Make that drafty but cool old house better than a new one – for less!

I’m a little sick in the head. But I’m not alone. 

I like old houses, I always have, and I always will. Apologies to owners of new houses out there, but I feel like new homes lack ‘soul’. I like the built in cabinets, the unique wood trim, the old-growth hardwood floors, the architectural details, the ‘patina’, the cool bathroom tile, the out of square rooms. Pretty much everything about old houses. Everything except, oh yeah, they’re uncomfortable. 

Our modern tastes run towards comfortable temperatures, preferably about 72 degrees, year round.

Old houses pretty much suck at comfort. Upstairs is way too hot in summer. That’s OK, because it’s too cold in winter. They have drafts. Old homes are not efficient. Suddenly a love of old houses starts to fall apart. Uh oh.

What if you could keep your cool old home in the cool area but have it be just as comfortable as a new one? What is that worth to you? $50/month? $100? Maybe even $200? (Tremont, Lakewood, Cleveland and Shaker Heights are the first ones that come to mind, fellow Clevelanders, or West Akron near Stan Hywet for Akronites.) What if it was actually cheaper than a new house?

How? Old homes have one big thing on new ones: they’re generally cheaper. 

Ask yourself this question: If you could stay in the cool old home you love, complete with all of its ‘charm’, for about the same or less as a new house, would you do it?

Half of you just stopped reading.  That’s fine, this idea is not for everyone, just freaks like me. I asked myself the same question.

Out of curiosity (which I have a lot of) I decided to run some numbers. 

Lakewood and Twinsburg are relatively similar, in my eyes at least, in that they are fairly affordable suburbs with primarily middle class inhabitants. So I looked for recently sold homes to compare to get an idea of price per square foot. For non-Clevelanders, Lakewood is an inner-ring suburb, one of the first built around Cleveland, where most homes were built before 1950. Twinsburg is a much newer suburb, it has plenty of older homes, but a good chunk have been built in the last 20 years.

I found that new homes in Twinsburg sell for $110-115 per square foot. Lakewood homes, at least the ‘normal’ houses and not the mansions, go for around $90/square foot.

That leaves some room to make improvements. Before you go get that new kitchen or bathroom, I ask that you pause for a moment and consider spending a nice chunk on Home Performance (this means a carefully designed system of insulation and air sealing with a heavy dose of Building Science so changes aren’t made that will mess other things up later.)

If you hate math, skip to the chart below to see how the math works out in a simplified manner.

So what does that open up? I tried in vain to find 2 houses that were almost the same square footage in Twinsburg and Lakewood to compare. For this comparison I found a 2150 square foot new home in Twinsburg that recently sold for $244,000. That’s $113.50/square foot. Since I could not find a similar home in Lakewood, I’m simulating it. At $90/square foot a 2150 sf home in Lakewood would cost $193,500.

So you might not want to take the whole $50,500 and put it to capital improvements, but leveraging some of it may offer some nice opportunity in both cash flow and value. 

Keeping things simple let’s use 100% financing (this recognizes the value of your down payment capital), and disregard the likelihood that the more expensive house has higher taxes.  

$244,000 at 4% over 30 years = $1.164.90

$193,500 at 4% over 30 years = $ 923.80

So the Lakewood house mortgage costs $241 less per month.  

Now the newer Twinsburg house may cost $25-$50 a month less in energy.  It may not, but let’s give it some credit here just to be safe.  But here’s the hidden opportunity, a home that’s been energy retrofitted may cost $25-$75 LESS to operate than the typical Twinsburg house.  Leverage the savings into energy efficiency (EE) improvements and you are likely to have a house that is not only more comfortable to live in than the Twinsburg house (I get a surprising number of comfort complaints from people in ‘new’ homes), it also costs LESS to operate.

Taking that $240/month and putting it into a 10 year term loan (you could use a home equity line easily for this too) at 4% will buy you about $24,000. At 15 years, it will buy you $32,000.

I have good news! That’s more than you need! A typical whole-house insulation and air sealing package including attic, walls, and basement usually comes out in the $10,000 – $15,000 range for a 1500 – 2500 square foot home. You may even have room for a new furnace and air conditioner!

That is all for the same monthly payment as the brand new house with no cool trim, bathrooms, cabinets, dormers, or charm.

There’s a nice bonus too. Those energy efficiency improvements that made your cool old house more comfortable actually save you money! Who’da thunk it? Efficiency saving money? If your cool old house is a ‘pig’, meaning it sucks up energy like a football team sucks down Gatorade after a game on a hot day, saving 50% on your energy bills is not out of the question. That typically works out to be $750 – $1500/year, or $60 – $120/month in savings. That $150 – $250 payment looks a lot better now, doesn’t it?

OK, so that was a lot of math. Here is is a bit simplified:

Interesting, isn’t it? Of course I’m ignoring property taxes, insurance, and to some degree resale value, but looking at it from a monthly payment standpoint, making a cool old home more efficient makes good financial sense. 

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