Renovation and Planning
The steps:
We went to about 25 open houses before seeing this house. Most of the move in ready homes were in good
condition but were fairly small and far away from downtown.
- See the house
- Make offer and purchase
- Plans and Approvals
- Renovate
When this listing popped up, I was a bit skeptical because the photos didn't show the potential. This house has a great floor plan with large rooms and a walk out basement. It's only 1 mile from downtown. It will also take up to a year of renovation work.
This listing highlights the need for a wide angle photography lens or a diagram of the floor plan. I almost ignored this house because I thought that it would be just another small room home.
This listing photo is zoomed in so the size of the room can't be seen.
This photo is taken with a wide angle lens so that the full size of the living room is
seen. The living room is about 15 x 22, a very large size for an Ann Arbor home of this
era.
Listing photo.
Wide angle lens photo.
Offer
Since this house needed extensive work, the potential buyer pool was very small. However, I had decided
that this was the house I wanted. We put in an all cash offer, closing in 3 weeks. Since we would basically
rebuild the old systems, we forgoed the inspection.
I did have my real estate team go through the house though. This consisted of my architect, builder, and agent. They have the experience to notice any massive problem. I probably could have paid less but I wanted to eliminate the chance that somebody else would swoop in.
An all cash offer doesn't mean that you have a pile of cash sitting in your bank account. It just means that you have access to the money before the closing. For me, this was a margin loan at my brokerage account. This could also be achieved through a home equity loan. Since this home was not in livable condition, it's likely that the buyer could not get a conventional mortgage for this property.
I did have my real estate team go through the house though. This consisted of my architect, builder, and agent. They have the experience to notice any massive problem. I probably could have paid less but I wanted to eliminate the chance that somebody else would swoop in.
An all cash offer doesn't mean that you have a pile of cash sitting in your bank account. It just means that you have access to the money before the closing. For me, this was a margin loan at my brokerage account. This could also be achieved through a home equity loan. Since this home was not in livable condition, it's likely that the buyer could not get a conventional mortgage for this property.
Team
It's good to have a team in place before buying and renovating a home. These people include a real estate lawyer, buyer's agent, insurance agent, builder, and architect.
It's much easier to develop these relationships if you've already renovated a home. However, an introduction
through a trusted connection can open doors.
Estimating Renovation Costs
Essentially, the price is the price. But nobody knows the price until you get a quote from a
general contractor. The best way to estimate these costs is to walk through the home with a
general contractor and get an approximate cost.
It can be very difficult to renovate a home on a fixed budget. It's quite possible that costs exceed the budget and that delays happen.
It can be very difficult to renovate a home on a fixed budget. It's quite possible that costs exceed the budget and that delays happen.
Making Plans
After we closed on the house, the architect and contractor can start making plans. If you know
the contractor that you'd like to work with, it's best to have him work with the architect during
this time so that you'll understand the costs before the plans are done. The other option is to
do a competitive bid with your finished plans to chose the best builder. However, this can lead
to a suprise in the bid prices.
After the plans are done, permits are needed.
After the plans are done, permits are needed.
Renovating the Home
This is the fun part to watch all the planning come to fruition.
Insurance
A vacant home and renovation project needs different insurance policies than a standard owner
occupied home. I worked with an insurance broker to take care of this. A broker can be better than
an agent since they are not tied to one company and can offer the best insurance product for you.