the flipper vs. the wrecking ball vs. the homeowner...
So, I've been quite busy since I was all excited to start this website and begin curating my PAST activities in the real estate and design universe - so busy I didn't have time to write for 6 weeks! Now it seems prudent to take some time to weigh in on what I've been learning and how it builds on what I've done in the past few years of house flipping, working on my own home(and trying to sell it), and working with a variety of client types.
In the past, picking a house to flip has been a mix of 'hey, that house looks like a good idea - let's do it!' and a general knowledge of the markets I was interested in working in. I knew enough to be dangerous, and I'm not afraid of hiccups and problems that come up in a process like real estate investing. Most of the time, it went pretty well - we learned a lot, had some fun, and made a little money. This time around, though, we've added some chairs to the table, and are aiming to approach things more analytically. A candid review of the mistakes and victories of past projects and a fine-tuning of the goals for THIS project steered how I look for properties that fit the budget, time frame, and my own design goals.
How can that help you, you might ask? Well, say you have a home that is of a certain age, or well-loved but perhaps has outdated style, or maybe is just a bit worse for wear, and you want to get the best shot at selling it. To do that, you're going to need to make your home more desirable to the people looking to buy a home like yours. Choosing what to invest in can be tricky - a lot of the advice you may have been given by other agents eager to list your home, or from watching TV or online videos about home staging will hit on items like fresh paint, granite countertops, painting kitchen cabinets, and new toilets. While it's true that those things can make the photos look better, they won't help you pass inspection. If your swanky (read: original 1967 interior) midcentury ranch or cavernous 1992 mcmansion has walls freshly painted in 2016 gray and you swapped in some sale-priced granite counters, it's not going to make a bit of difference to any builder looking to flip it, and the homeowner that wants it was planning to repaint it anyway. The reason that I bring this up as a problem is that it costs MONEY for a seller to paint the house, swap the counters, hang new light fixtures, etc. When I've looked at older homes lately as flip candidates, I am looking at the forgotten and low-priced inventory that have aged out of the move-in ready market that I can turn in showplaces of current style, and it's going to cost me MONEY to do that. If you look at this as a mathematical equation, every dollar put into a renovation, whether it's the buyer or the seller spending it, should translate into a higher value in the end. If that's true, a seller putting $12,000 into their dated 1960s home, using it for new paint and some cosmetic updates to stage the home, might think that then they will get $12,000+ more out of their sale price, and also not sit on the market looking sad and forlorn. However, as a buyer, I will be repainting anyway. I will be gutting the kitchen and baths, I will be putting in new flooring, new lighting, and new plumbing fixtures. If I go into a home and see that in addition to renovating and refinishing everything to suit today's market, I also have to put in new furnaces, a new roof, replace broken sliding doors (they ALWAYS seem to be broken! wtf.), and A/C units, then that affects my budget significantly. We have moved on from homes that really fit the bill in so many ways, but the added cost of replacing all the systems tipped the scale away from me. In a few cases, those homes had obviously been 'updated' to stage them from the market, but if that money had been spent on a new garage roof or furnace instead of on granite counters, I would have put an offer in. The result for the seller is that people who are like me and looking for a flip will move on, and buyers looking to find a bargain in an upscale market (and therefore might have seen photos of those new counters and fresh paint and believed it was 'updated') will move on when inspection reveals they need a new chimney, furnace, electrical panel, etc., and now they can't afford to buy it. Perhaps these observations are limited to the Chicago market and a rapidly rising 'bottom end' of prices for homes that need significant work, and slower 'top end' of new luxury homes that have traditionally replaced the torn-down homes in top markets. It seems to me, though, that this approach could work for anyone trying to position their home to attract a wider range of buyers, as long as their location is investment-ready. I'd love to hear your comments and questions below - let's start a discussion! Stay tuned for the next blog chapter regarding my hunt for the prefect flip, and my advice for sellers and buyers in the renovation market.... I promise no more 6 week breaks!