Just Starting, Need Help!
I purchased a home in July with the idea of staying in it for 5+ years. After seeing the market conditions in my area, I decided to do some remodel work to raise the value of the property and to possibly flip it. The remodel is almost complete which included replacing carpet with travertine tile in the LR, DR and Family Room, a lot of landscaping in the front, repainting the exterior and interior, adding lots of finishes, replacing brass fixtures with brushed nickel, completely gutting the master bath and redoing it. I paid 500k for the property and will have spent a little over 120k on the remodel. A house across the street has an identical floorplan and has not been improved since 1980, when both our houses were built. That house just sold for $570k and sits on half the lot mine does and has no swimming pool. I keep wondering if I have overdone the remodel. If I had not done any work to the house at all, it would probably sell for at least $600k for a $100k profit. Now, It has to sell for $720k to make that same profit. :-( Am I in trouble?
I was also wondering where I could post questions about acquiring land and building new construction... Is there a forum appropriate for that?
Tie up any loose ends you have on the remodel and get it appraised. After spending $120k this is chump change and you'll know where you sit. Properties that are in good shape are selling well. Take a deep breath and enjoy your weekend.
[addsig]
I was planning on getting an apprasial done as soon as the master bath is completed... Unfortunately the contractors are SOOOO slow. The master bath remodel is amazing, makes a HUGE difference but has cost over $40k. Is that too much to spend on a remodel for a master bath if the plan is to make money?
The kind of remodel you are doing is one where you make your house more enjoyable for you and your family because you are going to stay there a long time. It's not something you do to make a quick profit.
It will no doubt increase the value of your house but you are generally lucky to get back $1 for every $1 you put into the remodel when you don't do most of the work yourself and sink all that money into contractors and labor costs. If you are in an insane market like California where everything just keeps going up (23% on average in 2004) this rule obviously does not apply.
I always advise people to have a solid plan and do a little math before undertaking any task like this to see if it's really worth it. From your numbers, you would have made more money selling for 600k than 720k. The reason? Selling costs. You may FSBO but never hinge your profits on it. Figure 7.5% of the final selling price will go to brokers and bankers. In your example, selling for 600k would net you 55k whereas sinking 120k and selling for 720k will net you 46k.
A remodel such as the one you are doing has no doubt required a lot of planning, time and effort, material selections and having to deal with contractors and the inconvenience of a torn up house etc. for some period of time. What might that be worth?
I see little chance on you recovering $40,000 from a master bathroom remodel.
Dealing with 500K homes is totally different than the average rehab that most investors look at.
As advised, get an appraisal, but I think you are going to be very disappointed that the 120K you put in is going to net you probably 0 more in profit. A good comment here was that you did remodelling as if you were a homeowner not an investor. As an investor you have to maximize return by figuring out how where to spend and how much and not a penny more to get the maximum effect.
The best advice I can ever give anybody is to tour every other house for sale in the neighborhood while you are remodelling your property. You will be seeing what your buyers will be seeing. Too many times I have seen people in 400k-500k houses do full blown kitchen remodels, thinking they needed granite countertops to make the house up to par. Their mouths dropped to the floor after they started looking at other homes for sale in the same neighborhood that had formica counters and were selling for near what they were going to sell theres for after full rehab.
A lot of times these overblown remodels will help sell a house faster, but won't bring much more money for them then one done smarter and done way cheaper.
Thanks so much for all the replys. I was kind of figuring that I would be getting this sort of response =(
Even though it's not what I want to hear, it is good to get as much info as possible. I guess the good news is that I love the house and all the remodel work I have done to it so staying in it won't be a problem for me. I guess sometimes you have to make a few mistakes to learn. Luckily I am in an area where real estate is booming and people are getting 20%+ appreciation per year so hopefully the house will increase in value regardless, it just may take staying in it for a longer period of time. Thanks again for the replys. Hopefully some people will benefit from this thread and not make the same mistakes I have.