Looking for a house to rehab? Pay attention to details


January 09, 1993|By Karol V. Menzie and Randy Johnson

A bad market for real estate -- when nothing is selling -- is said to be a fine time to buy. That's currently the case: Mortgage rates are still low enough to be appealing, and a long sales slump is just showing signs of reversing itself.

But there are still plenty of pitfalls for the enthusiastic buyer.

It is easy to fall in love with the wrong house, especially in an area where a lot of rehabbing is going on. If you're planning to work on the house anyway, the best values are houses priced on the low end of the prevailing market -- houses in a prime rehab area that haven't been touched, or houses on the edges of a neighborhood where rehabbing seems to be heading.

Take a scientific approach. Once you've found a neighborhood you like, cruise it. Just drive around, checking out distinctions among various streets, until you have a pattern of which ones seem to be improving the most. Drive around in the daytime, in the afternoon and at night. Stop at every open house. The unrehabbed ones will give you an idea of what to expect in a project, and the finished ones will give you an idea of what buyers expect from that market.

Talk to people who know the neighborhood -- real estate agents, shopkeepers, neighbors, friends and friends of friends. Find out how they feel about certain streets, how they feel about neighborhood amenities.

TC One of the most important things to determine about a house, and one of the most neglected areas of research among home buyers, is how much will it be worth when it's your turn to sell it?

A house is a huge investment. But few people these days live out their lives in one house. It's highly likely that eventually you will be selling and moving on. That's a day you need to plan for before you put in a contract on a house. Where is the market going? What will be the return on your investment?

The glory days of the '70s, when all you had to do was buy a piece of property and sit back and watch the value soar, are over, maybe for a long time, maybe forever.

You need to be especially careful if you are planning to rehab the property. It's easy to get carried away and invest a lot more time and money than you can ever get back. Some people insist that doesn't matter to them, that they just want to get the house they want, where they want it.

But even the most independent-minded homeowner is not going to want to take a loss at selling time.

That doesn't mean you can't do what you want with a house -- it just means you have to pick the right house and improve it carefully, with an eye on the market. A real estate agent who works extensively in the market can tell you not just what prices other houses nearby are listed for, but the actual selling price. The gap between the two figures is an important clue to the desirability of the area.

When we started shopping for a house recently, we looked in a neighborhood we've always liked, and spent hours driving around, looking at streets and houses, checking out open houses, talking to agents we met.

It's a desirable neighborhood, close to city amenities, and there are houses in the designated historic district that sell for hundreds of thousands of dollars. We shopped on the fringes, where the rehabs were less predominant, but where the good things -- a good city market, popular restaurants and night spots, access to interstates and train stations -- still were close.

We found a number of houses we liked. One was large and untouched and full of potential, but beyond the back yard was a wasteland of urban decay. Another had a back yard full of roses and a harbor view, but it was tiny, barely habitable and needing more of an investment than was justified on the decent but unspectacular street.

Just as we were beginning to wonder if what we were looking for really existed, we found it: a nice-size house on a good street just outside the historic district, where one family had lived for more than 40 years. Although it had been kept-up, it was showing its age. But it was about the last house on the street that hadn't been rehabbed, and others had sold for nearly twice the price of this one.

We made an offer to the owner's real-estate agent and negotiations began. We know that agents represent the seller, but we were impressed with the fair way they dealt with us, and we liked the way they treated the seller. And they kept the deal on track, even when kinks appeared in our deal to sell a previous property.

Eventually the kinks worked out and both deals went through.

So we've begun another rehab. And, as houses do, this one has already offered us disappointments and pleasures. The columns we hoped for weren't lurking behind paneling in the living room, but the floors under wall-to-wall carpet and linoleum are in good shape for sanding and refinishing. Plaster walls behind paneling are also restorable in most places, and we found a nifty section of wainscoting in the second floor hallway. There's an awkward chimney that somehow didn't get figured into our layout, but there's plenty of room to raise the second-floor ceilings.

Rehabbing is always an adventure; but it's a lot more fun when you're confident about the outcome.

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