Bad Renovations – A House Tour

Many folks have caught the “house as investment” bug. They might be homeowners, flippers, or investors. Some folks make money at it; many do not.

Many readers may not know that I do property investment and property-investment consulting, and I’m one of the ones who actually makes money doing it. Never trust an investment consultant who doesn’t profit from practicing what they preach.

Today, I did a walk-through on an interesting house. It was a large, impressive home on a nice lot overlooking a golf course in an affluent neighborhood. It’s been in real estate owned (REO) status for about 300 days, and is currently listed at $499K. That’s a great price, given the neighborhood, and it should have sold. But it didn’t. Why not?

Let’s take a look at the photo gallery of this house to find the answer. These pictures provide a good illustration of something I consistently tell homeowners: renovating without a good plan or a reasonable budget is a waste of money.

You can see from the images that this is a challenging house. It’s got a “Miami Vice” architect/designer thumbprint based primarily on what seems to be The Triangle. But don’t let an interesting design stump you. This house would have had an eager buyer/owner if the renovations made to it over the years were done properly.

I can see that it was either in the hands of the original owners who didn’t have the money to maintain the place, and/or a flipper bought it and ran out of money to renovate it. Bam! It went to the bank.

A Closer Look at the Issues: What Will Help This House Sell? And What Will It Cost?

Exterior:

The roof and balconies need re-roofing and new decking. The plywood details at the eves also need maintenance and repair, including removal of a bee’s nest. I hate fussy architectural details like this for just this reason. Cost to repair and replace: $15,000 or more.

The whole house needs to be painted. This house is in Pennsylvania – not Miami – and white is probably not the correct color choice. Cost for exterior painting: $12,000.

All of the windows need to be replaced with modern, high-end windows. Figure $40,000 for windows and new sliders.

Look at the front door. That’s a door you pick up at Home Depot for around $1,000. It’s junk. This house is impressive enough to warrant a custom door. Cost: $5,000, plus installation.

The grounds are a mess in need of clean up. It also looks like the retaining walls need repair, and the pool suffers from lack of maintenance. Allow $30,000.

Interior:

The flipper spent thousands installing new, cheap, stone tile floor over the original tile floors – a cheap and low-end solution.

Builder-grade materials are a slap in the face as soon as you walk into this house. You never want a homebuyer to walk in and feel that the house you have for sale is cheap or junk. Needless to say, a house in the $800K+ range should really feel like it’s quality and high end.

The whole HVAC system is original to the house, and I saw no AC unit. It should be replaced with a new HVAC system. Allow $25,000 for that.

Everyone says that kitchens sell houses. This kitchen has a refrigerator placed more than 30 feet from the sink and oven, which is a big logistical mistake. What’s more, the cabinets are cheap, and the counter is a pre-made product from a big-box retailer. This kitchen is in need of a tear out. What a waste! Since the house and its rooms are interesting triangles or trapezoids, there’s even more reason to spend money on high-end, custom-made products. Allow $35K – $50K for proper cabinets, $15K for stone counters and plumbing fixtures, and $20K for a Wolf or Viking appliance package.

There are five bathrooms in this house. The flippers kept the original 40-year-old fixtures. Why? Anyone walking in will see they need to be replaced. Instead, the flipper went “cheapo” and worked around the old fixtures but installed new tile. You cannot make a silk purse from this sow’s ear. The bathrooms will need to be gutted and remodeled with 100% new product. Allow $30K minimum, per bathroom, with more for the larger master bath.

The lighting scheme needs a redesign. Allow at least $15K for interior lighting fixtures, and $20K for the electrician.

The finishes in a home of this caliber need to be crisp and clean and appropriate to the house’s style. In this case, you are going to need high-design specialty products like custom glass and steel stairwells, and lots of custom glass at the exterior entryway and at the front patio entryway. Allow $25K for custom glass inside and out.

In short, whoever worked on this house did so without knowing a lick about architecture, style, design, budgeting or planning. Everything that’s been done to this house has to be redone properly, at a cost of around $400,000. Add to this the fact that the flipper couldn’t sell the house and may have gone bankrupt in the process.

The fact is, small, simple houses usually will net the investor a better ROI than a big, complicated renovation like this one. But many remodelers or flippers like to get into an ego-stroking project like this one to show off. Never let your ego get ahead of the numbers. The numbers never lie.