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I am looking to sell my house in Hendersonville which is right next to Indian Lake elementary. Originally I bought the house for myself and was going to stay here a very long time. I had a business partner and we were going to remodel houses for profit together. I am a general contractor and have been building for 10 years. My partner kinda got cold feet and backed out on me. Now I do not have the money to remodel other houses without a partner and I am thinking of doing an extensive renovation on my house and selling it for a profit.
I would like to do the following to my house: remove and replace all roof rafters, gutters, decking, soffit, facia, and shingles in order to vault some ceilings, make front porch 10x20 and add carport to the back of the house.
All new HVAC (vents and split system)
rewire electrical
turn a half bath into a full bath
new high quality kitchen and appliances
install reclaimed pine and oak flooring mix
new high quality windows and doors
Vaulted wood ceilings throughout in various configurations
add a linear gas direct vent fireplace into the livingroom
I am thinking of making the master bedroom and closets larger as well by bringing out an exterior wall
This work will cost 60k dollars for materials alone.
I bought my house for 160K and with this additional 60K, I will be at 220k that I have invested in this property. I also have to make something for doing all of this work that will take approx 3 months and pay for the labor to get it done.
Here are the drawbacks. I would have a very high price per square foot because my house is only 1620 square feet. I think I would have to sell for 260K for this to be worth all of this work, but this house would be one of a kind.
I am nervous that the house might not appraise for 260. Is my brand new hvac system worth more than my neighbors old one? Is my linear direct vent fireplace worth more than all these cheap fireboxes in these new houses? Is my multi level custom roof worth more than a straight gable? Are my wood ceilings worth more than drywall? Are my expensive windows worth more than new cheap vinyl ones?
Is a square foot a square foot?
Thank you for your time. I am sorry for the long post.
As a Realtor for nearly 10 years and having pulled some comps, I can tell you that this is not a wise decision as homes are still selling in that square footage for around $120 a sq ft. In my opinion, no matter what you do to the home, $160 a sq ft is a stretch and will not appraise. Just my thoughts. best of luck.
As a Realtor for nearly 10 years and having pulled some comps, I can tell you that this is not a wise decision as homes are still selling in that square footage for around $120 a sq ft. In my opinion, no matter what you do to the home, $160 a sq ft is a stretch and will not appraise. Just my thoughts. best of luck.
Is that for a remodeled home? My question comes down to if one guy spends 12000 dollars on windows and another guy spends 3500, will the house with the 12000 dollar windows be worth more?
Same thing with cabinets. Are home depot specials worth the same a custom cabinets in an appraisal?
How is a covered front porch evaluated. Technically it is not living space, but it has to be worth something.
One more thing to throw into consideration is my lot is 1.2 acres. Vs the typical 1/4 acre lot.
It's hard to get more than a 20% premium for upgrades in any neighborhood. You rarely get back the $$ you put into renovations. Most buyers focus more on the visual updates and less on infrastructure items such as windows.
As a Realtor for nearly 10 years and having pulled some comps, I can tell you that this is not a wise decision as homes are still selling in that square footage for around $120 a sq ft. In my opinion, no matter what you do to the home, $160 a sq ft is a stretch and will not appraise. Just my thoughts. best of luck.
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Quote:
Originally Posted by NinaN
It's hard to get more than a 20% premium for upgrades in any neighborhood. You rarely get back the $$ you put into renovations. Most buyers focus more on the visual updates and less on infrastructure items such as windows.
^^^
What these guys said. Usually homes in an area all sell for about the same price, so what it sounds like you're doing is over-improving for your neighborhood, and you won't get your money back. If this was a modest home in an area of much more expensive homes, you might have a chance to recoup your investment in the remodel but it sounds like it's comparable to the ones around it.
I have remodeled a few of my rentals and also my personal home.
On my newest remodel I was into it for 62k and that was a complete remodel with the two of the three bathrooms and the kitchen being torn down to stud. New everything in the house including windows. And I'm not kidding when I say everything. Now I went a bit overboard on it but I went a bit higher on the materials because I didn't want base bottom of the barrel stuff. Those $2500 cabinets just don't hold up. There was also lots of damage from the previous tenant. If you plan on flipping the house I personally say you revisit the materials you are purchasing. You might be on the high side. I wouldn't go top of the line or bottom of the barrel. If the comps in the area don't support the price after remodel you need to remodel with materials that will get you some ROI otherwise the buyer will simply appreciate you using high end stuff but won't pay more for it. I guess you can wait till the prices go up or you find THAT ONE PERFECT BUYER if you want to go top shelf. Remember you're flipping it not living in it for 20 years.
Personally I would put good mid grade stuff
On my rental
Permits
Complete Re drywall kitchen and two bathrooms
Re texture whole house ( lots of holes kicked in walls which led to lots of patching so we just started tearing out drywall. Cheaper to replace a 4x8 than to screw around with 5 patches)
New plumbing
Rearranged master bath layout
Lath and mud shower and bath. (Completely tore out showers)
New floor and hotmop
Mortar bed floor of shower
Tile to ceiling in bath and shower enclosure
Tile floors
Tile all down stairs
Home Depot mid grade US made cabinets
Granite was included with the counters
New base dishwasher stove and fridge
New windows
New carpet
New paint
New doors with frames and casings
New baseboards
New steps
Powdercoated metal banisters
New window coverings
New data phone and cable tv wiring
Brought electrical up to code
Fans in every room
Probably forgetting a few things. But I had a lot of offers to buy when I listed it as a rental. I could of gone with some cheaper bids and materials but we plan to have it as a rental a lot longer. I wanted the longevity of the materials so I went with a bit higher quality.
Thank you all for your advice. I do have another question again about appraisals. The house across the street from me sold for 235k. It is a larger house, but what makes it larger is there is a bonus room over the garage. This bonus room has 4 or 5 foot walls with sloped ceilings following the roof pitch above. This room is not heated and cooled by central HVAC either. There is an air conditioner and heater in the wall like a hotel room would have. Does this square footage still count the same as the square footage of the house?
What these guys said. Usually homes in an area all sell for about the same price, so what it sounds like you're doing is over-improving for your neighborhood, and you won't get your money back. If this was a modest home in an area of much more expensive homes, you might have a chance to recoup your investment in the remodel but it sounds like it's comparable to the ones around it.
That is what is somewhat hazy. There are million dollar homes about a mile away. Of coarse they are on the lake. There is a new subdivision across the street selling in the 350's. There are also homes a few houses down the street selling in the 4 and 5 hundreds, but again on the lake. There are no nasty properties in this neighborhood, but I have the smallest or one of the smallest houses in the neighborhood, but sitting on the one of the largest lots.
That is what is somewhat hazy. There are million dollar homes about a mile away. Of coarse they are on the lake. There is a new subdivision across the street selling in the 350's. There are also homes a few houses down the street selling in the 4 and 5 hundreds, but again on the lake. There are no nasty properties in this neighborhood, but I have the smallest or one of the smallest houses in the neighborhood, but sitting on the one of the largest lots.
You are concerned about getting $260k, so why even mention million dollar homes or new homes? You must realize they aren't comparable or you would be thinking yours is worth that much.
I don't know about your area, but historically, updates return only a portion of the investment. The biggest return is generally an updated kitchen, which is typically between 85% to 95% of the cost, depending on area and market conditions. Other updates return less. You are hoping for a $100k return on your $60k investment on upgrades or about 167%. The exception to this would be a home that was purchased as a distressed sale. If it was in very poor condition, or was a short sale, or REO, purchased on the courthouse steps, etc. I am assuming that you purchased the house fairly recently and as a normal sale.
When you purchased the house, would you have paid $260k with the updates you want to do? Will a new buyer get 62% more utility/enjoyment out of the home with the updates? Why would a buyer pay you an extra $100k, for upgrades they can do for much less, or for the same and customize it to their own wants/needs? If a buyer can afford a $260k home, will they be interested in your house, or will they be looking for something larger, or on a lake? What else is available on the market at both prices?
I would suggest you talk to a local Realtor to see what is the difference in price between updated / non updated houses. Also, a good Realtor can advise you on what buyers in your area, at your price range expect in house. You need someone who is familiar with your area's market to help you determine if this is feasible.
You can definitely over-improve a house. If you're just looking to sell and make some money, you should really scale back on your ambitions. With a lot of upgrades, you simply won't get your money back. For others, you may receive a slight return.
Given your projected numbers, it sounds like you'd be better off just painting the house, if need be, and fixing only those things that need fixing. Why spend all the time and money if it's unlikely you'll net much more (or any more at all)?
A lower price may bring you more potential buyers. Let them decide how they may want to fix the place up to their liking. Let them be the ones who go over budget.
If you really want to flip houses, you need to start out with a house that is more suitable for a flip. Sure, on TV people take on huge projects which are total renovations, but there is usually too much risk compared to the reward. There are some areas where that strategy will work, but certainly not everywhere. Working with your numbers, that would not work very well in my area.
I started out in real estate doing housing rehab. I tried to pick houses which were ugly or distressed sales, but which could be fixed up primarily by doing mostly cosmetic repairs. Paint, plastering, sanding wood floors...only sometimes changing a furnace, re-roofing or doing something more major. I stayed away from structural issues such as bad foundations or needing to add on to a house. Those types of things can be budget busters.
Your market may be different; and there's clearly a need for more extensive renovations in some houses (although I hate to see houses with historic character gutted and made "new"). But you need to figure out what type of renovations are most suitable for you. Perhaps the biggest gain you can make in doing a flip is the value you can build up through "sweat equity". If you have to pay to have someone do the renovations, and if you pay for top-of-the-line (expensive) and extensive renovations...your profit margin is probably going to be rather small. And not everyone makes money on a flip.
Since you're a general contractor, I'm sure that there's lot that you can do. Whether you should do certain types of renovations, however, is another matter. You need to pay attention to the financial pros and cons and figure out, for you, what is best for each and every house you choose to work with--starting with your own. For this one, I think you'd be wise to scale back your plans.
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Usually homes in an area all sell for about the same price, so what it sounds like you're doing is over-improving for your neighborhood, and you won't get your money back. If this was a modest home in an area of much more expensive homes, you might have a chance to recoup your investment in the remodel but it sounds like it's comparable to the ones around it.
