what is a financially better move: to buy a renovated home or renovate an older home San Francisco, 94131)?

Asked by Ulrike, 94131 Tue Feb 8, 2011

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Gregory Karr, , San Francisco, CA
Tue Feb 8, 2011
Have you ever renovated a property? Are you ready to take on a full-time job? Professionals who renovate and then sell, expect to make a 20% profit after recapturing 100% of the money they spent for the actual renovations. If a home has been renovated, say two years ago, then it is unlikely the seller will recapture 100% of the money spent on the renovations. More like 70%. However, your question is not really a financial one. If you have never renovated a home before and don't know what your doing, then buy one that is in good shape. Don't let anyone tell you that it is easy to renovate a home. Think about it... electrical, plumbing, heating, roofing, windows and frames, foundation work (that will cost you an arm and a leg), exterior siding, drainage issues, pulling permits, bidding work, dealing with sub contractors, scheduling, etc... Even if you have a relative who is an experienced general contractor, be very very careful if you decide to renovate on your own. Even the professionals don't always make money on their renovation deals.... my guess would be around 60% of the time, especially in today's uncertain market. You don't want to be renovating if prices are going down, unless you have very deep pockets.
1 vote
Jerry Current, Agent, Pasadena, CA
Tue Feb 8, 2011
Buying a renovated home can sometimes allow you to buy the renovations on a depreciated basis. It really depends on your abilities and your tastes. If you like the way a home has already been renovated, then you may be able to get those renovations at a discounted price in the overall price of the home. If you have the ability and patience to work through a renovation yourself, then I think you will get a better deal overall because you'll get exactly what you want. The problem with renovations though is that once you start, all kinds of unforseen issues can crop up to make the job much more costly and difficult. So if you go the renovate yourself route, just be ready for them...
1 vote
Oggi Kashi, Agent, San Francisco, CA
Tue Feb 8, 2011
That depends on your finances. If you can remodel w/o borrowing then yes. If not, then it needs to be evaluated case by case.
Web Reference:  http://www.oggikashi.com
1 vote
Rob Regan, Agent, San Francisco, CA
Thu Feb 17, 2011
Don't buy a fixer unless you know what you are doing, and have very skilled, very trustworthy, and very reasonable professional contractors and an architect. And you have time to manage the job (even though your general contractor and/or architect are also supposed to be doing that)

I have seen 1 year renovations take 3 years with significant cost over runs which is exactly in line with the old adage in the contruction business - "it costs two times as much and takes three times as long" as the best estimate you get. Obviously that isn't always true, but too often it ends up being true.

In the bubble years everyone became a fix and flipper, and most failed. It just is not as easy as it looks.
Web Reference:  http://www.SFisHOME.com
0 votes
Rich Bennett, Agent, San Francisco, CA
Tue Feb 8, 2011
Hi Ulrike-

It ultimately depends on the cost of the home and the work it needs. Typically, it's better to buy a fixer than a house that's all "done". I sold a house in SF last summer that needed a lot of work. My client spent a reasonable amount in preparing the property for sale (and we did it in less than 6 weeks) and had he not done that, he would have gotten 3 to 5 times the amount he spent less had he not done the work.

I'd be happy to talk more about your options if you like.

Thanks much.

Rich Bennett - 415.305.4911

Zephyr Real Estate
2500 Market St.
San Francisco, CA 94114

Web Reference:  http://www.RichBennettSF.com
0 votes
DiPali Shah, , San Francisco, CA
Tue Feb 8, 2011
Hi Ulrike,
Typically it's better to buy a fixer and then renovate it. There are several variables (sq ft of house, sq ft of land, and neighborhood). The subdistricts associated with that zip code (94131) all vary in desirability.

If you are looking to flip a property, one thing you can do is see how much the fixer costs in the subdistrict you are looking, see how much it would cost to renovate it and see what it could be sold for once the remodel is done. Just make sure that the fixer you buy has a good foundation, see how the roof is, plumbing and heating. Those are costly items so make sure those are good before you go in. Also, check to see if the termite inspection doesn't have any red flags.

Make sure that the fixer is in a good area that others would want to live in for resale value if you decide to sell the place afterwards. You can change the house in a year but it takes years to change a neighborhood.

DiPali - 650-566-5766
0 votes
Uche Nchekwu…, , San Francisco, CA
Tue Feb 8, 2011
All things being equal, renovating the older home would be better, of course you will not typically find a situation where all things are equal. This is because you can realize the premium achieved by the renovations instead of paying a premium for those renovations.

This answer assumes that you will be able to renovate the home effectively, if you were looking at paying a premium to purchase the home renovated, or to renovate it yourself - you would find typically that you would pay a premium for the renovated home - that premium may be attributed to the convenience of the delivery.
0 votes
John Souerbry, Agent, Fairfield, CA
Tue Feb 8, 2011
Three issues:
1) Which home has the better location?
2) Is the already-renovated home improved to your standards?
3) Is the older home at (or near) the end of its economic life? In other words, can you expect higher than usual maintenance costs due to the age of the home?
In almost every instance, it's better to buy the better location. If they are equal, go with a home that has the lowest overall cost of ownership.
0 votes
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