When investors tackle a complete remodel on a property, it is hard to know when and where to stop – especially if you are someone who is all about doing things correctly with quality products and quality work. While the end product with all your time and hard work is a beautifully restored home, you soon realize that the hourly cost you will recoup for your time is way less than what you could have made working for someone else. We know, we have been there.
Before you know it, you have over-improved or over-designing a home to the point that the area or age of the home does not support the value you have put into it. This is especially true if you are wanting the full value of the time that you have put in. With the cost and time invested to make that property the perfect home, you would like to get a return on investment. In order to do that you start to drop the price, hoping to generate a buyer to really consider it. However, with every price drop, you see the value of your time going down. You also know that with every price drop the buyer is going to be getting a great deal on a home – a home that would never have been brought to the level it is now if you had not stepped in and put all the work into it. At some point it feels like a community service, since by taking the property to the level you did, you helped improve the neighborhood..
If we look at the listing that is currently on the market at 407 E Main in Steeleville IL, this home was beautifully remodeled to the next level. It was taken down to the studs and 100% reworked to a better floor plan. It is now 4 bedrooms, 2 baths with new walls, floor, plumbing, new kitchen (complete with new appliances)…. so little of the original 1931 home remains – it is like new. They even improved an older basement to make it feel fresh and new. The home now also has a concrete poured porch, sidewalks and patio. The owner absolutely dedicated a lot of time and money to bring this home to the next level and it definitely shows and improves the neighborhood. We started the pricing at $195,000 ($126 per square foot), since there are many communities where this home would have sold quickly and the owner would have been paid for his time. Now at 4 months on the open market, the price has been reduced to $169,000 which is $109 per square foot. This is an excellent price for a practically new home with a garage and large yard in Steeleville IL – and the contractor’s time is a donation to the cause.
So if you are thinking about taking the leap to doing a total rehab, we do want to send along this thought: If you are looking at your time strictly as an hourly cost to be recouped, that may prove difficult; if however, the project is a hobby or something you can spend quality time with others doing, the true return on the time you have invested may not be as important. Just realize going into it, that a rehab project will take a lot of time and cost and that it can be a chore to balance the budget and balance the time.