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Buying to Add On

In a hot market, getting a small house and remodeling it can be the way to go.


When Jennifer and Stephen Lax decided to start a family, they knew their two-bedroom house would be too small.

They thought about adding on, but their lot wasn't big enough, and besides, Stephen Lax was adamantly against remodeling.

"He's an attorney," said Jennifer Lax, a stay-at-home mom. "He's not the handyman type."

So they began shopping for a bigger home in the $500,000 price range in their Sunset Park neighborhood of Santa Monica.

But after 18 months of frustrating house-hunting, the Laxes still had not found a bigger house, having been outbid time and again by more aggressive buyers.

Finally, a frustrated Stephen Lax told his wife: "I'm sick of looking. We'll just stay here."

But Jennifer Lax--not to be stopped in her chase for space-- hit upon another idea--buying a small, old, nondescript house on a large lot and remodeling and enlarging it. Her husband went for the plan.

Less than a year and a bit more than $500,000 later--$320,000 for a 51-year-old house and its 6,750-square-foot lot, and another $220,000 for improvements--the couple ended up with a charming two-story house that has been appraised at $700,000.

Buying a modest, older house to remodel immediately can make sense, especially in a hot real estate market, and in favored neighborhoods where appealing houses are bid on by three or four people offering thousands more than the asking price.

And plenty of home buyers have adopted that strategy, according to Glen Pickren, whose company specializes in making loans to buyers who want to purchase and then remodel.

"It happens all the time. People want a new house in an older neighborhood," said Pickren, president of Barron Financial Services in Irvine and a 28-year veteran of the home loan industry.

But established communities with houses on big lots have no remaining empty lots. Buyers must either settle for an older home, buy a house that's already renovated or undertake a remodel themselves.

Often, the new owners undertake the remodel before ever moving in. Many lenders make real estate loans based on the value of the home after the anticipated remodel.

In fact, Pickren considers remodeling akin to property development and urges homeowners to bring professionals--builders, designers, lenders--into the planning process before a house is bought.

His company, for instance, offers feasibility studies to determine if the purchase price of an old house, coupled with the anticipated remodeling costs, will add up to a wise investment.

In other cases, people who expect to move up in their careers buy modest homes in neighborhoods they like, with thoughts of making the house better as their incomes grow.

"Some people don't want the neighborhood to get away from them," Pickren said. "They stake their claim and camp out."

According to Westside home inspector Bob Holmes, most people buying a house "of less than 3,000 square feet are considering adding on."

And if it's a smaller two-bedroom one-bath house, "it's a slam dunk" that they're going to add on, added Holmes, who has inspected more than 7,500 homes in the past 13 years. "People no longer want to live in a house with just one bathroom."

However, buying a house with the aim of adding on is a venture rich with the potential for misfortune.

"People make so many mistakes it's unbelievable," Pickren said. For instance, the house may not be sound. The floor plan may not easily accommodate a remodel. Local codes may not allow adding any more house on the lot. Some codes may prohibit a second story.

Plus, your new neighbors may not want a massive, nearly new house replacing a small unobtrusive bungalow. Some homeowners enlarging a home they just bought try to soften the look of a second story by stepping it back from the front facade.

Others, like the Laxes, add homey exterior features such as overlapping siding. White picket fences sometimes do the trick.

If you decide the risks in buying a house and adding on are manageable, be sure to buy a house that is right for remodeling. Here are some tips:

* Get professional advice first.

For Jennifer and Stephen Lax, success with their remodel-addition was partly a result of their exasperating 18-month search, when a pregnant Jennifer walked around her neighborhood telling everyone she saw that she was looking for a house to buy.

While the first 100 or so houses she looked at didn't fit the bill, she did learn a lot about houses, and she met an architect, Scott Prentice, who was transforming his own "hideous" house in the neighborhood into a gem.

During that time, the couple also met a local contractor, Mike Pritchard, who had done a successful interior remodel for friends of theirs, who praised Pritchard's craftsmanship and work ethic. The Laxes said: "He's the guy for us."

So, long before the couple bought a house, they had lined up their design/build team. As Jennifer recalled: "We had a builder. We had an architect. We had no house."

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