In Part 1 and 2 we discussed the importance of location, good floorplans, buying with an eye towards resale, good schools, amenities and ugly houses. In this paper we will discuss other important aspects of buying a new or used home.
Stretching your budget– Stretching your budget is a dual edged sword. When should you not stretch your budgets? It has been a while since inflation has caused variable rate mortgages to show up in the marketplace. This is where the interest rate can go up or down (usually up if variable mortgages are being offered) based on time and indexes. We all remember the 2 and 5 mortgages where the rate was steady for 2 years then subject to an increase until a balloon payment at the end of 5 years called the loan.
In uncertain interest rate times, be conservative and stay within your budget. However, the way we are today with rates so low, adding next level appliances may only add a few dollars to your monthly mortgage payment and favorably enhance resale value. This would be a good time to stretch your budget.
Pools– Pool desirability varies based on the buyer’s previous location. Over twenty years ago I sold our family house in Boca and moved near the beach in Delray. The house in Boca had a screened in porch. The kids were older and out of the house and my wife and I stopped using the pool years before. Our Golden Retriever however often (especially in the summer) frequented the pool as he pleased. I was happy the new home did not have a pool plus I was 1 block from the ocean if I wanted to swim. We did not miss it at all.
That neighborhood morphed into a different place over the past two years. Instead of mostly local full-time neighbors the folks from the northeast came in and started buying and renovating their second homes. One of their top requirements coming from up North was- “we need to have a pool.” Foreign buyers from above the Mason Dixon line all seem to want pools when they move to Florida. Depending on where you are from a pool is either wanted or not. Locals-No. Foreign buyers (people not from Florida but US citizens) Yes.
Old Homes– Depending on your skill level, the older and more obsolete the home in a prime neighborhood the more likely you will get a much lower price. Having said that you better know all aspects of building, including knowledge of the code, some structural building experience, dealing with architects and engineers and a large base of subcontractors. House flippers do mostly cosmetic changes. As they grow in confidence, they may move walls.
The last group (builders like myself) will take on a total GUT job. The home we bought in Delray needed all 40+ years of my building experience to recreate an up to date beach home. The kitchen and living areas were upstairs and the bedrooms were downstairs, no central air, plenty of asbestos. But I picked the house because it had good bones (pilings, terrazzo, strong structural components). Eight months later the ugly caterpillar changed into a beautiful butterfly.
So, make sure you are capable of making major renovations or that you have the money to hire excellent professionals. Work your way up slowly.
Stephen Gravett has been a real estate developer for over 45 years and was most recently CEO of Kennedy Homes for the past 11 years and is still CEO of Kennedy Development Partners (KDP) and full time Director of Operations for 5 Star Developers. He is also a state licensed broker and since 1980 a State licensed General Contractor Unlimited. He flew B-52’s in the US Air Force during the Vietnam war.