Category: Real Estate - Page 2

Cost to Remodel a House

Assuming you have 3 bedroom, 2 bathroom 1100 square foot investment property, following is a breakdown of costs to remodel it relatively cheaply and quickly using neutral colors.

Floor Plan

Using Live Home 3D, this is an example of a 3 bed, 2 bath, 2 car garage house. The kitchen is U-shaped. The bedrooms are almost all the same size. Two of the three bedrooms have walk-in closets. The laundry is central to the house. There is a small patio next to the kitchen and living room.

Colors

Here are the neutral colors we’ll be choosing.

Floor – beige or light gray
Wall – beige (Roman Plaster PPU7-10U) Behr / Home Depot
Ceiling – same as wall color for simplicity or Swiss Coffee
Baseboard – pure white
Kitchen cabinets – light gray
Kitchen appliances – stainless steel
Kitchen countertop – white
Bathroom vanity – light gray
Bathroom sink – white
Doors – pure white

Wall

Replace all outlets and switches with Dekora ones

(Roman Plaster PPU7-10U)
Behr / Home Depot

Ceiling

Spray walls and ceiling same color for simplicity. Or, spray ceiling Swiss Coffee.

Swiss Coffee

Floor

Choose large 12”x24” tiles for fewer grout lines and quicker completion.

Decorelle Galileo 11-Pack Gray 12-in x 22-in Glazed Ceramic Stone Look Wall Tile

99¢ /sq. Ft.

Kitchen

Get cabinets from IKEA. They deliver.
Average 10×10 kitchen

Insignia™ – 18.1 Cu. Ft. Top-Freezer Refrigerator – White

$500

Amana – 24″ Built-In Dishwasher – Stainless steel

$350

Amana 1.6 cu. ft. Over the Range Microwave in Stainless Steel

$200

IKEA 10×10 kitchen

~ $3500

Light gray cabinets with off white countertop

Go with a solid color so in case it gets damaged, it can easily be painted gray.

Amana – 4.8 Cu. Ft. Freestanding Electric Range – Stainless steel

$450

Kohler Verse Drop-in Stainless Steel 33 in. 4-Hole Single Bowl Kitchen Sink

$200

Single hole, Single handle

Single Hole Single-Handle Kitchen Faucet in Brushed Nickel

$50

GAGALIFE Built in Sink Soap Dispenser or Lotion Dispenser for Kitchen Sink, Chrome ABS Pump Head, with 13 Ounce Large PET Soap Bottle

$18

Bathroom

Glacier Bay 1-Piece 1.1 GPF/1.6 GPF High Efficiency Dual Flush Elongated All-in-One Toilet in White

$150

Glacier Bay Everdean 30.5 in. W x 19 in. D x 34 in. H Vanity in Pearl Gray with Cultured Marble Vanity Top in White with White Sink

$230

Go with a solid color so in case it gets damaged, it can easily be painted gray.

Buy at Marshalls, Ross, TJ Maxx for less

Delta Modern Single Hole Single-Handle Bathroom Faucet in Chrome

$80

Hampton Bay 4-Light Chrome Raceway Vanity Light

$20

Laundry

Amana 3.5 cu. ft. White Top Load Washing Machine

$450

Amana 6.5 cu. ft. 240-Volt White Electric Vented Dryer with Wrinkle Prevent Option

$450

Landscaping

3/4″ Ginger rock

By at a rockery and have delivered

Italian Cypress Trees

$40 / tree at Costco (only available in Spring)

$100 / tree at a nursery

Garage Floor and Driveway

5 Gal. Tan Granite Grip Decorative Flat Interior/Exterior Concrete Floor Coating

$224

Whole House Renovation Plan

Turn on water, gas and electricity
Use laser measure to measure each room
Use Live Home 3D to draw floor plan
Print multiple copies of floor plan and staple to wall
Demolition – Day 1 – 2
1. Wear coveralls / protective clothing
2. Lay down large tarp in driveway to make debris cleanup easier
3. Demolish kitchen using Bosch jackhammer, monster sawzall and pry bar
1. Remove both bathroom toilets and and vanities
1. Remove all flooring.
2. Rent floor surface prep tool to smoothen floor. Include the garage floor.
3. Remove all outlets and switch covers
4. Remove all interior door knobs, if necessary
5. Put all debris in driveway
6. Vacuum all dust using cyclone filter to minimize filter clogs and simplify disposal
Drywall – Day 3
1. Add drywall where necessary
2. Patch holes in walls where necessary
3. Texture walls where necessary
Paint – Day 4
1. If reusing baseboard, label each baseboard with a number and label corresponding wall in the floorplan with the same number
2. Remove baseboard and put on floor and cover with plastic
3. For each area that needs to be covered, e.g. outlets, ceiling lights, registers, vents, etc, cut painter’s plastic to size
4. Spray glue around the area that needs to be cover and stick plastic to it
5. Wear coveralls / protective clothing
6. Use air sprayer to spray paint on walls and ceilings.
7. If necessary, spray paint doors white
Floor and Wall Fixtures – Day 5 – Day 9
1. Pay someone to install tile flooring on all floors
2. While floor tiles are being installed, do following
  1. Replace outlets, switches and plates with Dekora ones
  2. Install bathroom lights
  3. Install bathroom towel hangers
  4. Replace all door knobs, if necessary
  5. Paint baseboard
Kitchen – Day 10 – Day 13
1. Pay someone to install IKEA kitchen
2. Install kitchen appliances
3. Pay someone to install quartz countertop
Bathrooms – Day 13
1. Install toilets
2. Install vanity
3. Install vanity faucet
Landscaping – Day 14 – 18
1. Remove trees
2. Rent mini skid steer to remove 3 inches of dirt
3. Rent excavator to dig holes for Cypress trees
4. Plants Cypress trees
5. Lay down weed fabric
6. Lay down cement board
7. Pour and level Ginger rocks
Debris removal – Day 19
1. Rent dumpster
2. Transfer all debris from driveway to dumpster for haulaway
Fence, garage floor, driveway, and exterior cement walkways – Day 20 – Day 21
1. Pressure wash the garage floor, driveway and fence
2. Spray tan Granite Grip using air compressor
3. Paint fence

Cost Breakdown

Using a spreadsheet, create a cost breakdown like below.

Based on this, we can estimate that including labor and other items, the total cost for a whole house renovation would be around $20K.

House-Buying Tips

Avoid Lead Paint

Lead-based paint and lead-contaminated dust are the most hazardous sources of lead for U.S. children. Lead-based paints were banned for use in housing in 1978. All houses built before 1978 are likely to contain some lead-based paint. However, it is the deterioration of this paint that causes a problem.

If possible, buy a house built after 1978 to avoid lead paint.

Avoid Asbestos

Unless you perform detailed testing to rule out the presence of asbestos, every pre-1981 building must be treated as if it contains asbestos.

Avoid Plaster Walls

Plaster walls were used to finish interior houses up until the 1950s at which time it was replaced with drywall. Plaster walls are like stucco. Since they are hard, cutting and drilling a hole for, say, hanging a picture is difficult.

If possible, buy a house after the 1950s to avoid having to deal with plaster walls.

Avoid Old Wiring Systems

Old homes used knob and tube wiring till around 1920. After that, flexible cables were used till the 1940s. After that, cables were run through metal conduit till around 1965. Around 1965, homes began using modern NM cable commonly called Romex.

If possible, buy a house after 1965 to avoid having to deal with old wiring systems.

Roofs

Roofs are one of the most expensive parts of a house. Replacing the shingles on a roof can cost around $10,000. Shingle roofs commonly have a lifespan of 25 years.

If possible, find out when the roof was installed to determine whether the roof will need replacing soon or not. Concrete tile roofs are very long lasting so it would be good to get a house with that.

Transfer Tax and Title Fees

Don’t assume that your agent will draft an agreement correctly that is in your best interest. Certain things such as title and escrow fees and city and county transfer taxes are either paid by the seller, buyer or both, depending on which county the property is in. For California, you can reference this table.

Avoid Flood Zone

If the property is in a flood zone and you need a loan to buy the house, the lender will require you to pay for flood insurance. That is yet another expense you should avoid having to pay. To determine if a property is in a flood zone, enter the address at FEMA Flood Map Service Center.

If the property is in a Special Flood Hazard Area (SFHA), then you will be required to buy flood insurance. For example, the property at 2421 Country Club Boulevard 28
Stockton, CA 95204 is in a special flood hazard area as shown in the map below.

HOA

Some properties may appear much cheaper than others for the same square footage. Beware, however, that these properties can be just as expensive or even more expensive because they may be part of an association and require a monthly HOA fee which can range from $25 to over $500 per month.

Homeowner’s Insurance

Shop around for homeowner’s insurance. State Farm is the largest insurer with 17% of the market. They also provide an instant online quote and replacement cost estimator and their premiums are usually cheaper than other big-name insurers.

When choosing insurance coverage, one of the biggest issues is the cost to completely rebuild your house. One way to determine this is by using DwellingCost.com. Some appraisers use this.

Homeowner’s insurance costs can vary wildly. You should get a quote from an insurance broker and compare costs.

Mortgage Shopping

When shopping for a mortgage, you can probably get a better rate from a non-bank lender. Here are some rate comparison sites:

Some low-cost lenders I’ve used in the past are

Also, consider getting a mortgage from a credit union. Unlike banks, credit unions are not for profit so they can offer lower rates. For example, if you live in Alameda County in the San Francisco Bay Area, you can become a member of 1st United Credit Union and get competitive rates for personal and rental property home loans. See their rates.

Selling Your House to Buy a New House

If you want to sell your existing house and buy another, e.g. because you’re moving or need a bigger home, then keep in mind that the first 10 years of your 30-year mortgage primarily goes to paying interest rather than principal. As such, if you were to sell within the first 10 years, you wouldn’t have much equity from your monthly mortgage payments. Of course, if your house went up in value, then you may have a decent amount of equity.

Recessions, Home Prices, Unemployment and Inflation

When an economic recession occurs, one thing that happens for sure is the unemployment rate goes up. You can see a graph of the California unemployment rate since 1967 on the St. Louis Federal Reserve Bank’s website. Below is a copy of that graph until 2019-01-01.

The shaded areas indicate a recession. As you can see, the unemployment rate has jumped up during each recession. Logically, as unemployment goes up, incomes go down since fewer people are working. Following is the graph of real median household income in California over the years.

So how do you know when a recession will occur. It turns out that the best indicator of a recession is when the Treasury Yield Curve inverts.

House-Buying Strategies

Buying a house can be stressful, especially in a hot market. If you wait too long to put in an offer, it may be too late as the seller may have already accepted a existing offer in which case the buyer would be “in contract” (pending sale) in which case the seller can’t accept other offers while in contract. Therefore, getting “in contract” quickly blocks other buyers.

Property Appraisal

Of course, the more you offer to buy a house, the more interested the seller would be to accept your bid. However, you don’t want to offer too much as you could be overpaying. Let’s say you find a duplex on sale for $360,000. You then do some research to determine if $360K is the market value.

Redfin Estimate
According to Redfin, you find that the house is estimated at $360K. However, Redfin shows you how they came up with that estimate using comparable properties in the area. After looking at the comparables, you find that Redfin’s automated estimation algorithm is using single family homes as comparables instead of duplexes. Obviously, single family homes are not good comparables if the subject property is a duplex.

Creating House Floor Plans in 2D and 3D

If you need to only create 2d house floor plans, I personally have found Lucidchart to be easy to learn and intuitive to use.

If you need to create 3d house floor plans, I have found Live Home 3D to offer the best features for the price. At $10 (on sale), you can easily create 2d and 3d home plans. You download and install the program which allows for faster 3d rendering. My typical workflow to design a house is as follows:

1. Create a room by clicking the Room button

2. Draw a room (2d) by dragging the shape of a rectangle

3. Pick a door style

Invest in Real Estate or Stock Market (and Other Comparisons)

Average rate of return

Stock Market: 10% (before inflation). 7% (after inflation)
Real Estate: 10% (especially in the San Francisco Bay Area)

ROI based on own money or borrowed money

If you invest $100,000 in stocks, with a 10% ROI, you’ll get $10,000 at the end of year one.
If you invest $100,000 in real estate (20% of a $500,000 house), with a 10% ROI, you’ll get $50,000. Your ROI is based on the value of the property ($500K), not your $100K down payment. Most of your ROI comes from borrowing $400,000 from the bank.

Of course, you can also borrow $400,000 and dump it all into buying stocks but

no one, especially a bank, would lend you $400,000 to invest in stocks, and even if they did, the interest rate would be more than 10%, causing you to lose money
unless you invest in something like index funds, investing in individual stocks is more risky because their values can plummet in very short periods of time, e.g. Facebook dropped by 26.4% in just one day. A single-day devaluation like that would never happen in real estate. Real estate depreciation can occur, but it would take at least months.