Wonders never cease

The New Orleans Safety and Permits office. City Hall. June. Can you think of anything scarier? Well, no one could be more surprised than me that I was able to get in and out, with the form I needed signed AND a permit for the first $200K of work on That Old House, in less than 15 minutes. They were nice, they were efficient, my two-year-old daughter didn't even have time to start whining. Who'd have thought?

Regarding Linda's comment on my last post, we are planning to sell our first house, Chateau Danneel, in the next year. It recently appraised around 2.5 times what we paid for it eight years ago, so we think it's time to take what we can get for it and run. I don't want to have my entire net worth invested in local real estate for obvious reasons, and the maintenance on two rental properties is more than I want to take on.

Here's a little background on the house we're trying to buy now. I'm strongly tempted to call it Maison Derriere after one of my favorite Simpsons episodes, since it is, after all, in back of our primary house. However, it's an 1800 sq ft 50's split-level ranch, so calling it "Maison" anything seems a bit grandiose. Right after Katrina, we got in touch with the owners and made them an offer for the value of just the land, assuming the house was a tear-down. It sits on a lot that was originally part of our house's lot, but was subdivided in the 50's. We liked the idea of having a huge yard. The owners had been told the house could be sold for its pre-Katrina value, or more, if they waited until the panic was over, so we didn't reach a deal then.

Fast forward to last month, and I saw a For Sale sign on their yard. I called my agent to get the skinny, he told me the house was gutted, empty, and open, so Mr. N and I took a look. It's in surprisingly good shape. The lowest level, which is at ground level, had tile floors and cement block walls, so is basically fine. The middle level, where the kitchen, living and dining rooms are, has been gutted, and the upper floor, where the bedrooms are, is totally fine. The wood floors upstairs had evidently been covered by wool carpets for 50 years and are in remarkably good shape. Most importantly, structurally everything seems stable. Nothing is slanted, the doors work upstairs, there aren't cracks in the remaining plaster... unlike what we have at That Old House.

I had my agent run the comps, and got my contractor in to give us a rough estimate of what it would cost to replace the electrical and HVAC systems and finish out the middle floor. Ultimately we agreed with the sellers on a price in the middle of what we each originally had contemplated. The market in this area is such that even if we just flipped the place, selling it immediately after making repairs, we'd come out ahead. But given the amount of work that remains to be done on TOH, it wouldn't be a bad thing for us to have someplace in town to live until we're finally able to move in there.

So the plan is that we'll fix it up, live in it for a little while, then rent it out. As far as I'm concerned, the lowest level can be used for utility space and a play room for the kiddo, but we're not putting anything down there we can't stand to lose in a storm. I'll tell potential tenants the same thing. We're close to the university district so it's not a problem finding good tenants, and living right next door will make maintenance easier. Plus, we can still take out the fence between the lots and have a big yard. If the worst happens and there is another big flood, we'll take our flood settlement, put it in the bank, and tear the little house down and have an even bigger yard.

Major financial acrobatics are ongoing, of course. We're refinancing Chateau Danneel (the first house), getting enough cash out to buy Maison Derriere. Then when we sell Chateau Danneel next year, we own the little house outright, and can make enough rental income off of it to make up for not having the income from CD. It's fascinating how having some equity in a house I bought when I was 24 and had no idea what I was getting into now allows me to go to a lawyer's office, sign a bunch of papers, and come out with keys to a new house - without actually having spent any "real" money for it. It's a mad world.

Coming soon - architect's sketches of the modifications to TOH!