Expert: Dave Johnson - 8/9/2009

Question
QUESTION: Hello, Dave.  Here I am again asking for your advice.  Previously, I had decided to build on the piece of land we now own(still have a balance of $7000.)  However, with the crime rate in that particular neighborhood, I'm apprehensive.  Now I am reconsidering moving the 1967 house to this piece of land as we could decide to sell it later if it turned out to be a dangerous location, or we could buy this house that would cost $7000 to move and the house itself would cost $8000. It is a 1500 sq.ft. house that would have a bedroom, bathroom, and front porch cut to end up being 1247 sq.ft. The porch would be relocated and be raised on  concrete.  The cost of the fixing up the house and the moving would total $35000.  The house does not have rotted wood except on the bottom of the house, but only on some areas.  And it would be put on new pier and beam.  The people who will do the updating of the house will be responsible for any cracks that may arise in the walls. They will put in new air conditioning unit and water heater, redo the whole bathroom with a fiberglass tub, take care of the interior except the ceiling and floors.  They will also not do anything to the kitchen and  laundry room. They say that when the house is located, it will be leveled on pier and beam and that that won't be a problem since it is a very sturdy house.(The house does seem to be in very good condition as it seemed to be maintained always.) If worse comes to worse, I would sell the property or rent it, but I do not want to pay for a new house if it will not be valued as is should be and the taxes will however be high.  The whole house with the land will have cost me $56,000, which I think is not a bad price.  But I am not an expert in this area, and would greatly appreciate any advice regarding this house.

ANSWER: Hi Esther,
It appears you've done your homework. The only thing I'd be concerned about is the possibility of a low sale price if the area is not "desirable".
Talk to a local realtor and explain as you did to me exactly what you plan to do and see if they can give you a figure on the property value.
The investment is certainly not huge, so it looks to me like you'd have a good deal of equity in the project.
Again, Good luck!

Dave

---------- FOLLOW-UP ----------

QUESTION: I'm sorry, but I don't understand terminology dealing with real estate.  What do you mean by your last statement?  Is it a good thing or not ---the investment is ..... Can you please explain in layman's terms?

Answer
Esther,
I mean that as the cost of the whole project is not really big, there may be a lot of equity (the amount earned after sale. example: if you sell it for $100,000 and you only have $56,000 invested, there is equity or earnings of $44,000 .)

But, as I said earlier, you really need to talk to a local realtor and see what the proposed house will be worth...
Dave