Stretch goal into a dream house, good idea?

MyMiatas said:

Does your current home have a basement?  Could it (the basement) be an area that could be updated to rooms?   

Unfortunately no, no basement (or attic).

I would build the addition.  3500 foot 5 bedroom sound a bit too McMansion-ey to me.  

Two storey addition.

Only potential drawback is the mortgage rates will still climb with current home prices valuation remaining high or failing (certain areas). 

In reply to Sine_Qua_Non :

I'd expect house prices to start falling based on historical behavior, but it always lagged behind a rise in mortgage rates.

We were half-heartedly looking for a place more suited to my wife working from home, and recently our realtor suggested sitting out the next six months or so for this exact reason. 

In reply to BoxheadTim :

Property values are a double edge sword, if they go down a little both houses lose.  Existing house isn't as valuable so the difference will remain similar.  

Streetwiseguy said:

I would build the addition.  3500 foot 5 bedroom sound a bit too McMansion-ey to me.  

Two storey addition.

Location, location, location,  the three important points of real estate. 
      Really you are buying land not the plants or building.   Because the building will always depreciate, ( go out of style.  Need updating, maintenance, ).  The land however will always appreciate.  Good locations will at least appreciate at the rate of inflation plus a little more for scarcity. 
  Prime land with good schools, good businesses, nice amenities will appreciate at multiples of inflation. 

Desirable  land such as water Front, resort or vacation style, or spectacular views will appreciate the most.   

Javelin said:

So I have a place that I've been in for 5 years and owned for 4 that's a fixer upper. I bought it dirt cheap direct from the owner and have done a ton of work (all new windows, electrical update, new hot tub, partial flooring, all new crawl space, etc, etc) but it still needs a lot (paint, flooring, updates). We have been working with a contractor to try and get it to be what we need (it's a 3 bed/2 bath 1750 sf) that we have plans and engineering to change to a 5 bed/2.5 bath 2250 sf) but it's been a bear to get things moving.

We looked at houses and we found a place that we absolutely love, but it's pricey! It's a 4 bed/3.75 bath (plus finished attic, office, and den) 3350sf. We would have to really stretch to get it, like get max $$$ for our place, sell the Cayenne, and maybe even sell the Boxster to have enough down.

So do we build on or sell and buy?

(Side note, my current interest rate is 2.125% and the current quotes are 5.5 ish % on a VA)

Build on will shock you with costs plus the time involved and just hassles of living through construction.  Plus you'll be paying a higher mortgage rate.  
     In the end, buy the location. Not the building.  
 Real Estate always appreciates at the rate of inflation.  Plus a slight increase  because as population grows  private land has more pressure.  
     Let me repeat.  Buy location. Not the building and plants around it. 
     My late wife wanted another house from the one I am in. She liked the colors and arrangement  over this one.  But today that house has been torn down and is part of a bigger estate because it was so cheap.   While the value of this land has steadily climbed from $117,000 to well over a million in todays market.  
  Location, location, location. 

That is unfortunate that it does not have a basement... shop around for different styles of additions. (Garage with upper master bedroom)  Second mortgage for the cost.  

In post #1 you wrote; "we found a place we absolutely love..."    That sort of seals the deal.

You can move in now and get on with your life.   Not have to live through an extensive remodel that surely will have cost over-runs, and end up still being a compromise.   This from a guy that remodels homes for a living.

Well said.   I spent more than 25 years building my own house .   With any luck at all I'll get it finished before  I have to take my long dirt nap.
       Life is for living.  Stretch and go for it.    

If you like the place and are going to live there for 5+ years just buy it.  Yes, mortgage rates are higher, yes the housing market is most likely going to go down in the near future but that only matters if you need/have to sell the house in the next few years.  If you can afford the house and it's going to make you happy to be there, with a plan of being there 5+ years, you'll be fine.

Going to post the Cayenne for sale here first if you pull the trigger?

docwyte said:

If you like the place and are going to live there for 5+ years just buy it.  Yes, mortgage rates are higher, yes the housing market is most likely going to go down in the near future but that only matters if you need/have to sell the house in the next few years.  If you can afford the house and it's going to make you happy to be there, with a plan of being there 5+ years, you'll be fine.

Yes. This next place will be where we stay until the kids are done with school (10-12 years).

Placemotorsports said:

Going to post the Cayenne for sale here first if you pull the trigger?

Absolutely!

Update - We have decided against the particular house we looked at, but it's because we've decided to change locations. Our contractor finally gave us a bid for the project that was more than DOUBLE the original estimate ($132K vs $60K) so expanding is untenable (we don't think +2 bedrooms, +1/2 bath, and +200sf will raise the value of the house $132K). So if we're moving, we want to get out of this town and get to somewhere with way better schools, that's closer to where we always are anyway and her kid's dad.

So now the hunt is on to figure out which area to live in.

Are you looking to Portland at all? I've noticed a lot more homes for sale here in St John's lately. Garages are few and far between though. 

thatsnowinnebago said:

Are you looking to Portland at all? I've noticed a lot more homes for sale here in St John's lately. Garages are few and far between though. 

Absolutely not. I work for the State of WA and I hate Portland besides PIR.

I like to kill three birds with one stone whenever possible. Since you said ADU is a thing where you live.. could you build a rental unit above a shop space on your big lot in great location? And then use the rental income to support an addition on the house?

Antihero said:

I wouldn't buy a house right now around me, the prices are about 8 times what they were 2 years ago 

 

Plus, you don't want a house built in 2005, that was a "boom" time and they are built as cheaply as humanely possible so they could get max profit. I saw houses that were 3 feet out of square, plumbing not hooked up and draining into the crawl space and all sorts of other horrors. Your 1980 house is significantly better as 1slowvw mentioned before.

 

Personally I'm not a fan of "stretching"  for long term investments, too much can go wrong

There is a major difference between stretching for an investment and stretching for a home.   No matter what you have to live someplace.  Where an investment is simple math you either win or lose. 
  Home where you start out with equity  can be used in a dozen ways ( refinance, 2nd loan, interest only payments, collateral on a personal loan etc) to provide you with someplace to live if things go wrong.  
      The chief advantage a home has though over investments. Is leverage, over a long enough period of time real estate prices will always go back up.  There are more and more people every year seeking someplace to live.  Renting is a dead loss in that even if your property owner only raises rent  modestly in the end of 30 years you have no equity built and nothing to fall back on in retirement.  
 Whereas 30 years of payments at the same price you paid per month initially will seem like a real steal.     
 

I did this two years ago just before the real estate market caught fire. We have a family of six and bought a gently used McMansion.  The extra space has been a welcome change. It also has a basement apartment that we now use as a short-term rental --  it pays my mortgage most months. YMMV.

I think prioritizing the kids and their needs is always the right move.  I'd sell every dang thing to help them.  I sold both Porsches recently while between jobs to keep the status quo.  
 

Materials and supply chains are messed up right now.  An expansion will be nuts.  
 

I'd be really wary of 5% plus interest too.  The amount in interest you pay on your loan will skyrocket.  
 

If you find something going on with lots of cash will help a lot.  Selling our house in Dallas, we put lots of cash in the new one.  We did it a few months ago so we got 3.5% interest.  I'd have loved being in the twos again, but that may never happen again.  
 

Don't rush, but doing it for the kids is the best reason!

We've looked at around twenty homes in 5 different areas to get a better idea. We definitely want to move forward with moving, there is no point in us doing the expansion because it would still be too small of a house, and frankly the school district we are in is terrible compared to the ones just 30 minutes south.

We are realizing that we really need 5 bedrooms plus a dedicated office space. The Cayenne will be sold soon to help make it happen, as well a large portion of my collections.

Be careful with the assumption that housing prices always go up over time.  My hunch is that it is heavily tied to the fact that our population has never decreased, which is likely to change in the near future.

I would also only view a home as an investment if exiting is a realistic option.  If you really hate the idea of having to abandon an area or downsize, you should probably view your home as an expense.

In reply to bigeyedfish :

I researched this subject very closely.  Turns out in the depth of the Great Depression when farmers were losing their farms and workers their homes. They'd go back on the bank books  as an asset and sold  when  someone was willing to buy them for book value.   
       Yes individuals can have problems. Sickness, divorce, loss of Job, Bankruptcy,  Gamboling, etc.  resulting in the individuals loss of a home.    Outside influences  such as loss of industry,  national disasters,  etc can cause  problems.   But when those things happen  your profit or loss of money isn't typically your prime concern.  Any other investment short of sticking money in a coffee can and burning it in the back yard  is going to be as bad or worse. 
   But yes either money becomes worth less or property goes up in value over a long enough period of time.   For example, during the 2008 recession book value on my home went from 1.3 million to $500,000. But 7 years later it was back and now it's higher still. It's purely academic until I take my long dirt nap.  Then my heirs get to do the math involved. 

In reply to Javelin :

Still waiting on those Cayenne details...