We already decided to renovate (1940 Cape Cod 2-story, we are the second owners). And since we bought it 4 years ago, we will do fine after the work is done - rent included in the cost or not. But I am greedy - I want to maximize whatever angle I can! There are lots of ways to justify/rationalize the sunk cost of the rent (extra cost of the addition. avoiding a broker’s fee) – however you treat it, I have already ‘lost’ $30k. It is sort of like a receivables account in default – I am looking for ways to squeeze anything else out of it.

I am also lucky in that my brother has a broker’s license, so only have to worry about 3% if we were to sell. I have done the math of our house for current value with permits and plans ready to go and moving into something finished vs. our total cost in after construction - it ends up being close with the rental thrown in (it should not be close - call it the Santa Monica government multiplier on cost of construction) - but we do come out a little better renovating. But that math is just theorhetical for us - we love the house we are in and are not selling - hard to put a price on being able to get this great old house we lucked into to be almost exactly how we want a new house to be (but with the old charm and style).

So really, my question is not about my renting per se - just how to maximize the act of renting as a stand-alone issue from the reasons for renting. All the other info is just sharing background (though if you have a good rental idea for us, it will be background well shared!).

Depends on where and when you bought here in LA? But if you want, I can show her all the flyers I picked up today at open houses (I hit a few to see what buying options I have too). It being a nice day and just after New Year’s resolutions, lots of people were out, and I saw a few good quality houses which will do fine, but more than half of my stops had price reductions of some kind. $15-30k, and sometimes it was a second or third reduction. For most people (anyone who bought 2004 and before) they will still make a lot on their houses if they sell, but looking at what is sitting on the market vs. recent sales, my take is prices are back to a few % above where people bought 12-15 months ago. Two I saw today are people who bought fall 2005 and need to sell for whatever reason. Decent enough places, but they will each lose $20-50k if they can sell at their current asking price (these are in the low 700s, mainly in Westchester and West LA – houses are asking a few thousand above their '05 purchase price – but as mentioned they have to pay the 6%).

I am not an economist, but my thoughts are that the housing market (except for great properties) will dip back a few % below 2005 prices before hitting a strong support level in the spring (basing this on what I could buy now with my potential rent payment @ current interest rates vs. what the same payment would have translated to @ 2003/2004 rates, talking to a bunch of realtors the past few weeks, and looking at things like rent to mortgage service ratios of income properties on the market). Anyways, if you sell now but wait a few more months before buying, then I think your wife might be right on the move vs. remodel. But if you move now, I think you are buying into a declining market, and that is definitely worse than what your return from a remodel will be. Probably not hundreds of thousands in loss... but you never know!