Bungalow Blues

Paul and Mary Beth Trautwein have enjoyed walks to the beach and restaurants for the three years they’ve lived in the arty community of Venice. But with the birth of a daughter two years ago, and with Paul, a Web master and graphic designer, now working full time from home, the Trautweins’ 800-square-foot bungalow is no longer quaint. It’s cramped.

“We are running out of room here. My office space is now in our bedroom, and that’s not conducive for a client meeting,” said Paul, 38, who gave up his office to provide a bedroom for daughter Edith.

The couple--who bought their two-bedroom bungalow for $239,000 in 1999--are now torn between undertaking a major remodel to add space or leaving the neighborhood they love. “I’d almost forgo my needs,” Paul said, “just so we could stay here.” The couple’s fantasy is to add a second story to their existing home that would include a master bedroom, a second bath and an outdoor deck--especially important because the house sits on a lot of only 2,200 square feet. All told, the remodel would add about 500 square feet and cost about $150,000.

A much less costly option would be to convert the bungalow’s 200-square-foot garage into office space for Paul. But the city of Los Angeles requires homes built in that era to have at least a one-car usable garage.

A third option--by far, the Trautweins’ least favorite--is to move. “We would prefer building another bedroom here,” said Mary Beth, a graphic designer who works for the Getty Museum designing exhibitions. “But it feels like it would be beyond our reach.”

Alex Khoshnam, president of KEC Financial, a mortgage company based in Tarzana, recommended the couple solve their space problems by moving. “To remodel will be difficult for them,” Khoshnam said. “They should sell and buy a new home.”

Converting the garage into office space, he said, wouldn’t add value to the home, and undergoing a major rebuild could take from four to eight months, during which they would have to rent elsewhere.

“If you have not [undergone major construction before],” said Khoshnam, who also has a contractor’s license, “it will not be a picnic.”

Even though adding a second story to the property would most likely increase its value, Sandy Berens, a real estate agent with Coldwell Banker’s Marina del Rey office who specializes in the Venice area, worried that the Trautweins would not be able to resell the bungalow to make a profit.

“They’d have to list the house someday in the $540,000 range to make it worth their while,” she said. Instead, Berens recommended the Trautweins sell the bungalow now--listing it at $425,000 or more--and take advantage of the current sellers’ market. If so, she said, they could make a nearly $200,000 profit.

“It’s against all odds that this house would be worth that,” Berens said. “We may never see this kind of market again.” Remodeling now and trying to recoup those costs later, when the market may not be so hot, she said, “doesn’t make sense to me.... They should move. They’ve made an incredible profit.”

But the Trautweins--who married five years ago after moving to Los Angeles from Philadelphia--appear split on that. “Mary Beth is in favor [of moving],” Paul said, “but I am reluctant. I love this house. I love our neighborhood.”

Still, the couple was open to looking at properties in Culver City and, reluctantly, the San Fernando Valley. Based on the Trautweins’ excellent credit, Khoshnam, the mortgage broker, pre-approved the couple for a $220,000 loan. That loan, along with an approximate $200,000 they would have in equity from the bungalow, would let them shop for homes in the $350,000 to $450,000 price range while increasing their monthly housing cost by only $300 a month to $1,700.

But as many buyers in the market have found, inventory is tight. Berens was able to find only six homes in the Culver City, Venice and West Los Angeles areas in the Trautweins’ price range with three bedrooms.

“It’s probably the most sought-after price level in town,” Berens said. “First-time buyers are looking at that price level, as are young couples selling their first homes and moving up.”

Although most of the homes would increase the Trautweins’ living space, none had two baths and many were in poor locations, near freeways or on busy streets.

“They have the extra bedroom,” Berens said, “but the space is probably only a couple of hundred of square feet more [than] what they have now.”

Instead, Berens suggested what Paul feared the most: that the Trautweins look in the San Fernando Valley.

“It’s pretty much a fact that you can get more for your money in the Valley,” said Dorene Martin, a real estate agent with Coldwell Banker’s Studio City office who works frequently with Berens. “We are seeing a lot of Westsiders from Westwood, Brentwood and Santa Monica who are figuring that out now.”

A property search in the San Fernando Valley found 11 properties from $349,000 to $425,000 ranging in size from 1,266 to 1,891 square feet--a few that were more than double the size of the Trautweins’ bungalow. The homes were in Burbank, Encino, Sherman Oaks, Tarzana and Valley Village. One house in particular, on a tree-lined street in Van Nuys for $359,000, was on a 7,000-square-foot corner lot and had a fenced swimming pool.

“They would have loved this house,” said Martin of the property that sold to another buyer in a matter of days. “I don’t know anyone who wouldn’t have loved it.”

Still, Martin said there are some Westsiders who simply won’t move to the Valley.

“For some people, there is a perception that the Valley is the suburbs, and they are resistant to that and the commute,” she said.

The Trautweins felt that although the homes in the Valley were “cute,” they weren’t thrilled with their locations and found that many needed repairs and that the homes didn’t offer them enough for a complete lifestyle change.

“I didn’t think the houses were so much bigger,” Mary Beth said. “And there was no street scene. Here in Venice, people can walk around. I like that.... The Valley just doesn’t make sense for us.”

But the Trautweins learned after crunching numbers that adding a second story to their bungalow may not make sense either.

Khoshnam recommended the couple take out a new first mortgage for $300,000 to cover the cost of the remodel and what they owe on the bungalow. But a $300,000, 30-year fixed loan with an interest rate of 6.75% would increase their monthly mortgage payment to $2,300--out of the Trautweins’ reach.

A less costly option would be for the Trautweins to take out a home-equity line of credit for $150,000 at a 4.9% adjustable interest rate for the remodel. That second loan would amount to an additional $620 in initial monthly payments on top of their current $1,300 mortgage--or $1,920 total.

But Khoshnam warned against that. “Interest rates may go up and so will the payment. [The home-equity line of credit] is only a short-term solution,” he said, and it’s also out of their price range.

In addition, the Trautweins hadn’t factored in the cost of relocating during the remodel--which could increase their monthly living expense by $1,500 to $1,700 a month for a comparable rental.

The remodel would be within their budget, Khoshnam said, only if they found a contractor who could do the job for $100,000.

For the moment, the Trautweins have decided to stay in Venice and work on ways to bring down the cost of the remodel, including having Paul do some of the work.

“We’ve learned we’re not ready to spend $150,000 for a remodel,” he said. They plan to continue to look for properties in the Culver City area and research which neighborhoods have the best elementary school for Edith.

Most of all, they said, they aren’t going to be pressured into selling a house they love. “We’re going to continue working on our house and not be so reactionary to the market,” Mary Beth said. “If our house goes down in value, other houses will too. It all fluctuates wildly.”

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This Month’s Home Buyer Make-Over

Subjects: Paul, 38, and Mary Beth Trautwein, 37

Occupations: Paul is a freelance graphic designer and Webmaster and teaches graphic design and photography at Mount St. Mary’s College. Mary Beth works for the Getty Center in exhibition design.

Combined Gross Income: $64,749 in 2001.

Goal: The Trautweins need more space for Paul’s business and for their growing daughter Edith, 2.

The Problem: Mary Beth and Paul love their Venice neighborhood and are hesitant to move, even if it means having a larger home with a yard. They are debating adding a second story to their home--a major renovation that could take from four to eight months--or moving to a new area such as the San Fernando Valley.

What Options the Experts Recommend

* Capitalize on today’s strong seller’s market and sell the bungalow now.

* Since there is nothing available in their price range in the Venice area, look for a larger home in the San Fernando Valley.

* Research public elementary schools on the Web at www.lausd.k12.ca.us.

Meet the Experts

Alex Khoshnam is president and a broker of KEC Financial, a mortgage company in Tarzana. The company has a second office in Inglewood and originates about 300 loans a year.

Sandy Berens has been a real estate agent since 1979 and with Coldwell Banker since 1996. She specializes in the Venice Canals and the Westside.

Dorene Martin is a Coldwell Banker real estate agent specializing in the San Fernando Valley.

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Allison B. Cohen is a Los Angeles freelance writer.