LESLIE: Alright, now we welcome Kermit from Tennessee. What’s going on at your money pit?
KERMIT: My wife and I have three little girls and the gentleman I work for, his family offered us an1,800-square-foot home for $31,000.
LESLIE: How much work needs to be done?
KERMIT: Yeah, we’re getting it for like 20-some-thousand less than it appraises for.
TOM: Is the house under repair or was it never finished? Why does it have no heat and air conditioning?
KERMIT: She just always used electrical heat; 220 that you plug in.
TOM: Oh. Oh, OK.
KERMIT: We actually had to install baseboard heat to get the appraisal done.
TOM: Oh, alright.
KERMIT: And we’re excited about it but – you know, of course we’re on a budget with the three girls. So we’re wondering what should be the first few things that we do because we’re going to have about $6,000 or $7,000 that we can spend up front. Everything else is going to be when income taxes roll around.
KERMIT: What would be the most important thing to do upfront to where like in a year or two we’ve got some equity where we can refinance or second mortgage to maybe finish out the rest of the repairs all in one go?
TOM: Well, let’s start with the basics. Structurally speaking, you have a good roof; you’ve got good siding so we don’t have to worry about the building getting leaks?
KERMIT: Yeah. Siding needs pressure washing. The rest is probably good to go for at least another five years.
TOM: Maintenance I’m not concerned about, OK? Inside the house, let’s talk about the home improvement projects that give you the best return on investment. That would be kitchen and bath. You mentioned that the kitchen is a bit tired?
KERMIT: It just has no cabinets.
KERMIT: It’s a huge kitchen. It’s an 11×14 with very little cabinet …
TOM: Well then I think that’s definitely the best place to start. With those three beautiful girls you’re going to need a lot of cabinets (chuckling) …
KERMIT: Oh, yeah.
TOM: … to store all your dishes and food and what not. So I think the kitchen’s probably a great place for you to start. Now, you know, in terms of the cabinets, certainly they’re – this is a project if you’re a bit handy you could do it yourself. There’s lots of great cabinets that are available at home centers that are not real expensive that look pretty darn good. You know, places like Home Depot and Lowe’s and IKEA …
TOM: … all have great cabinets these days.
LESLIE: I will say, Kermit, avoid those thermal foil cabinetry; the ones that are like super-white. It’s a heat-shrinked covering on an MDF-framed cabinet and they look great and they’re inexpensive but give them a few years and they’re going to yellow and you’re going to be really sad and there’s not much you can do about that at that point. So splurge a little bit more and go for something that you know is going to stand up.
KERMIT: I think she’s wanting something she can stain herself and finish.
TOM: Well then, you could use an – you could use a unfinished wood cabinet and do the finishing work yourself.
KERMIT: What about like the flooring and like central heat and air; things like that?
TOM: Well you said you had …
LESLIE: You’ve got to do what’s going to make you guys comfortable first …
LESLIE: … I would say.
TOM: And you – I thought you said you had heat installed.
KERMIT: Well, it’s got baseboard heat.
TOM: OK. Well …
KERMIT: I didn’t know – you know, if central heat and air makes that big of a difference, you know, for like home value or not.
TOM: As far as value is concerned, I would say in your part of the country having a central air conditioning system is certainly going to have a big comfort level and give you some return on investment if it comes time to sell that house. But I would start with the basics. You’ve got to – I would put a kitchen in before I would put in something that could possibly be considered a luxury; you know, certainly a …
LESLIE: Mm-hmm, like air conditioning.
TOM: Like air conditioning. I would concentrate on your kitchen. I’d just put in a basic set of kitchen cabinets; a basic flooring; take a look at those bathrooms; get everything sort of basically functional and then you could do the central air later on; just down the road a piece.
LESLIE: And you know, Kermit, if you’re looking for a tick list, have you had the house inspected by a home inspector?
KERMIT: No, that we haven’t.
LESLIE: Well, you should do that. It’s worth the couple of hundred bucks. Get someone to come into the house. Go to ASHI.org, which is the American Society of Home Inspectors. Find somebody in your area. Have them come in and they will put together an entire report on your home: what’s working; what’s not working; what needs to be fixed. And then you can even have a conversation with this person at that point and say, you know, “What’s imperative and what can wait?” This way you kind of understand what needs to be done as far as – you know, as to what is just a bonus.
KERMIT: Well, that makes sense to me. I appreciate it.
LESLIE: You’re so welcome. Enjoy the new house.
KERMIT: Thank you.