall score. For example, one highly scored school that we considered had tons of negative parent and student feedback because the principal was so obsessed with the MSA scores that he cut out a lot of the extra subjects and offerings in order to teach to the test. So yes, it was a high performing school that got a 9 on great schools, but it was't a well-rounded school, and I knew it would be a bad fit for teen LK.
Honestly, an 8/10 versus 10/10 split isn't that big of a difference to me.
Oh we would definitely get a home inspection and then any other estimates/inspections needed. The carpet to be ripped up has hardwoods underneath so there may be re-finishing costs but my DH has actually refinished hardwoods before.
I'll definitely read the reviews and see what students and parents think.
I voted for the cheaper house. The thing with houses is that no matter how finished they are you'll still want to do work to it (personalize it so it fits your family's lifestyle) and there's always going to be something that needs fixing. There's more financial room to breathe with the cheaper house.
I'd go with the cheaper house with the better school district.
The best advice I was given was to buy what you can afford in a neighbourhood you really like. Location is a huge factor in price, and you can't change location. Then renovate when you have the money, and you'll increase the value if your home.
I think the better neighborhood and large yard are a huge draw. Location is very important- and will affect your life in many ways- I am sure the school district is still good?
How different are these neighborhoods? Is the first just slightly better/preferable or what? (Sorry if someone has already asked/you've already answered.)
FWIW, we went with the cheaper house that needed some work. None of it immediately necessary. We don't regret a thing. (I know some of yours was more immediate.) We also know we'll need a new AC and Furnace at some point but we're just waiting on that to happen. Lol.
Speaking from experience here....remodeling SUCKS! We've been at it since May 2010 and it's still not done. Hubs has been doing it all himself and there hasn't been a weekend since we started that we had without sawing, painting or hammering. I can't wait to have my man back!
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Ok so DH and I have been house hunting for the better part of a year and seem to meet at the same cross roads. We've found 2 potential houses that both have pros and cons.
House #1 is $350,000 (would probably go for $325,000), in our current neighborhood which is good, but not our favorite school district (I have a 10 year old daughter). The house has a HUGE backyard (1/2 acre) and has been remodeled beautifully. The only thing it needs is new countertops.
House #2 is $265,000 (would probably go for $200k or $225), in our favorite school district (best in the county) but not our favorite neighborhood. It has a newer kitchen but needs some work. Carpets to be ripped up, molding replaced, furnace and A/C, and the basement needs to be completely re-done. There is some sort of hole in the ceiling that we aren't yet sure what it is from.
My feeling is that I'm not afraid of work and the lower mortgage payment would be awesome. It would allow us room to put money into the house and/or still be able to do things like go on vacations other than our annual family trip to the beach. DH I think is a little afraid to do some of the work. I also feel like if we put money into the house, we can sell and upgrade in a few years, but if not, the house is a good enough size to live in with 3 kids anyway.
So what would you do?