The house hunting is getting complicated

We were outbid on House #7, which was a real disappointment, so we’re back to looking at houses again.

The one we didn’t get:

We have a very specific amount of money we’d like to spend. It’s the amount that’s in our 1031 exchange, from the sale of the California rental. We’re already under contract for the first rental, so we know exactly how much is left for the second rental. It’s an appropriate amount for a rental in Albuquerque, so it shouldn’t be a problem. Unfortunately, we’re just not finding a house we like for the right amount.

We’ve found townhouses we like, that cost less than what we want to spend, and we’ve found nice houses for more than we want to spend. We’re just not finding anything very close to our target amount.

So yesterday I came up with a somewhat complicated suggestion. There’s a house that needs a little bit of upgrades that is slightly below our budget. I can’t directly use 1031 funds to pay a contractor for upgrades. So I’m proposing that the owners do some upgrades at their own expense, and then I’ll buy it at over list price. This way, I can use the 1031 funds to pay the owners a higher price for the house, otherwise I have to do the upgrades myself using cash out-of-pocket. This is also sometimes done when people want to roll the cost of upgrades into their mortgage.

It does make for a more complicated offer though, because I’ll need to get a bid for the work we want done, and then include the bid in our offer.

The house we’re considering is House #9.

This house is less expensive than House #7 for several reasons. First of all, the school district isn’t quite as good. House #7 is in a district where the elementary, middle, and high school all score a perfect “10”. House #9 scores a “10” for elementary and middle, but a “9” for the high school. Still very good, but some people only want the best.

Secondly, House #9 is a zero-lot-line house. These are also sometimes called patio homes or garden homes. It means the houses are built right up to the lot line. In this case, each house gets one side yard and a backyard. The side yard wall is the neighbor’s house wall. These are still officially detached homes.

Here, I drew a sketch to show the difference between attached houses, zero-lot-line, and regular detached houses, since it’s hard to describe.

The third disadvantage of House #9 is it lacks curb appeal. This isn’t a big deal, but it will make it somewhat harder for me to get it rented. Prospective tenants look at rentals on-line, and I’ll need an appealing first photo. So at some point I’ll want to do something with the front yard. Maybe a little courtyard wall? Not sure yet what, but something. At least there is a tree. But the house is a funny shape.

Also the living room, which is along the side of the house, looks at the neighbor’s house wall.  You can see in the photo below, the windows on the left looking at the wall.  But there’s room to add landscaping, and it could be a pretty little private patio.

There’s also a backyard. I would paint that block wall and it would look a lot better.

The interior is nice, it’s just…um…pink.  The walls have a slight pink tinge and the kitchen counter tops are light pink.

I’m going out there with a contractor tomorrow, so I’ll know more then.