My primary (and only) residence is a ~800 sqft (74 m2) 2BR/1bath single family home built in the 50s on a ~6000 sqft (557 m2) lot. I'm 3.5 years into my first 5-year term on the closed mortgage, with roughly 250k owing of the 320k purchase price. Some parts have been renovated, but not very well and it's obvious the previous owners just did a rush job getting it ready to sell.
I went for a house instead of a condo since I understood they retain and appreciate more in value, and I wanted the distance from neighbours sharing walls on either side, above and below me. Yardwork and upkeep are not things I want to spend my time, so I'm now thinking a condo is a better choice (with good sound insulation).
1- Tear down and rebuild the garage (rotting and too small to fit most vehicles), renovate interior (bathroom is the most in need of work), get the centre beam fixed (I think it's just jacked up too high in one spot as it causes the hallway floor to bulge, but that spot is inaccessible to verify without removing some drywall or the furnace), replace the rotting fences and do some basic landscaping.
2- Tear it all down and build a larger house (or multi-family) in-line with the area, and a garage big enough for the average truck-loving Albertan.
3- Take advantage of a recent rezoning, which would allow me to subdivide my property into two 25x120 foot lots (7.6m x 36.6m). This would also require tearing down the existing structures, and having two long and skinny 2-story houses built.
I don't think I'd be able to cover mortgage, utilities and other expenses by renting it out, so selling seems like the best option.
With my current cash + LOC, I could do option 1, although I'd need to get an estimate on the main beam repair first. From my understanding I should get back the cost of the garage in the sale price, and having a decent one should boost marketability. This would also allow me to keep living here while work is being done.
Option 2, I'm not sure how I'd finance it. I found some values for construction cost per square foot (http://www.altusgroup.com/media/1160/costguide_2014_web.pdf)
HOUSES
Speculative (Basic Quality) 120 - 140
Speculative (Medium Quality) 130 - 190
Speculative (High Quality) 225 - 340
Custom Built 350 - 880
If I use $200/sqft for medium-high quality, and 1200 sqft, that's $240k. If I'm able to refinance my existing mortgage to include that amount, I'd need one for $490k minus say $60k cash I could put down. Using a mortgage calculator at 25 years, this is around the limit of what I could afford based on my salary. One problem I see is houses in my immediate area max out around $450k in assessment value, so unless I'm missing something, I'd be walking away with less net value than I have now.
Option 3, I don't think I could finance. I'm not sure if there are minimum size requirements for the skinny houses, but assuming the same as option 2, that'd be $480k in building costs. This would make for a $670k refinanced mortgage, which I couldn't swing. The 2 lots might get up around $350k each, which would at least put me in the positive once sold.
Plus, options 2 and 3 would require me living somewhere else, adding more monthly expenses.
Should I just stick with #1, or should I try to get more accurate numbers for potential costs and sale prices for #2/3? Subdividing seems like it'd be the most lucrative, it's not really an option for me if I can't finance it.
Is it worth considering #1 and renting it out even if I'll need to kick in an extra $400 (rough estimate) a month, while I get a condo for myself? This would allow me to retain the asset without straining my finances.
Any other possibilities I'm missing?
I went for a house instead of a condo since I understood they retain and appreciate more in value, and I wanted the distance from neighbours sharing walls on either side, above and below me. Yardwork and upkeep are not things I want to spend my time, so I'm now thinking a condo is a better choice (with good sound insulation).
1- Tear down and rebuild the garage (rotting and too small to fit most vehicles), renovate interior (bathroom is the most in need of work), get the centre beam fixed (I think it's just jacked up too high in one spot as it causes the hallway floor to bulge, but that spot is inaccessible to verify without removing some drywall or the furnace), replace the rotting fences and do some basic landscaping.
2- Tear it all down and build a larger house (or multi-family) in-line with the area, and a garage big enough for the average truck-loving Albertan.
3- Take advantage of a recent rezoning, which would allow me to subdivide my property into two 25x120 foot lots (7.6m x 36.6m). This would also require tearing down the existing structures, and having two long and skinny 2-story houses built.
I don't think I'd be able to cover mortgage, utilities and other expenses by renting it out, so selling seems like the best option.
With my current cash + LOC, I could do option 1, although I'd need to get an estimate on the main beam repair first. From my understanding I should get back the cost of the garage in the sale price, and having a decent one should boost marketability. This would also allow me to keep living here while work is being done.
Option 2, I'm not sure how I'd finance it. I found some values for construction cost per square foot (http://www.altusgroup.com/media/1160/costguide_2014_web.pdf)
HOUSES
Speculative (Basic Quality) 120 - 140
Speculative (Medium Quality) 130 - 190
Speculative (High Quality) 225 - 340
Custom Built 350 - 880
If I use $200/sqft for medium-high quality, and 1200 sqft, that's $240k. If I'm able to refinance my existing mortgage to include that amount, I'd need one for $490k minus say $60k cash I could put down. Using a mortgage calculator at 25 years, this is around the limit of what I could afford based on my salary. One problem I see is houses in my immediate area max out around $450k in assessment value, so unless I'm missing something, I'd be walking away with less net value than I have now.
Option 3, I don't think I could finance. I'm not sure if there are minimum size requirements for the skinny houses, but assuming the same as option 2, that'd be $480k in building costs. This would make for a $670k refinanced mortgage, which I couldn't swing. The 2 lots might get up around $350k each, which would at least put me in the positive once sold.
Plus, options 2 and 3 would require me living somewhere else, adding more monthly expenses.
Should I just stick with #1, or should I try to get more accurate numbers for potential costs and sale prices for #2/3? Subdividing seems like it'd be the most lucrative, it's not really an option for me if I can't finance it.
Is it worth considering #1 and renting it out even if I'll need to kick in an extra $400 (rough estimate) a month, while I get a condo for myself? This would allow me to retain the asset without straining my finances.
Any other possibilities I'm missing?
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