Finding your footing in fall housing market – Washington Blade
If you still use Facebook, you know that there is a group for everything, from different breeds of dogs and cats to silly games that lead to data mining of your information for business or nefarious purposes, to groups that offer advice on certain medical issues, to everything real estate.
One of the Facebook groups in which I participate allows users to share do-it-yourself home improvement tips. It’s a bit like HGTV or the DIY network, with a dose of reality thrown in.
Simple topics might include improving curb appeal, selecting paint colors, installing flooring, replacing an electrical fixture, or changing a toilet.
Sometimes contractors weigh in on more complicated work and even give an idea of how long a project might take and how much it might cost in a particular area of the country.
It constantly surprises me how little people know about how their home works. I fault the seller’s market over the past years, where inspections are either short or non-existent, for much of that.
It used to be that an inspector would spend several hours with a buyer, going through the condition and operation of a home’s systems and fixtures, providing a written report, and even including a binder that outlined how to fix simple items or when to conduct general maintenance.
The advent of the “walk and talk” inspection, conducted prior to making an offer, shortened that process. A buyer would have to take his own notes while the inspector was talking and pointing things out. Often, the buyer would go home with information in cryptic shorthand that made no sense a few weeks down the road.
Some people still fancy themselves as house flippers, intent on making a massive profit by making a few choice renovations and reselling a home. My Facebook group often brings out those who have the desire but lack the skills or funding.
One person recently posted photographs of a house he was interested in renovating for profit. His first question was whether he could remove all the mold himself or whether he should hire a professional mold remediation company.
I looked at the photos and immediately thought of Tyvec suits, respirators, and those movies where CDC warns of a toxic environment that must be contained and the toxins eradicated — not my idea of a DIY project.
Another unrealistic aspect of this renovation was his cost estimate — $100,000 to cover mold remediation, a new roof, central air conditioning and heating and, of course, new electrical, plumbing, drywall, fixtures, cabinets, and appliances. Even with a price of $175,000 for the house and a potential value of $400,000 after renovations, the professional flippers told him he was living in La-La-Land.
Amateur flippers in the DMV have seen their options dry up in the past five years, as even distressed properties left in disrepair can sell for half a million dollars or more. Even the professionals are knocking on doors, sending postcards in desired neighborhoods, and calling or texting owners and real estate agents, looking for properties to fix and flip.
Still, if you are inclined to try rehabbing, even for your own home, here are my top five things to consider before diving in.
• Get to know what permits you will need and the process and timeline for obtaining them, or else you may face the dreaded orange Stop Work Order slapped on the home’s window.
• Find an architect and/or engineer to help with planning the layout. Remember, not every wall can come down to make an open concept floorplan without shoring it up in another approved manner.
• Learn about “hard money.” Unlike traditional home loans that are based on income, assets, and credit, these high-interest, short-term loans rely on the difference between what you pay for the house (“as is” value) and what the “as renovated” value is estimated to be upon resale.
• Consult with a real estate agent about popular features and finishes to help you sell the house quickly and get the highest price. Purchase those items locally to avoid supply chain delays.
• Budget for unexpected cost overruns of 10-15%. Even with an interest-only loan with no payments due until resale, you will still owe taxes and insurance and make periodic payments for materials and labor. Don’t forget to add commissions and closing fees on the purchase and sale.
Your first project may not result in the profit you anticipated, but it will give you a sense of whether it’s worth trying again or leaving renovations to the professionals.
Valerie M. Blake is a licensed Associate Broker in D.C., Maryland, and Virginia with RLAH Real Estate / @properties. Call or text her at 202-246-8602, email her via DCHomeQuest.com, or follow her on Facebook at TheRealst8ofAffairs.