How to Recoup your Renovation Costs

Lembu Listing from 4/2010

Renovating one’s home is always a dream for many people.  But also a source of many nightmares and headaches.  There’s not too much you can do to get around construction delays and your natural desire to always want more, but there are some things you can do to make sure your investment is financially sound and that you’ll be building equity as you throw tens of thousands of dollars into your renovation.

Figure Out Your Long Term Goals

When renovating, two of the goals that will be in tension will be the following:

1. making your home more comfortable for you
2. making sure you can get your money back when you sell.

You might love a stainless steel countertop, but what if no one would ever buy it from you?  They sure wouldn’t pay for your renovation cost–in fact, they may even ask to dock the price since they’d have to replace the harsh surface with a classic granite counter.  You might hate hardwood, but if you tile your entire house and you happen to live in a classic New England neighborhood, you might have to replace your flooring with hardwood just to get people to come and see your place when it’s on sale.

Generally whether you’re going to live in your home for five years or 30 years makes a big difference in how you decide on renovations. If you’re thinking 30 years or longer, resale value isn’t as big a deal since you’ll probably have to redo everything in 30 years anyway. In five years with minimal wear and tear, you’ll be selling whatever you renovated, and if done right, you can recoup as much as 80% of your cost for certain renovations.

Create a Gut Renovation Plan Based on Resale

For this section, I’m assuming you’re renovating with the priority of maintaining resale value and recouping as much of your costs of resale as possible.

Fine Homebuilding Kitchen Estimator

Fine Homebuilding Article on Kitchen Counter Costs

My rule of thumb with renovation levels is to stay at the quality of your neighborhood.  I.e., keep up with the Joneses.  If everyone in your neighborhood has laminate countertops, you might think twice about getting granite if you want to get your renovation money back on resale. If the quality of everyone’s units is really high, you also want to make sure to stay high yourself otherwise you lost the market on all the people that come to that neighborhood looking for nicely trimmed units. If everyone in your neighborhood has 700 sqft units with 8 foot accoustic-tiled ceilings, think twice about making your place the lone 2000 sqft unit with 10 foot ceilings and deep crown moldings. You won’t get your money back because people are nervous to buy the best property on the block.  If your place is in serious need of rehab, anotherway to go is to go cheap–that way you don’t spend that much money, and you can think of the cost of renovation as being reconciled by wear and tear over the five years that you’ll be using the home.  Then when you sell, someone like yourself will be buying the place–someone trying to buy something cheap that needs work.   But the drawback here is that you rule out all the typical home buyers in your neighborhood.  If you’re curious how much renovations cost, take a look on the web–companies like Fine Home Building Magazine have some great resources for pricing out a kitchen, as well as various articles on aspects of home renovation–as an example, check out this one on kitchen countertops, which shows that the cost of laminate countertops can be as little as 1/10 that of granite, labor included.

Report on Neighbor's Homes

One thing you can do when you need to decide how much to remodel is to ask your real estate agent for all the listings in your neighborhood in the past 5 years–that way you can browse photos and floorplans (if originally provided) to get a sense of what everyone else is doing. For example, in East Cambridge, most units have low ceilings, crooked floors, and are built adjacent to the sidewalks without any offset, and the prices, while still high to reflect convenience of commuting and proximity to amenities, are definitely lower than in say Cambridgeport or Agassiz. If you have a chance to completely redo a place in East Cambridge, you’d want to be careful to not over do it. Whereas in Agassiz, you’d probably be hard pressed to even find a contractor that would willingly install laminate countertops in any kitchen over there–she or he would definitely take a hit to their reputation if the public found out.  For a sample of all the listings in a neighborhood, click on the “Report” graphic left–this is all the publicly available information along with photos from the MLS.  This particular file has all the condos between 900-1100 sqft sold in Cambridgeport in the past two years.

Finally, make sure that the average person is going to appreciate the renovations that you choose to do. Historically, kitchens and added living space have always had high resale values. Some renovations, such as extensive landscaping or copper roofing, have tended to not return renovations costs as well. Check out Remodeling Magazine’s great site on Cost vs. Value for statistical information on the value of all types of renovations.

Get a Professionally Designed Plan and Stick to it!

When doing major renovating projects like a brand new bath or a kitchen or even flooring, stick to projects that you would do if you were going to gut renovate the entire unit. For example, say you bought a fixer-upper, and plan on doing renovations here and there over the years as you save up money to pay contractors. Hire a designer or architect to help you make a plan for the entire unit. There are some basic principles that any competent designer will be cognizant of, which will really help you resell properly in the future. These principles are important not only in making sure the layout elements of your renovation are done properly, but also so that the design throughout your home is consistent.   Examples of layout elements would be like a 42″ wide walkway which is always recommended between a kitchen island and everything else, or a 16″ distance from the center of your toilet to any side wall or cabinet for bathroom comfort.   Design consistency elements might include details such as the style of trimwork you use–in a 150 year-old Greek Revival home, you’d be much safer maintaining the strong window trims and restoring the exterior heavy cornice rather than just removing it and placing clapboard all the way to the roof line. These design details are important for proper use and timeless character.   Another example of consistency would be in having the same flooring throughout the unit, especially in small open-layout condos, which adds to an expansive feel. Sometimes people will add an engineered hand-hewn dark walnut flooring to a living room while leaving the original wide-pine floors intact in the adjacent dining room. While dark hand-hewn walnut flooring is nice, you’ll get better resale by matching the original pine flooring. There are many other principles a professional designer will guide you through, while still matching your goals, which is why it’s really important to hire a professional or at least consult one.

So make a plan, and throughout the years of renovating, stick to the plan and always keep checking your ideas against the plan.

Resources

There are many resources out there for making renovation decisions based on resale.

Take a look below:

Cost vs. Value Website–Boston Region, by Remodeling Magazine. This site has great information about resale, taken from surveys done across the country. The previous link was the local Boston site. You can also find national statistics at the National Level of the website.

Article on Cost vs. Value, 2009, by the National Association of REALTORS.

Ensure a Remodeling Project Pays Off, from Yahoo. This is a short checklist of things you can do to get your money back at resale.

If you have any questions, feel free to contact me or another broker–our contact info can be found at the Lembu Homepage. Good luck with your remodeling, and remember, use your broker for information, renovate smart, and use a plan!

8 Ways to Get Your Basement Dry

From The Master Plumber Blog

With the 10 inches of rain dumped in eastern Massachusetts this past week, I’ve been hearing lots of stories about basements.  Agents are asking each other if they’ve got water in their basements, and clients are loving looking at potential homes right at the time that any leaks and wet basements would be easily visible.  From a few inches of water in the city where street water is quickly drained into the ocean to two-foot deep underground swimming pools in the suburbs, lots of people are seeing water in their basements.  Here are some ways in which you can start keeping your basement dry, placed in order from easiest to implement to most complicated.  Note that managing water outside your house via gutters and landscaping will solve the majority of wet basement issues.

1. Clean your gutters out.  When a gutter spout gets clogged or a gutter gets blocked, water from the roof can pour over the gutter at the blockage point and fall right next to the house, many times digging out a trench in the dirt or wearing away the concrete.  Either way, the water collecting next to the house eventually seeps through the foundation and becomes water in the basement.
2. Divert your gutter downspout away from the house.  You can add hoses to bring the water from the downspout away from your house, or you can create or buy a little trench that carries it away as well.  If your home is on a hill, then you can even bury the hose under ground and have it pop out away from your house so you don’t have to deal with moving the hose every time you mow the lawn or walk around the house.
3. Regrade your yard.  This entails moving or adding soil such that the ground slopes away from your home such that when rain falls or gutters drain water out near the house, the water will flow away from the foundation walls.  Make sure to use soil, and avoid sandy mixtures or gravel, as these materials just allow water to flow straight through them.
4. 

   From Ask The Builder

   Add a linear french drain around your house.  This works best when your house is on a slope and water comes down towards your house.  The drain should be dug out such that it intercepts all the water coming down the slope, and brings it around your house until it’s downhill from you.  The Ask The Builder website has a cross section diagram of the drain as well as a picture of where the drain should be placed relative to the house.

5. 

   From Drycrete Waterproofing Ltd.

   Add a french drain inside your basement with a sump pump system.  This drain collects all the water in the floor of your basement and brings it to a dug out pit in the corner of your basement.  Inside this pit is placed a tank with a sump pump which automatically pumps out water whenever it reaches a certain level in the pit.  You should have a battery backup system for the pump, since many times flooding is accompanied by power outages.  Some people will set up a sump pump alarm with their security alarm system so that they can be warned when the power goes out and there is water in the sump pump that needs to be drained–this allows for people in areas where the power can go out for longer periods to rush home and turn on the generator for the sump pump.

6. Place an elevated subfloor on the floor of the basement.  Once you’ve added a french drain inside your basement, an elevated subfloor is the next step.  This can be done simply with treated 2×4 laid down flat on the floor and placing moisture-proof plywood over, or with specialty products like the Dricore Subfloor.  Both methods leave an air gap between the finished flooring of the basement and the concrete floor, which does two things.  First, if there’s ever a situation where the sump pump goes out or excessive rain and a little water actually collects on the floor, you’ll have an inch or so of tolerance where your basement flooring and furniture won’t get wet, and after the rain stops or the sump is fixed, the water will go back down with no one the worse for wear.  Second, it lifts the finished flooring off the concrete which lessens the feeling of basement dampness that can come from being right on the concrete.  Generally people will place a sheet of plastic over the subflooring, then place their carpet or laminate/engineered flooring on top of that.
7. Add a french drain right on the exterior of the foundation walls.  This is a lot of work, as the ground needs to be dug out to the bottom of the foundation.  However, this is very effective given that the water is pumped away from the home before it gets inside.  This type of work would be important if the linear drain wasn’t an option due to the grading or yard geography, and you were getting chronic water in the basement.
8. Waterproof the exterior of the foundation.   Some people will waterproof the interior of the foundation walls, which is useful to prevent moisture seepage, but if there’s any kind of water pressure, the water will come through interior waterproofing.  Plus, it’s not good for masonry to be constantly soaked in water, so if you can, it’s better to waterproof the exterior of the foundation.  As in #6, you have to dig out the foundation in order to get at the walls.  There are several methods of waterporofing.  Dry Crete Waterproofing has a product called Delta-MS which is a membrane that is completely waterproof but leaves an airgap between the membrane and the foundation, which leaves the foundation masonry completely dry–and if any moisture were to get in between the membrane and the wall, it would just flow down into the french drain system that is at the bottom of the foundation.  Other companies will just spray on a tar-like mixture to seal the foundation.

There are a ton of products and people out there that will promise you a completely dry basement.  Always take things with a grain of salt–keep in mind that the only way to prevent water from getting into your basement is to get rid of the water.  Watch out for products that you can just paint on to the inside of your walls that promise anything besides a change of color.  You gotta get rid of the water first–which is why just adding some dirt around the house and moving downspouts around tends to fix most peoples’ problems.  If you still have water after those two quick fixes, then start looking into more serious work and consult a professional contractor to see what your best path would be.

Review: Tips & Traps When Negotiating Real Estate

In this collection of tips about all aspects of negotiating a real estate transaction, Robert Irwin reaches back through decades of real estate experiences and helps the reader learn through real life stories.  “Tips & Traps” is actually the name of a series of books that Irwin has written about real estate, with one book each for the topics of of negotiating, selling, buying, condos, and more. This book reads more like a collection of stories than a cohesive book on negotiating, but that’s the whole point with the series title of Tips & Traps. Irwin goes through the various aspects of a real estate transaction chapter by chapter, and intersperses his writing with text inserts titled with “Tip” or “Trap”, where he highlights the main traps to watch out for, or a tip to be sure to remember. Very easy reading, and with hundreds of useful nuggets of wisdom throughout.

This is a great book for the potential buyer. Irwin presents a general outline of how to go through the entire process from choosing an agent to choosing a house to closing and renovating. For example, in chapter 1, Irwin gives advice to the buyer in how to manage their agent, and to not just do whatever the agent wants. Some agents tend to want to maintain good relationships with everyone in the community, and fear that aggressive dealing or low offers will make people not like them. Irwin reminds the buyer that an agent should not be afraid of tough negotiating–if anything, a reputation for strong representation can only help an agent with referral business and an image of integrity and strength. Irwin points out a trap for this topic:

“Some agents don’t like the pressure of tough negotiating. If that’s the case, then either demand that your agent perform to your desires or get a new agent.”

Irwin also covers most of the basic customs and rules in how a home is purchased, from making offers, counteroffers, to signing the P&S and doing inspections.  In chapter 7, Irwin covers how to negotiate a broker’s commission, but also ends up covering how brokering works, how the commissions are split, and how some brokerages offer discounts and whether or not one should consider these discount brokerages.

Near the end of the book, Irwin provides advice on how to deal with banks, and reveals a surprising number of ways in which one can negotiate with banks, and in what situations you cannot negotiation with banks. The following tip describes different types of mortgage brokers, and why you might want to be very picky about what type of broker you choose:

“It’s usually more difficult to negotiate with a direct lender such as a bank or savings and loan because you generally don’t get the opportunity to talk to the right person. You usually talk to a loan salesperson who simply mouths the lender’s policy. “We have loan A, loan B, or loan C. Take your pick.” If you can get in to see an officer who has discretionary powers, it is possible to get a loan tailored to your needs. That’s why it’s sometimes best to deal with a small lending institution instead of a giant one—or better still, a mortgage broker who has the ear of the lender.”

In the final chapters, the author has information for investors and those that want to have a house built. From calculating the return on investment to how to negotiate contracts with builders such that you don’t end up with an unfinished un-permitted house, Irwin seems to cover it all.

As a real estate agent, I found this book to be invaluable in that I got to read about hundreds of real life examples of transactions with issues–from contingency situations where the buyer, seller, and the person selling to the seller all needed to close on their houses at the same time to client relationships that really should be let go of in order to maintain integrity by ensuring the best services for the client, the stories were all informative and many times entertaining. It’s also a good refresher of a broker’s obligations to their client both according the legal rules from our states as well as according to the ethical rules from the National Association of Realtors.

Review: House

House by Tracy Kidder

I just finished reading House, a book written by Tracy Kidder about how a house gets built.  It’s not a recent book–it was published in 1985, with a reprinting in 1999.  In House, Kidder follows all parties involved in building a house in western Massachusetts–from the couple commissioning the home to the architect and builders that are also involved.  Along the way, Kidder gives enthralling descriptions of everything from how lumber is brought from tree to house, to how one particular building company creates bids and divvies up profits, to the history of the Greek Revival style in America.   My favorite aspect of reading House was probably just losing myself in Kidder’s poetic use of words.  For example, in the Wood chapter on page 125, Kidder describes an aspect of the tree as lumber:

Each time Alex slices the end off a two-by-ten, a whiff of the Big Woods comes out. The aroma hangs in the air all day. After a day of carrying the lumber here and there, the carpenters’ hands have grown sticky with pitch. It might be the blood you find in the cellophane package of a steak. The pitch reminds you that the wood came from something living. It would be easy otherwise to forget that lumber is a piece of tree, but the freeness of lumber is the salient fact about framing. It informs all of the accumulated wisdom and scientific data’ behind the lumber-grading books and building codes that speak to the issue of sturdiness in houses. A tree can grow tall, withstanding gravity and bending instead of breaking in the wind, because its fibers are very strong in compression and in tension. You can’t easily crush those fibers–shorten a piece of wood. And it’s even harder to pull a piece of wood apart along its grain. A proper frame for a house reproduces treeness. Studs standing vertically in a wall are trees in compression, withstanding gravity. The underpinnings of a floor–girders and joists laid horizontally on one edge–are trees in the wind as people walk over the floors above. A girder or a joist, properly laid out, will scarcely bend at all if it is as hefty as it ought to be, but it will bend a great deal before it breaks. Jim could have consulted his book of stress tables to learn the proper sizes for the pieces of the frame. This time, an engineer, hired by Bill, has already done most of that job for Jim.

One caveat is that this book might disillusion those that aren’t used to the hard and superficially cold culture of New England folks.  Some Amazon reviewers said this story put builders and architects in a bad light, but for people that have been in New England for a while, a little confrontation never meant any harm, and never left any bad feelings once everything was done.  If anything, the interactions felt milder than what I’d expect in home-building transaction, especially given the high level of professionalism among all parties.  Kidder does a fine job in teasing out the backgrounds of each of the parties, sometimes so honestly that I felt myself squirming on behalf of the subjects.  But the rich backgrounds really helped me to sympathize with all parties even during their disputes over contracts, style, and deadlines.

If you’re in the housing industry, or looking to build a house, I’d definitely recommend this book.  Kidder writes about ideals here, showing the dreams and ideals of carpenters who are truly artists, an architect who aspires to do things just right, and home owners who hope of setting down deep roots.

Other Reviews

Check out what some others have to say about House.  One reviewer on Amazon used this book in the classroom:

When I first read House I was enthralled. Finally, a book about the building of a house from inception to possession. I started to use excerpts from the book in my high school construction classes, and then bought 35 copies to use with my students. I now have the book broken down into about 25 lessons and read it each year with my new classes. It adapts very well in a construction technology program for Vocational high school students, and with the current emphasis on literacy we get an added bonus. Thank you Tracy Kidder, you have helped many students over the past 5 years.

A blogging architect loves the book but admits it hits home negatively at times:

I can’t deny that this is a really good book. Architects may decide to skip this one to avoid frustration and anyone in the middle of a home renovation should probably stay away (House would also certainly serve as a cautionary tale for anyone planning on building their own home). But for anyone who likes well-written nonfiction, I highly recommend House.

Time Magazine in 1985 had a review describing Kidder as a virtuoso:

[T]he author is a virtuoso of lucid and compelling narrative. Here he gives equal time to client, architect and builders. The result is a three- dimensional view of an activity instinctive to the species, and a subtle examination of cultural and class differences.

Related Tidbit re: the Cambridge Public Library

The architect featured in House, Bill Rawn, ended up moving on from building a residential home to creating one of the foremost architectural firms in the country.  Of local note, his firm designed the new main branch of the Cambridge Public Library, which just opened in October of 2009.  One of the cool features is a double wall of glass that provides transparency and openness while still providing good heat and cooling insulation.

9 Tips for New Condo Owners

1. Take advantage of any existing owner-occupied property tax exemption.  Look it up on your city’s website, or call city hall and ask about it.  In Cambridge, information can be found at the city website.
2. If you have central A/C or forced hot-air heat, make sure you know where your filters are, and set up reminders in your calendar to replace them regularly.  The timing on the replacement depends on the type of filter and quality that you buy. When you go to buy filters at the hardware store, the box will state how often you have to replace the filter.  These days they even have HEPA rated furnace filters.
3. Keep the phone number for a trusted plumber on your refrigerator.  Many plumbing companies will have a 24-hour hotline that will page their on-call plumber in case of emergencies.  Water damage from plumbing as well as hot-water system failures are things you want to be able to get under control quickly.  I use 2 Rivers–they’re expensive, but they seem to know what they’re doing.  Do your own research by asking friends, or checking Angies List (see next tip).
4. Use Angies List.  This site has consumer reviews of all types of contractors.  From plumbers to electricians to handyman services, you can find out which service providers are reputable, and which ones are not.  They’ve also just begun to add reviews for health care providers and real estate professionals–though the amount of information in these newer categories is still very small. There is a fee–last I checked, it’s about $80 per year.
5. Get to know the people in your condo association.  If you’re in a small association, like two or three units, it’s pretty easy to get to know them through the association meetings or just inviting them over for dinner.  In larger associations, you can attend association parties and meetings, as well as volunteer for various committees and jobs.  This will get you more visibility, and ultimately give you a little more opportunity for input into the rules of the association.
6. In small associations, keep tabs on the finances.  Two main methods for paying for assessments like a new roof or a new exterior paint jobs are to either have each unit shell out their share of the money, which could be $5000 per unit depending on the job, or to increase the monthly condo fees enough so that when the time comes to do the repair, the association will have enough funds in reserve to cover the job.  There’s really no difference in these two methods, so the one you might vote for would have to do with whether or not you’re the type of person to prefer keeping money in your own saving account, or the type of person to prefer paying fees up front.
7. If you will be doing any changes to your unit that will be visible from the outside, make sure to read your master deed to look for any restrictions.  Some associations will restrict the type of window blinds or curtains allowed in order to keep a uniform aesthetic look for the building.  Some people find this overly strict, but it does help with maintaining property value.  Others may prohibit hanging clothing over deck railings, or keeping certain belongings on the balconies  such as bicycles.
8. Keep all the documents from your closing in one place.  Scan them into your computer and keep backups, or keep the actual paper somewhere you can remember.  Documents like the master deed, any disclosure statements from the previous owners, de-leaded certifications, old financials or utilities, and plot plans can all be useful when you are ready to sell your condo someday in the future.
9. Brace yourself for noise, and don’t assume the worst of your neighbors.  Few buildings are properly sound proofed, as proper sound proofing can cost $10,000 or $20,000 per 1000 sqft.  Since few condo buyers take the opportunity to scope out a place during the evenings when the upstairs toddler is running around or a new romance is in full bloom, developers have no motivation to properly soundproof.   Thus noise is the nature of condo living.  Don’t expect your neighbors to be completely quiet, and don’t assume that just because it sounds like people are playing tackle football upstairs that they actually are.  Various factors such as the size of the air cavities between your ceiling and your neighbor’s floor can act as noise amplifiers, and make something as simple as someone getting up from the dinner table sound like a car crash.  Ask your neighbor nicely about the noise, and keep in mind that your downstairs neighbor might be hearing the same things that you are.  If the noise keeps you up at night, consider soundproofing your bedroom–there are several effective renovations you can do these days to soundproof noise coming from any direction–up, down, or through the walls.  See our previous article on soundproofing.