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What Do You Do When Your House Is Worth Way Less Than When You Bought It? · Making Cents

• 0:00
  What do you do when the house you bought is now worth less than you paid for it?
• 0:05
  Could picking up a hammer maybe let you reno your way out of a financial mess?
• 0:09
  Because today's letter writer bought in the boom, watched their house climb past a million in apparent value, and then watched the property market tank and their house value slide back below what they paid.
• 0:23
  And the house isn't exactly working for their lifestyle either.
• 0:26
  But it's hard to fix that when the numbers aren't on your side.
• 0:31
  So do you throw another six figures at it and hope that the numbers work out?
• 0:36
  Or do you cut your losses, sell and start again?
• 0:40
  Vanessa Williams from realestate Co NZ watches exactly which houses sell and which ones don't, so she knows what buyers are willing to pay for right now, the.
• 0:51
  Makeup of bedrooms in a house does absolutely help with your average asking price.
• 0:56
  And if you're leaning towards cutting your losses and selling, you need to be strategic.
• 1:01
  Stop that being a straight up gamble.
• 1:03
  What is important to you right now?
• 1:05
  Is it a home for your children?
• 1:08
  Is it a really good financial investment?
• 1:10
  So welcome to Ask the Experts where each week we take your questions, bring in someone from inside the money world, get you the answers you actually need.
• 1:19
  Making Sense is partnered with realestate Co NZ to get you the info you need in today's market.
• 1:26
  Realestate Co nz download the app today.
• 1:30
  I want to help as many people as possible reach financial freedom by taking control of their money.
• 1:35
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• 1:37
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• 1:38
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• 1:42
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• 1:46
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• 1:49
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• 1:55
  Welcome, Vanessa.
• 1:57
  Ready for the letter?
• 1:57
  I certainly am.
• 1:58
  Hit me.
• 1:59
  All right, here we go.
• 2:00
  Hi, Frances.
• 2:01
  What do you do if you bought during the boom?
• 2:03
  It's your only house and it's a real work on DIY or Flick.
• 2:09
  We bought when houses like this were in demand.
• 2:11
  Three bedrooms, 800 meter section, paid just over RV but adjusted.
• 2:16
  It came out around what the market expected.
• 2:19
  Fast forward six years, we've seen it go from 780,000 up to over a million back to approximately 755,000.
• 2:30
  We've also spent around 45,000 on maintenance and upgrades, painting the interior and exterior carpet, electrical work and a new deck.
• 2:40
  Deck.
• 2:40
  With two kids and a questionable third bedroom, it's freezing in winter.
• 2:45
  Essentially just tacked on we're thinking, is it better to invest in the house and create two or three proper bedrooms and an office out of what we have, or just start fresh somewhere else?
• 2:58
  We've had estimates of 130k to 200k for the extension, but it probably wouldn't add that much value.
• 3:08
  The question is essentially, do we stay and accept it's not a great financial decision, or go and deal with all the things old houses come with when you buy them?
• 3:20
  There's a lot in that letter.
• 3:22
  A lot.
• 3:22
  Yeah.
• 3:23
  Have fun tracking all those numbers.
• 3:25
  So they bought in the boom.
• 3:28
  Now it's sitting below what they paid.
• 3:30
  That's a bit gutting.
• 3:32
  The last time we talked, though, that's been a pretty common story.
• 3:35
  Right.
• 3:36
  I mean, what's been happening with the market overall?
• 3:38
  Yeah, that has been a common story over the last year, especially.
• 3:42
  Sorry, over the last sort of five years, because we have had this boom.
• 3:46
  We have had a small bust, or what we'd probably call, realistically a correction, because it went super crazy.
• 3:54
  And then, of course, with zero movement and over three and a half years, we actually have a lot of people in this bucket because a lot of life changes over six years.
• 4:05
  Right.
• 4:05
  If we all just wind back the clock six years ago, wouldn't that be lovely?
• 4:09
  But, you know, you wind back the clock six years and most people were in quite a different life stage.
• 4:14
  And so I do think that we have almost had this false sense of security with the property market that I'm pretty much guaranteed for it to at least move.
• 4:25
  And that hasn't been the case for this list.
• 4:27
  But basically, since COVID when we saw that boom in 2021.
• 4:31
  That's right.
• 4:32
  Softening back to what I would call, you know, sort of the.
• 4:34
  The leveling of the market and then be very, very stagnant for three and a half years.
• 4:39
  That.
• 4:40
  That's.
• 4:40
  That's hard for New Zealanders.
• 4:41
  Right.
• 4:42
  So this year, 2026, that hasn't been any different.
• 4:46
  We haven't seen any movement.
• 4:48
  And of course those lovely external factors, especially when we're sitting in an election year, who knows what's happening with the war where, you know, we've got a bit of a.
• 5:00
  Bit of a recorrection in our mind around property, around what we have to start thinking about, which perhaps has been different to what perhaps our parents experienced.
• 5:08
  Yeah, yeah.
• 5:09
  I think it is quite a different environment these days.
• 5:12
  And so they're thinking, well, could we maybe reno our way out of it?
• 5:16
  The quotes they've got do sound very expensive.
• 5:18
  That up to the sort of $200,000 price tag.
• 5:22
  What do you think?
• 5:23
  Can you reno your way out of something like this?
• 5:26
  Especially if the Renault is looking that expensive.
• 5:30
  Yeah, I didn't mean the Renault.
• 5:32
  Your way out of anywhere is a really dangerous sentence in my humble opinion.
• 5:37
  Look, I think that we need to wind back a step in my mind and go, what actually are your goals?
• 5:45
  Like, why did you buy that house originally six years ago?
• 5:48
  You probably had a plan.
• 5:49
  What were our hopes?
• 5:50
  What were our dreams?
• 5:51
  What did we want to achieve out of this?
• 5:54
  Because if you actually love the location, it's really near family or schools or daycare or whatever it might look like actually this might be a good opportunity for you to reset what that goal looks like.
• 6:07
  If you had bought it thinking, right, we're gonna do up and flip in three years.
• 6:13
  That would be right in the middle of COVID time and you've gone, actually, let's not do anything.
• 6:17
  Cost of building's gone crazy.
• 6:19
  Who knows?
• 6:19
  I mean, I still remember Jib gate.
• 6:21
  Was it that we used jib for like eight months in New Zealand?
• 6:24
  Yeah.
• 6:25
  You know, so maybe some of those factors played a part in you changing the decision.
• 6:28
  I would just rewind the clock a bit and go, hold up.
• 6:32
  What did we actually buy this house for?
• 6:35
  Is it still serving that purpose?
• 6:37
  Or actually, have we changed the purpose of this house and now actually it ticks more things than it doesn't?
• 6:44
  And then start to decide what that renovation will look like.
• 6:47
  Because whether you are renovating for a future next 10 years, children perhaps are going from school age to teenage age.
• 6:54
  Oh, my Lord.
• 6:55
  The house needs to look a little bit different for that.
• 6:57
  But, you know, if that is the case, then that's a very different decision than we've made this as a financial decision.
• 7:04
  We want to make money out of this house, then I believe you would take a very different path.
• 7:09
  Yeah.
• 7:10
  And balancing the finances versus the lifestyle.
• 7:12
  I feel like this is why property can be so fraught, because there's this real tension.
• 7:17
  They don't always work together.
• 7:19
  So if they're looking at some of these changes and they are trying to balance that out, I mean, what was it the bedrooms and whether they try to make it work a little bit better?
• 7:32
  I mean, are there high impact areas to focus on that can make more of a difference whether we're thinking lifestyle or finances?
• 7:41
  Yeah.
• 7:42
  I find it interesting to go back to that 45k.
• 7:45
  You've been there six years.
• 7:46
  That's actually probably what I would just say is general Maintenance, you know, you want to look between five and ten grand a year just to put it into your house to make sure that you don't end up with
• 7:56
  a big bill at the end.
• 7:57
  So I know our lovely listener writer and you know, put that as part of the mix.
• 8:02
  I'd probably even remove that.
• 8:03
  Like that's just what you should be putting into a house so that you are continuing to nurture your asset and making sure it's livable.
• 8:11
  So don't hold that too closely to, you know what it is the output is.
• 8:16
  What is very clear when we do look at the numbers, is that anytime you're adding bedrooms or bathrooms, there is a significant uplift in the value of the house.
• 8:27
  Caveat, caveat, caveat.
• 8:29
  Markets, demand, supply, what's all happening.
• 8:32
  But when you just look at the raw numbers, one bed, one bath starts around 500k.
• 8:38
  Okay.
• 8:38
  On average, nationally you up that to two bedrooms, one bathroom and you add on another 80 grand.
• 8:44
  Now let's fast forward up another bedroom.
• 8:47
  So three bed, one bath and you hit another hundred thousand dollars.
• 8:51
  So you're up to 680 now, four bed, one bath, $940,000.
• 8:59
  And then of course, five beds, one bath, which would be pretty tough to live in just quietly.
• 9:03
  But Anyway, that's about $1.2 million.
• 9:07
  You're really starting to see quite a significant jump.
• 9:10
  So that there tells us at a very surface level that the makeup of bedrooms in a house does absolutely help with your average asking price.
• 9:19
  Now of course, a five bedroom home with one bathroom is pretty challenging to live in.
• 9:24
  Hotly contested for the bathroom, I imagine.
• 9:27
  Absolutely.
• 9:28
  So if we start to look at say a two bedroom or three bedroom home with two bathrooms, so that gives you a little bit more livability, it means life's a little bit easier to sort of work in.
• 9:39
  You're looking at around, that sits around 940, $40,000.
• 9:43
  Go from 940 to 1.1 million.
• 9:46
  When you add another bedroom and two bathrooms.
• 9:49
  So that's four bed, two bath, it goes up to about 1.6 million.
• 9:53
  When you're looking at five beds and.
• 9:55
  Two bathrooms, that extra bathroom really does make a big difference.
• 9:58
  Absolutely, yes.
• 9:59
  And as you can well imagine, if you've got five bedrooms, you probably do need that second bathroom.
• 10:04
  Right.
• 10:04
  It's pretty important.
• 10:05
  You've got to be really mindful about which track you're going down because of course you, you know, if that's third bedroom's questionable and really cold, then you know that is going to be harder to Sell.
• 10:15
  And if you have the opportunity to upscale that, great.
• 10:18
  That's certainly going to help not only your family, but also the resale value, but vice versa.
• 10:23
  If you're going for full maximum value, you want to be thinking about that future buyer in mind as opposed to what's going to work best for you and your family now and in the next 10 years.
• 10:34
  If you are looking for property, start with Realestate Co NZ, New Zealand's longest standing property site.
• 10:41
  They've been dedicated exclusively to property since 1996.
• 10:46
  That's even before Google.
• 10:48
  Whether you're buying or renting, no other property site gives you as much information.
• 10:54
  The Market Insights feature lets you view the median asking, sale and rental prices in a suburb for over 1, 3 or even 10 years.
• 11:03
  Want to know what a property is worth?
• 11:05
  The estimated sale price range uses the latest sales figures from the real estate industry.
• 11:11
  Scroll to the bottom of a property listing to discover what it sold for in the past, the council valuation and what you can expect to pay for it even before you view it.
• 11:21
  Become the property expert, download the realestate Co NZ app and make informed decisions fast.
• 11:29
  They say it themselves that even if they did sell and move on, they expect that they would be looking for an older property.
• 11:38
  I imagine they must have done some research and seen that that's what's in their price range for what they need for their family.
• 11:44
  So it's tricky, right?
• 11:45
  In terms of the devil you know versus potentially going for another house which might have its own problems as well.
• 11:52
  Yeah, I find that an interesting concept because I would have thought that if you don't want to put the energy, time, effort, finances and love into the existing kind of, we'll call it a do or upper.
• 12:03
  I think that was what the letter said.
• 12:05
  Why would you then go into that sort of area?
• 12:08
  You would think if you are going to move, I'd seriously consider going again.
• 12:12
  What is the intention for us to move if we want to be warmer, drier, dark?
• 12:16
  I mean there are a lot of new builds out there at the moment.
• 12:19
  Warm, dry, 10 year warranty.
• 12:22
  Reading between the lines, perhaps this person was a little bit lost on actually what their intention and their plan was and I think that's why there's sort of these question marks in their mind and perhaps even the answers
• 12:34
  that they had going, well, we've actually got a door open now, but we'll probably go back to an old door.
• 12:39
  To me, that doesn't feel like they kind of know where they're at or what they want to do so, I'd go back, as I said, go back to that, you know, rewind six years ago, what was our intention?
• 12:49
  Fast forward, of course, and go, what's our intention today?
• 12:51
  We've got two kids that are six years older than they were then and you know, we're six years wiser.
• 12:56
  We all hope and take some of that into account and utilize that.
• 13:00
  And I think that will probably set them on a bit of a clearer path as to what that next step looks like.
• 13:06
  I think that's so insightful.
• 13:07
  I think that's such a good point in terms of maybe, you know, as we've already talked about, there is the finance and the lifestyle sometimes conflict.
• 13:16
  But if you bring it back and say, okay, if we're going to refocus and, and really get our heads on straight here to decide what we want to do, then maybe it's what's the life first?
• 13:27
  What did we want from this?
• 13:29
  What do we need for our family right now?
• 13:31
  Okay, now how do we get creative to make the finance of that work?
• 13:36
  The numbers of the housing market do what they're going to do.
• 13:38
  There's been all sorts of projections for whether the housing market is going to go up again, go down again.
• 13:42
  It's all very smart guesses, you know, nobody really knows.
• 13:48
  So to bring it back to those lifestyle factors first in order to get your head clear and to know what you want and then work backwards from there on the money, I think that's really smart.
• 13:57
  Do we have any data at the moment in terms of if people are looking to take on sort of more of those doer upper houses or if they're looking for something that is just straight move in ready and
• 14:08
  quite easy.
• 14:09
  Is there any, anything on that?
• 14:10
  Not specific data, but what I do find, and a lot of people talk to me property, it probably doesn't surprise you is that it's typically a type of person versus a not type of person.
• 14:21
  There are those who are doer uppers, diyers, they do love this.
• 14:25
  It is part of their who they are, it's what they love.
• 14:28
  It gives them purpose, it gives them joy.
• 14:30
  How?
• 14:31
  I'm not sure because that is not personally me.
• 14:33
  Yeah.
• 14:34
  But you know, no shade to them.
• 14:36
  That's awesome that that is.
• 14:37
  And I do think that that is a type of person versus people who are like, I just want it to be done and I want to enjoy it, I want to live in it, I want to love it
• 14:47
  and I've got other hobbies and you know, fun things that I enjoy or, you know, lifestyle choices.
• 14:52
  So there's quite a heavy market at the moment with a lot of new builds, especially in the townhouse sector.
• 14:58
  So there's plenty of stock out there if people are just looking for.
• 15:02
  My goodness, I just want to.
• 15:04
  A little bit more lock up and leave.
• 15:05
  But also something that's warm, dry, double glazed, triple glazed, you know, heating all sorted.
• 15:10
  There's actually some really great stock out there at the moment that would perhaps help those who are not necessarily in that DIY sector.
• 15:16
  Yeah.
• 15:17
  I gotta say, our first house was not a full doer upper, but definitely an improver.
• 15:23
  And we spent the whole time we were there doing these little projects and by the time we left, we left to move city.
• 15:29
  So we had to get out of there and finish everything really fast.
• 15:32
  By the time we left.
• 15:32
  I think my main point was never again.
• 15:34
  Yeah, Fear.
• 15:38
  Fear.
• 15:39
  And I wasn't even doing most of it.
• 15:40
  Yeah.
• 15:42
  It's just like another job though, isn't it?
• 15:43
  Like if you have got a job and then coming home to make orchestrate tradesmen and what's happening.
• 15:48
  And even if you've got a project manager, they still need decisions from you.
• 15:51
  Right.
• 15:51
  You've still got to be happy with what you're investing, what you're choosing, whether it's for you, whether it's for future selling, you know, so there's still a.
• 15:59
  It's a decision fatigue, I think, you know, listening to an earlier episode, there's like we take what, 30,000 decisions a day and then you add a renovation in the mix of all of that.
• 16:07
  That's good.
• 16:07
  Get it gets you up to like 45,000 a day.
• 16:10
  Does it?
• 16:11
  That's a lot.
• 16:13
  Exactly, exactly.
• 16:14
  I know.
• 16:15
  I mean, you can, you can get some amazing.
• 16:17
  For those who are into it, they can make some amazing wins.
• 16:20
  I just.
• 16:20
  Yeah, I.
• 16:21
  I hit the point where I was like, this was great for our first house and now I don't have to do that again.
• 16:25
  Yeah.
• 16:26
  All power to them, but not personally for me.
• 16:30
  So, okay, if you were to sit down with this person and you're having a couple of wines after work and they lay this out, they're your friend, and they ask for just top of your head thoughts, what would
• 16:39
  be the main thing you would say to them?
• 16:41
  Yeah, I would say, darling, tell me, what is it that you want?
• 16:44
  What do you actually want?
• 16:46
  What is important to you right now?
• 16:48
  Is it a home for your children, you know, that can last you throughout the next decade?
• 16:53
  Is it a really good financial investment that I can potentially make some money out right now and then get really clear on what it is that you want to do.
• 17:03
  Because if it's the latter, it might not even be the property that you're talking about.
• 17:07
  You know, there's many other ways to help service your money or make good financial decisions that do sit outside of property, as we well know.
• 17:14
  I think that's.
• 17:15
  That's super insightful.
• 17:17
  Exactly as you say, you cannot set out a map if you don't know what the destination is.
• 17:21
  So figure out that destination first.
• 17:23
  Absolutely brilliant.
• 17:23
  Thank you so much.
• 17:24
  Vanessa Williams from realestate Co nz.
• 17:27
  Now, if you have more questions, but anything property, Vanessa, is the inside word on what is actually happening out there right now.
• 17:34
  Send it through to us, askRancesCook Co NZ and we'll get those questions sorted for you.
• 17:40
  Until next time, have a great day.
• 17:44
  This podcast can only give you general information about how things work in most situations.
• 17:50
  It's not individual financial advice.
• 17:52
  If you're after that, a financial advisor.
• 17:54
  Is always the best bet.