Questions about Renovating Old Homes
with replies by Thomas J. Elpel
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Is it financially viable to renovate old brick homes for resale?
I often drive past brick homes that were build at the turn of the century- that are now completely derelict- roof is ruined, windows boarded up- but they are still fundamentally beautiful and have charm. I can't help but wonder if it would be financially smart or stupid to attempt to gut one of those and try to make some sort of eco friendly place out of it. It would have to be decorated and designed in the style of it's time to some degree in order for it to look right, and I'd want to keep the stairway and banister- things like that (if salvageable).
I know there are some fundamental things that could not be retrofitted without sacrifices in the style- such as changing the layout of the windows. But do you think there is a profit to be made- putting in heavy duty insulation, a hearty roof that will support solar panels, and a few other energy saving things?
Maybe I'm not educated enough. For years I have been going to real estate seminars and soaking up information, but it always feels wrong somewhere inside. So much of that whole thing is about dollars and nothing else. Something about going out and improving the state of the world through creating energy efficient housing out of garbage really appeals to me. I can't help but think that such a project is a royal money sucker and little else. I have a hard time making sense of where to follow real estate rules for flips and where to follow eco building strategies. The two do not overlap terribly well. Real Estate rules say to run (not walk) away from derelict properties like this one, but for some reason I have always felt drawn (likely because I think it would be an affordable way to get into real estate at all, which is otherwise out of my reach
I guess though the real question (and I'm not sure if you are the man to ask or not)- is: How hard is it to build a new and eco home- within the shell of an older one. Is it any easier then building from scratch? The mortar is already there. However, at the same time- so is the style of the house- and it isn't in an eco friendly direction necessarily. I'd love to hear your opinion on this, or if you know someone already doing something like this I'd love to get connected as well.
I think there is a fundamental difference in perception between someone who wants to turn over a house (old or new), versus someone who wants a quality home.
For many people, a house is a house, and whatever is on the outside is just the skin. If you have a derelict old house with brick walls, then that's all you have, a skin of brick. The rest of the house needs to be repaired or rebuilt, and that can be a crapload of work. You are better off to start from scratch.
On the other hand, if you want a quality home that will stand the test of time, then the brickwork is both the skin and the skeleton, and the most labor-intensive part of the building process. Having built stone houses, I can tell you it would have saved me a whole lot of trouble if the stone walls were already standing! The rest is infinitely easier to tackle.
Interesting, isn't it, that two perceptions of the same thing could be so drastically different?
Here are the principal issues as I see them:
1) Can you get a screaming good deal on an old brick house to start with? I know that after the crash of 2008, banks were selling some reposed, derelict homes for as little as $1,500 in places like Pittsburg and Detroit, I think. I wouldn't expect to get anything nearly that cheap, but $25,000 is still a screaming good deal. Anything under $50,000 might still be a really good deal if the house is made of brick.
2) Can you live in the house while you fix it up? How much effort would it take to make some part of the house minimally habitable, so that you are not paying rent or a mortgage somewhere else while you work on the house. This is especially important if you lack both capital and skills for taking on the renovation. Your first one could take a number of years to complete. Down the road, with experience, you might be able to turn them over pretty quickly, and you could roll the profits from one into materials for the next. It will also take you a while to familiarize yourself with good sources of salvaged or secondhand building materials and methods to keep costs down. There is nothing wrong with going slow and learning along the way.
3) Changing the layout of the windows to optimize solar gain or improve the view definitely complicates things. Yes, it can definitely be done, but it does create some additional work, and you want the end product to look as if it were built that way in the beginning. From that standpoint, I think it is easier to cut new windows in than to fill in old ones, but I would definitely minimize that type of work, if possible, unless it will save other work and expense later in the project, or significantly raise the value of the end product.
In terms of profitability, yes, I believe you can make a good living at this sort of enterprise. Most people subscribe to the Wal-Mart model of prosperity: turn over a gazillion products, making only a penny on each one, but it still adds up to a gazillion. I've always subscribed to the thrift model of prosperity: move slowly and thriftily, and you may not need much money to prosper. And if you do retrofit and cutesy up a nice old brick home, then you may end up with one or several years worth of income in your pocket all at once. Its definitely doable.
I hope this helps!
Thomas J. Elpel