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Rebuilding parent's house - Anyone have similar experiences?

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Rebuilding parent's house - Anyone have similar experiences?

Old 10-20-05, 01:32 PM
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Rebuilding parent's house - Anyone have similar experiences?

Hi everyone ~
Since there are so many of you with such extensive life experiences, I thought I'd get your take on this situation.

My mother-in-law (MIL) has a property that is paid off. However, the home is 40 years old, is a below average condition, and will probably need some pretty good maintenance to get up to code.

To make our lives a little easier, she asked if we would like to use the property to remodel the house. We told her that contractors have suggested that remodeling would not be worth it in the long run (because this is a house we plan to live in forever), so rebuilding would be a better option. She reluctantly agreed.

Currently, we are at the stage of going through the mortgage brokers and attorney.

For the attorney side, we need to figure out what to do in bad situations. We have thought the best way is to all be on the title. She wants to maintain half of the house. She feels that she is putting up the land, and the cost to build the house would be comparable. MIL would be 50% owner, while my husband and I would be 25%/25%. Basically, she doesn't want to get kicked off the land, and if it were to go bad with our marriage, she doesn't want to lose everything. MIL agreed that when she passes away, her interest in the property would go to my husband. However, if my husband passed away, we would now be 50%/50%. We would have the option to buy one another out, but I'm pretty sure neither would have the income to do so. She also said that co-ownership would also allow either person to stay even if the other wanted to sell and split the income. Of course, there's other things that need to be thought about and decided. Any thoughts on what situations could possibly come up, and how you would resolve them?

For the mortgage, we are getting mixed messages. The broker suggested that since the property we want to build on is paid off, we should cash out the equity (up to 80% of the appraised value), and refinance into a mortgage. He said that since we are not on the title yet, we should have MIL sign on the loan as well, and we can get our names added to the title afterwards. One attorney we spoke to said that we would need to be on the title first. I know that the second way is safer in general, however, due to the rising mortgage rates, we're not sure if waiting another month is a good idea.

My husband and I know that we can just buy something else, but financially it would be impossible to get a single family dwelling for the price of the rebuilding. However, it's understandable, that it may/may not be a sticky situation to rebuild my MIL's house.

Anyone have any thoughts about anything? I would just love to get feedback from outside, non-biased people on what to do, how they would feel, etc. I'm sure that there are lots of things my husband and I need to consider, as well as keep it in good interest for my MIL.

To those who have read this long post, thank you for your time! =)

-DVD Girl

(The title has been changed due to dick_grayson saying he did not have a mother-in-law...not that I think this may change his reply anyways. )
Old 10-20-05, 01:49 PM
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Old 10-20-05, 01:57 PM
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you need to provide a lot more info:
where is the property located? market?
how much is the prop worth as is?
how much will the rebuild appx cost?
appx total price of prop once it's rebuilt?
Is MIL curretnly living on the prop and planning to keep living there after rebuild?
what does "bellow avg cond" mean? details? what do you mean by bringing up to code?

from the info you have given..
Dont ever make an assumtion that "because this is a house we plan to live in forever", there is almost no chance that you will stay in a prop forever. Things change - jobs, family situations, unforseen circumstances, etc. You need to take this in to account.

i am not clear as to why a rebuild is necessary. 40y is not that old for a house and even if it's in bellow avg cond (depending on what that means) it will surely cost less to refresh it then to completely rebuild it. (roof, paint, windows, etc)

it seems like you're a little over your head with this. You need to talk to a real estate attorney and a "trustworthy" contractor(friend?) that will give you an honest oppinion.
Old 10-20-05, 02:08 PM
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68 posts since Jun 1999 and you joined the month before me? Welcome back?

On topic, I know I will have this problem when my dad dies and I get the house. It was built in the 30's & 40's and is totally run down. It will take me at least a year to clean up all of his garbage and sell whatever I can. Then I can take a look at all of the damage to the house.

There is a big hole in the living room ceiling, which collasped this last March, a month after I moved out, because he wouldn't fix the roof, because of all of the leaking water.

I will have a big job on my hands when that time comes.

Chris
Old 10-20-05, 02:23 PM
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Hi Oraphus ~
Thank you for responding. I hope that this will give you a better idea on the situation...

where is the property located? market?
Hawaii. Market is doing very well here.

how much is the prop worth as is?
According to our property tax, a little over $500K.

how much will the rebuild appx cost?
Contractor hasn't gotten back, but we're assuming around $400K.

appx total price of prop once it's rebuilt?
$900K

Is MIL curretnly living on the prop and planning to keep living there after rebuild?
Yes. She is currently unemployed, but plans to work part-time. We told her if the living arrangement goes through, she would only be responsible for her share of the utilities. We would cover everything else (mortgage, property tax, homeowner's insurance.)

what does "bellow avg cond" mean? details? what do you mean by bringing up to code?
According to the appraiser that came a couple of years ago, the house is "below average". Think of a house that is 40 years old, and barely any maintenance has been done, except in extreme conditions (termite infestation, roof leaking).

from the info you have given..
Dont ever make an assumtion that "because this is a house we plan to live in forever", there is almost no chance that you will stay in a prop forever. Things change - jobs, family situations, unforseen circumstances, etc. You need to take this in to account.
Very true. We do want to live in this house forever, if possible. We have no intention of selling it in the next 5 years for an investment, etc.

i am not clear as to why a rebuild is necessary. 40y is not that old for a house and even if it's in bellow avg cond (depending on what that means) it will surely cost less to refresh it then to completely rebuild it. (roof, paint, windows, etc)
The house is on stilts, and water is running under the house. Bathroom is sinking. House is shifting. Electrical probably needs to be redone (has never been worked on). The home is 3 bedroom, 1 bath. We are planning to raise our family here and want to increase our family by 2, not including MIL. We would want to have the living conditions separate to maintain our privacy (separate kitchens/living areas), yet still be close to one another.

it seems like you're a little over your head with this. You need to talk to a real estate attorney and a "trustworthy" contractor(friend?) that will give you an honest oppinion.
We are going to speak to a real estate attorney soon (as we spoke to a tax one, and I don't feel he touched on "real estate" scenarios). As for a contractor, they thought to get a house that met needs and would last our lifetimes (i.e. even if we remodeled, we'd still be living in a 40 year old house), they suggested to rebuild.
Old 10-20-05, 02:27 PM
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Originally Posted by mrpayroll
68 posts since Jun 1999 and you joined the month before me? Welcome back?
Thank you, Chris, but I never left! I guess I don't post too much in general. I'm not the most outspoken person. I don't think I've ever beaten anyone to a posting a deal before... Everyone here is so on it! I must say that I love reading everyone's posts though...very informative (well, the serious ones), and laugh outload hilarious. These qualities are definitely what keep me coming here (and the deals aren't bad either!)
Old 10-20-05, 05:32 PM
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Hawaii , my favorite place on Earth :-) what I would do,is found out how much it will cost to bring up to code and build on the the existing house it might be cheeper in the long run. I did this with my moms house.
Old 10-20-05, 06:12 PM
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i have been involved in something simillar in CA, but i am completely unfamilliar with Hawaiian market and the building codes/dificulty especially on property above water. It could be chaper to rebuild it completely...
i think cashing out the equity is the best play here... then use the money to rebuild the house. only take out as much as you'll think you'll need for the rebuild... plus as an added bonus you now have a tax right off.
You will not be able to get the loan unless you're on the title. That will need to be done before anything can happen. No bank will give you money unless you can prove that you have a vested interest in the property.
i would also sign another contract with the MIL, saying that the prop will go to you two when she passes... maybe a trust deed.
i am trying to bring a lot of this up from memory so dont take it as facts.. talk to a lawyer.. he should help clear most of this stuff up for you.

good luck,
BTW ... i'll be in Maui at the end of the month .. can't wait..
Old 10-21-05, 01:57 AM
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