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There are many unknown variables here. Purely from cash flow, it may not be worth investing $100 k to recoup $1k/mo on a $1.1m house.
Sell the house and invest the funds. 1.1m to only get <5k a month sucks.
How much is on the HELOC total?
If you have $300k left on your HELOC, then you are $300k in debt…. At $3200/mo you’re almost a decade away from paying that off (assuming this includes interest) + assuming you’re putting that $100k in reno costs, that puts your HELOC (your debt) at $400k + interest.
I generally think real estate is good to hold on to, even if the numbers look tight right now. If it's in a decent enough location, it will work out ok in the long run (beyond ten years).
However, that's a lot to put in a single piece of real estate. Even if the value you mentioned is conservative, it's still around double or triple the median price of a house in most locations.
Look at the tons of articles about people having difficulty selling luxury homes. There are tons of lists about celebrities who can't sell their homes. I thought those would be only for homes above ten million, but even some two million dollar homes are difficult to sell.
Then there are tons of articles about "McMansions" and baby boomers with too much house. Many are struggling to even sell $600k homes.
Besides the obvious that the more expensive an item, the more difficult it is to sell, I think houses in the higher brackets are extra difficult. I imagine that a person or a family that can afford a luxury home has particular tastes and needs. They want what they want in the place they are going to live. It's very personal. No one is going to buy a house and like everything exactly how it is.
The more expensive a house, the more chances that the buyer will want to make costly changes. So if the house is already remodeled and up to date, they will have to consider ripping out something that is in good shape and destroy some value before putting in what they want.
If you want to live in a million dollar home of your dreams, that's one thing. But as an investment (which is what you are talking about), I think it has too many risks.
Unless you are in a special market, like the DC area, renting out an expensive home is more difficult that do 3 cheaper homes that add up to the same price.
TLDR: Expensive real estate is not an ideal investment. If you have an opportunity to sell it at an acceptable price, then it's probably a good idea. I would suggest selling before remodeling.
$1m is not expensive in this area. The median price for the town is $995k (single family is $1.4m).
I would do a cash on equity analysis. As of right now, you have $800k in equity and let’s say it breaks even on cash flow with 3,200/payment so your return on the $800k is the annual appreciation on the house and potentially tax benefits depending on your taxable income. If you were to renovate and rent it out maybe you can cash flow $500/month since your Heloc payment will go up but your rent rate will go up too AND the annual appreciation of the house. If you sell right now or with the renovations, you can walk away with about $600k-$700k depending on closing costs and commissions since you also have to pay back the HELOC. So now you decide what you would do with that cash and what kind of return you would get. Also there could be capital gains tax owed too when you sell.
The real estate investor in me tells you to turn it into a rental as is or upgrade and rent. Then after a year I would 1031 exchange for other rental real estate assuming you want to become a landlord.
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How much is the HELOC amount?
Is $1.1M the current market value, or the ARV?
I’m curious how much you would net after the sale. If the house isn’t in “retail” condition, I would question how much it would sell for and how much would be left after the HELOC is paid off.
It’s $1.1m based on the work that is needed. Comparable homes in the same neighborhood go for $1.3-1.4m.
I agree you should sell… but based on some your responses, it could make sense to renovate before selling if you think 100k of work could yield 200k in sales price
One thing I didn’t see you mention: where is your mom living after this?
Our family has other properties she’s been staying st