Tool: Returns On Remodel Investment In Money Mag

karma_carpentry

http://money.cnn.com/popups/2006/mon...les/index.html

I've often used the idea that a client's investment in remodeling will be reflected in the sale value of the house, so they're effectively improving their living space at a fraction of the actual cost, if they plan on selling the house anytime soon. The link above gives some hard percentages for different kinds of remodels.

Mike Finley will be happy to note that bathrooms are at the top of the list at 102% return on investment in resale value. Siding is also a positive return at 103%, but most of the returns are in a healthy 90% range.

The info is presented better in Remodeling magazine, but I figured clients are more likely to trust/recognize CNN and Money Magazine.

http://www.remodeling.hw.net/content...&sectionID=173

Gordo

Good info.

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Looks like some pros were here.

mahlere

You know, according to Flip This House, most items have a return of around 200%.

For example :"New hardwood flooring-$2500, added value $5000"

They couldn't possibly be wrong, could they

Mike Finley

And you wonder why I switched from doing everything to a niche market place? Actually it didn't have to be bathrooms because of a heavy return on investment, that had little to do with it. Specializing instead of generalizing is a whole different topic. But anyways you've revealed a big secret that I have been using all along, so I might as well talk about it, if it helps some others out to sell more jobs.

We use a figure of 92% return which is more realistic regionally for us. You can see a web version of what we give customers in hardcopy about return on bathroom remodeling investment here if you are interested http://www.rockymountainbathrooms.co...investment.htm

The study I use is a joint venture from Harvard Joint Center for Housing Studies & HomeTech Information Systems. The numbers that Money is using may be skewed because they aren't adjusted regionally. Regionally a bathroom remodel in one city may be only a 76% return on investment and in another market might be 144% return. But regardless for about 3 years now it is the biggest bang for you buck for a remodeling project.

For us about half the time investment resale questions come up and we take full advantage of the ROI of what we do to help make the sale.

Anybody in remodeling should be using things like this to actually sell (yeah, dirty word for some people) what they do, they add credibility and increase your level of professionalism with customers. For those guys that think selling is a dirty word, this example is exactly what selling really is. It's more about evidence of why your customer should purchase your products and not about twisting somebodies arm.

With the housing market turning the way it is not using this information is wasting a huge advantage. The facts are in a buyers market with lots of inventory available, buyers can pick and choose, discussing this with your customers helps close the sale.

"Buyers want ready to move in homes, so if you ever do sell, you will have to remodel eventually or lower the price of your home in order to sell it, so why not invest in it now and enjoy it while you live there, it's basically money in the bank."

Mike Finley

Not sure if you are kidding, but for a average customer selling the house they live in they aren't going to make money on a remodel. Wholesale and retail prices are totally different, we are selling retail services, so it would be very misleading to tell people that they are going to make money on a remodel, it really isn't true. In the long run it can be due to appreciation, but it is rarely the case of somebody wanting to sell their house and spending 10,000 with a contractor and increasing their house's value by 10,000. About the only exception I can think of it paint. Painting certainly is the #1 return on investment for anybody.

mahlere

Nah, I just laugh at the numbers and the unrealistic expectations that they put in people heads.

There is a house near me that someone bought about 8-9 months ago. They brought in contractors and gutted it. Redid it real nice (at least from the street-haven't actually went into the house) and put it right back on the market. 3-4 months to fix up, 5-6 months standing empty for sale.

Will they make money on it, I don't know. Did they expect to make a killing on it, based on these TV show, I'm sure.

Mike Finley

I do agree that there are some very unrealistic numbers being thrown around on TV. You're still talking about an investment though. Rehabbing an investment and remodeling a residential home for the owners are totally different animals. A good rehabber has a better shot at profit because he should be looking at everything from an investment point of view, a residential customer is going to almost always be looking at things from a living with it point of view.

mdshunk

Eh.. that's the difference between wholesale and retail. When you're flipping, you're doing [should be doing] your upgrades at wholesale cost. When you sell, you're getting retail.

mahlere

yeah, understood. but you're average person that wants to make a killing in flipping won't.

by the time they buy the house, hire the contractors, pay the carrying costs, etc. What's left?

But the numbers that I seen thrown out are not what the average person will pay a contractor to do it. Whether it be an investment property or their own residence.

mdshunk

Right... that's where people screw up. The most important way to succeed on a flip is to pay careful attention to buying materials and selecting skilled labor. It is a rare flip, indeed, where you can pay retail for material and skilled labor and make the numbers work. [This is the primary reason that you'll never get a flip that was well done below the cosmetics.] It's all about "sizzle"... sizzle bought at wholesale and installed by wholesale labor.

My apologies to the original poster for derailing this thread. The original post was providing some very important information with regard to remodeling payback.

Mike Finley

And.... just to throw some more anit-flipper stuff out there...

the do it yourselfer flipper - which seems to be the other version, these guys buy all the materials wholesale and do 95% of the work themselves then sell and stick the profit in their pocket, however for a lot of them all they are doing is going to work as a contractor for themselves everyday instead of for somebody else. Making 50K a year flipping houses by doing all the work yourself is just a job as a contractor with you as both the contractor and the client.

mdshunk

Yes, I do work for one. He does two houses a year from spring to fall, and takes the winter off and goes to Florida. This fellow knows his stuff, and does fantastic work. He only subs out what he legally can't do himself.

MattCoops

once I fix my credit we'll start flipping houses

if it wasn't for my wife, we would never have a mortgage

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