Fixer Upper vs Move-In Ready — Which One Actually Makes You More Money?

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is your host Christian Nossum with the Awesome Nossum Group at Wilson Realty Exchange, Inc. And today I have an awesome guest Mr. Varun Jain.

Varun: [0:11] Hey, nice to be here.

Christian: [0:12] Thank you so much for joining me. We have a really fun topic that I think a lot of buyers have been asking us about, not just investors, but also homeowners, people that wanna move into a house. Yeah. Um, and that is, should I buy a fixer-upper versus a move-in ready house? So today, we're really gonna talk that over. We're gonna go over specifics on what a cosmetic fixer is versus a much bigger fixer, uh, and then help you decide which one you're best suited for, or if you should just skip all of it and go with a move-in ready house. Just move

Varun: [0:50] in.

Christian: [0:51] Yeah. It's a lot easier, obviously, but you're gonna pay for it. So, uh, everyone thinks the, the answer is obvious. Buy the ugly house, fix it up, build a ton of equity. Um, but what we see in real life is that sometimes fixers can be, while a very good investment, can also be very stressful. Yeah. So we're gonna really go over a lot of the pros and cons here to help you figure out what might make the most sense for you. Um, we're gonna cover the diff- different types of fixers, cosmetic versus a full-on fixer, what's easy to update versus what can turn into a big can of worms. Uh, we're gonna go over the different types of properties and kinda go over the scale of easier to harder and that scale of what's easier to fix up versus harder to fix up. Yeah. Uh, where value's actually created, how to know if you're even a good fit for taking on a project, uh, how to fund the renovation, and finally, the permitting and construction. So let's get right into it.

Varun: [1:56] Yeah, yeah. Uh, so, uh, what's a fixer, really, right?

Christian: [2:00] Mm-hmm.

Varun: [2:00] So, uh, first thing we need to clarify is not all fixers are created equal, right? There are two broad categories that we talk about, right? It's a cosmetic fixer, and then you have a major fixer, which is where you need structural upgrades, layout changes, system upgrades, so on and so forth, right? So th- th- these are two broad categories where fixers would fall into. Yep. Uh, and most buyers think that they are buying a cosmetic fixer, but it, more often than not, ends up in the second category, and then there is buyer's remorse. Yeah, yeah. Right? That happens more often than- They didn't

Christian: [2:37] realize they bit off more than they could chew.

Varun: [2:39] Yeah. I … And I feel like the part of this is just TV shows make it feel simpler than it should be. I've never been

Christian: [2:46] on one of those.

Varun: [2:49] He's a liar. He's been on season one of- … M- Million Dollar Zombie Flips. Yeah. Yeah, so watch it. Uh, it's a great episode. Uh, but, uh, in reality, it's … Again, TV show versus what's real is very different.

Christian: [3:03] Very.

Varun: [3:03] A- and, uh, it- You need to know what kind of fixer you're getting into. Mm-hmm. That's where you lean on your real estate agent. Yeah. Hopefully they can guide you correctly into what's, what, what is something you can kind of take on versus you don't wanna bite off more than you can chew.

Christian: [3:18] Yeah. So- And so I would say while you're trying to figure out who should be your agent or who you want to hire as your agent, see if, if you are thinking of buying a fixer, make sure they actually understand fixers- Yeah … and the scale. Because there's a big difference between a cosmetic versus a full-on fixer, and if your agent doesn't understand how to figure out that scale and what those projects are, uh, you could make a bad choice. Absolutely.

Varun: [3:46] So, yeah. Absolutely, yeah. But preferably an agent who's, who's done some investing on the side, some flipping on the side, they understand it. Yep. They have some contractors that they can refer. It, it helps to have that kind of a team member in your corner.

Christian: [3:59] Yeah.

Varun: [3:59] Yeah. So let's get into the type one, the easy cosmetic fixer. Yes. The fixer, right? This is where, uh, you're talking about paint, landscaping, flooring updates, replacing old cabinets, countertops. But you're not changing any layouts. You are not, uh, moving too many walls. Uh, you're not, um, trying to, uh, finish out a whole basement, right? That- that's kind of the boundary line in, in at least our opinion- Yeah between a cosmetic and a major. Um, what also kind of defines a cosmetic is, uh, the scope of work is predictable, and hence your renovation cost and timelines are also predictable. Um, uh, these can be done in phases or parallel. So you could choose to just update your kitchen month one, and month eight, uh, you can do your bathroom. It doesn't have to all happen at the same time. You could also do it in parallel if you need a landscaping update and a kitchen update, both can happen simultaneously with two different contractors. Um, and then the lastly, um, th- they are the ones where your budget doesn't blow up overnight. Yeah. You don't find too many things that are a surprise, uh, because of how defined the scope is.

Christian: [5:20] Yep.

Varun: [5:20] So, um, a- and these are where you can create value, and fairly quickly, right? Yeah. These are shorter timelines, so you create value, you create value faster. Um, if a f- home feels dated, but things are in the right place, kitchen has a good flow, but has cabinets from the '40s, but everything is in its right place and you're not moving plumbing around, changing that around, that can add a lot of value.

Christian: [5:46] Yeah, adding new appliances and swapping out the old cream color or white ones- Yeah … or whatever for, for newer ones. Like

Varun: [5:52] that's, that's simple. Yeah, the, the blue pink ones. Yes,

Christian: [5:54] yes, yes.

Varun: [5:56] Um, and a- and those c- can be done without breaking the bank as well. Um, and so, uh, we'll talk about funding as well, but I do wanna say that- If you are able to scope out some of these cosmetic fixes during the home-buying process, there is a chance you might be able to get a rehab loan where the mortgage pays for some or all of your renovation costs, and it makes funding them easier. But we'll double-click into funding a little bit more, uh, later in the segment, uh, to talk a little bit more about how do you prepare for it.

Christian: [6:29] Yeah. Yeah.

Varun: [6:30] So this is cosmetic fixer, uh, fixers. Uh, Christian, let's talk about the heavy hitters.

Christian: [6:36] Yeah, the ones that can potentially open a giant can of worms. Uh, the ones that look like they're potential opportunities, but in the end can just be a nightmare where you lose sleep, your budget blows up, um, your timeline blows up. That's the stuff that we're trying to avoid. Yeah. So, uh, these include where you're moving walls, you're changing the layout. Um, like, you can always open up a wall, but if you're moving walls, that's a different category in my opinion. Yeah. Um, if you're moving plumbing, that's a big deal. Like, that's really expensive, and sometimes not even possible. Or if it is ex- uh, is possible, it can get real expensive real quick.

Varun: [7:18] Yeah.

Christian: [7:19] Uh, where you're adding square footage, like expanding the house, that's really expensive real quick, and it requires permits and all this timing. Um, if you're finishing off unfinished square footage, uh, that can also add up real quick depending on what exactly is going on. We'll go into that a little bit more. Um, converting a basement into livable square footage. It is a great opportunity if everything aligns.

Varun: [7:48] Yeah.

Christian: [7:48] And we'll talk about that a little bit more. Um, and then updating the major systems. So if all the electrical, all the plumbing, um, the heating system, everything, the roof, the siding, the windows, all of those things need to be updated-

Varun: [8:01] The sewer

Christian: [8:02] yeah, the sewer line. That can add up real quick. Yeah. Um, those are big costs that are often unforeseen. So, uh, that's where people really get into trouble, and that's what we're trying to avoid here. Because once you open up the walls, if you don't know what you're gonna find, you can really screw yourself over. Um, one thing, one thing that seems like it would fit into this category is actually building a detached unit, like a DADU.

Varun: [8:27] Yeah.

Christian: [8:28] And I actually disagree. I think that is easier than doing a remodel.

Varun: [8:33] Yeah, and especially in, in Seattle, that's where we are- Mm-hmm … based, right? So, um, Seattle has done a lot of work in making the permitting of these DADUs a lot more easier, faster. Mm-hmm. And there are, I think, enough contractors out there today, um- That specialize … that specialize- In building them … in just building these. Yeah. So, uh, it, it feels a lot more easier to manage new construction- Mm-hmm … in, especially a detached unit, new construction in the city of Seattle, than finishing out a existing home.

Christian: [9:04] Yeah, yeah. It's as easy as you f- hire a surveyor to map out the land, you hire an architect to design the building, and then you hire a contractor to build the building.

Varun: [9:14] Yeah.

Christian: [9:14] Like, it's really not that hard.

Varun: [9:16] Didn't we cover all of this

Christian: [9:17] in the podcast? We did. We covered it in episode 145.

Varun: [9:20] Yeah.

Christian: [9:20] So if you're thinking about potentially building something new, listen to episode 145, um, 'cause that's gonna go way in depth. We were- Way, way, way in depth on that episode. Yeah. So, yeah. We

Varun: [9:32] laid out essentially all the steps you need to take, all the team members you need for a new construction, how funding works, and so on and so forth. Yeah. So, yeah.

Christian: [9:39] Yeah. But I think that, like I said before, that is an easier route than… And something that's totally doable for people depending on their appetite and their comfortability with it. Um, but it's really not that hard, and I don't think that's, like, a deal breaker for, shouldn't be a deal breaker for a lot of people. Yeah. Mm-hmm. Um, okay, let's get back to the flipping. So here are some of the safe and manageable things that you could switch, and you kinda touched on these already. Yep. Updating an outdated kitchen. Uh, like, if the layout makes sense and you're not moving things around, like, you could move a fridge. If there's a water line, like, m- adding a water line or moving it over a few feet, that's not a super expensive plumbing thing. Right. Um, swapping where the electrical is isn't necessarily a super expensive thing, especially if you're already gonna replace the floor. Because if the electrical is in the flooring underneath and you're gonna replace the flooring, doesn't matter if you cut into the floor. Move some wires, move some water lines around. That's not super expensive. So that's one way you could update a kitchen. Um, just updating a bathroom. Like, if the floor plan- Yeah makes sense, you're not moving where the toilet is, you're not moving where the shower is, um, not moving the sink, but maybe adding a double sink, a double vanity versus just one. That's not a super expensive thing. Uh, the cosmetic wear and tear, just updating that. F- you know, patching walls, um, new paint, uh, maybe new drywall, maybe getting rid of the lath and plaster potentially if you need to. If it's really cracked and stuff, you can replace it. Dirty job and you know you're not gonna wanna do it yourself most likely, but you can get it done.

Varun: [11:21] Yeah.

Christian: [11:22] Um, swapping out these ugly finishes, lighting especially. That's a super easy one. Yeah. Lighting is so inexpensive now. Uh, you can buy all- we buy all our lighting basically on Amazon at this point.

Varun: [11:34] Yeah.

Christian: [11:34] Um, very inexpensive. And then cleaning up the yard. Like, landscaping is one of the least expensive ways to update the curb appeal, and it's- it makes such a huge difference.

Varun: [11:46] Yeah, yeah.

Christian: [11:46] Um…

Varun: [11:47] And just to touch on that, right? Yeah. Like, um, I- I've heard this again and again from multiple people, lighting is considered the jewelry of the house. Mm-hmm. And so just updating the lighting changes the look and feel of- Yeah … an existing house. Even if you don't end up updating everything else, just updating the lighting fixtures just changes how the house looks and feels, and just a fresh coat of paint.

Christian: [12:08] Yeah.

Varun: [12:09] It's-

Christian: [12:09] That- that- that much right there, and it can change the entire feel of the house.

Varun: [12:13] Agreed, yeah.

Christian: [12:13] It's crazy. And lighting can be, for each lighting fixture, it's like under $100 most of the time. Yeah. Like 50, 60 bucks, something like that. Yeah. Really not super expensive.

Varun: [12:23] Agreed.

Christian: [12:24] Things that you should proceed with caution when deciding to do them are, um, moving around an entire layout of the house. Not just a, a room, but moving the kitchen from one side to a different side, moving bathrooms around in the house. Um, making a small kitchen a much bigger one. It can be inexpensive depending on where you're gonna keep the plumbing and the electrical, but it can also be very expensive if you're moving everything around-

Varun: [12:52] Yeah

Christian: [12:52] uh, plumbing and electrical-wise. So, uh, homes that feel cramped or are really dark. If you're starting to add more windows in or deal with the exterior envelope of the house, um, that can snowball and get pretty expensive- Yeah … depending on where and how big those windows are gonna be. Um, and then basements- They they can really go either way. Like, if it's a low ceiling, I always just pass, 'cause it's just, it doesn't make sense. Yeah. You can theoretically dig out the basement and make them more livable, but it doesn't always make sense financially.

Varun: [13:30] Yeah.

Christian: [13:30] Um, also you have, a lot of times in the basement, that's where the furnace is, that's where the electrical panel is. In our area, they flood a lot. Um-

Varun: [13:40] Yeah … Speaker: and we'll, we'll go over this a little bit more, but- And then structurally- Yeah … most of the time when you touch the basement, then you have to think about do we have to do seismic retro strapping and those- Mm … kind of fun things.

Christian: [13:51] Mm-hmm. Yeah, and that's where you can really go down a rabbit hole and things can get expensive real quick. Yeah. So be careful of those things. And then deal breakers, major foundation issues. I'm talking like big ones. A crack here and there, little things like that, not a big deal, but I'm talking major foundation issues. Probably just walk away. Yeah. Uh, major water intrusion. Again, some foundation and small water intrusion issues, not a big deal, but I'm talking like we can't figure out how to stop the water from coming in. Com-

Varun: [14:21] yeah.

Christian: [14:22] Um, that's where it can become a big problem. Um, most basements- They were not built to be finished ever. Yeah. When they originally built them in the, you know, early 1900s, they did not think, "Oh, this is gonna be a rec room at one point, or a bedroom or a bathroom." It was, "This is storage and where the laundry's gonna be," if there even was a laundry back then. Right. So, um, and they weren't flat, they were sloped toward a drain. Like, they were literally built to flood. To … Varun: Yes. So, um, yeah. Your, your agent and the home inspector should be able to tell you if these are … If there is water intrusion, if it's a major deal or if it's something that's totally able to be remedied somewhat inexpensively.

Varun: [15:06] Right,

Christian: [15:06] right. Which sometimes they are. Um, a full electrical rewire or plumbing re-plumbing, um, that can add up real quick.

Varun: [15:15] Yeah. ' Speaker: Cause you're tearing into walls, then you gotta patch the walls, and that can be a big problem. Um, and then additions that require permitting, engineering, those are potential big deal breakers as well. Yeah. A- adding anything to an existing envelope is always, uh, a big undertaking.

Christian: [15:32] Yeah.

Varun: [15:33] A- a- and one thing I would say is, before we go onto the next section, is all of these are deal breakers for, for the most part, new homeowners or homeowners who are not comfortable with renovations. Yeah. There's a very small subset of homeowners that we know of-

Christian: [15:48] Yeah

Varun: [15:48] that might be comfortable taking on some or any of these projects.

Christian: [15:52] Yeah.

Varun: [15:52] And so we just wanna caveat that by saying if you do wanna take this on, please be aware of what you're getting into, and that's what we wanna shed some more light on.

Christian: [16:01] Yeah, exactly. Exactly. Yeah, they're not always bad deals, but they are bad deals for the right person. Yeah. Yeah.

Varun: [16:10] Nicely said, yes. Um, so, um, let's take … Let, let's talk about the type of properties that are easier versus harder to update, right? Mm-hmm. Like, there are some properties where, type of properties where you can easily update things. Mm-hmm. These are condos-

Christian: [16:25] Yeah … Varun: townhouses, ADUs. Um, uh, that are … So- Circling back, right? There are three types of properties usually that we see in our market is condos, townhouses, and ADUs, which I kind of, uh, bundle them together because they have shared walls, and then there are standalone single-family homes. Um, there are different complexities for each of them. Um, easiest ones are condos, right? Yeah. You, for the most part, don't have to worry about siding, roof, windows, because the condo associ- association will not allow you to move windows anywhere. Mm-hmm.

Varun: [16:58] All you're worried about are things that are within the walls, and also you're not changing layouts. Uh, in condos, the extent of your updates would be flooring, um, uh, cabinets, countertops.

Christian: [17:11] Yep.

Varun: [17:11] A- and light fixtures. That is it. Um, maybe finishing out the cabinets with nicer built-ins. Mm-hmm. But that's it. Yeah. Other than that, I don't think most condo association would allow you to do anything.

Christian: [17:22] No, you're not adding bathrooms, you're not moving plumbing, you can't do any of that stuff. Yeah. And even with flooring, if it's a hard surface, a lot of times with condos you have to get approval-

Varun: [17:32] Right,

Christian: [17:32] right … on that hard surface. Soundproofing and … Yeah. Because, yeah, there's soundproofing involved. If you're on the bottom floor, maybe it doesn't matter, but if you're anywhere else in the building, they often require you to do a test sample-

Varun: [17:44] Right

Christian: [17:45] and make you jump through all these hoops. So, um, yeah.

Varun: [17:48] But those are, but those are usually the easiest ones to upgrade. Yes. Um, and the scope is very well defined. Yep. You know what you're getting for, uh- Potentially what cost you're gonna put into it. Yeah. Uh, and, uh, more often than not, there will be a unit similar to yours that is updated so you can see what it looks like- Yeah beforehand.

Christian: [18:07] Those are simple, cosmetic. You really can't go big fixer on a condo.

Varun: [18:11] Right, right. E- Yeah … almost impossible to do that. Yeah,

Christian: [18:14] exactly.

Varun: [18:15] Uh, the next is townhomes and ADUs. Yeah. Uh, you have shared walls, so you gotta be aware about your neighbors. You n- kind of have to consider that. You have to deal with roof and siding now- Yep if you're doing some kind of updates like adding windows. But for the most part, townhomes are also recently built. Yeah. It's not a, a type of housing that existed back in 1900s or- Yeah … 1950s. And so the layouts are not going to change dramatically. You're not going to add a ton of bathrooms. Usually townhomes don't even have space for additional bathrooms. No. And so all of these updates, again, you're not moving walls, you're not moving electrical and plumbing. You are, for the most part, doing the same things that you would do in a condo. Yeah. Uh, countertops, count- countertops, cabinets, flooring, and that's about it.

Christian: [19:01] Yeah. You just gotta deal, if you're gonna deal with the exterior of a townhouse or an ADU, a lot of times there are bylaws, like rules, that stipulate how you can do it. So if you have shared walls with someone, there are, again, rules that say, "Hey, you can't paint your unit a different color. Both units have to be the same color- Right … and the same style siding. And the roof, um, you know, same thing. You have to replace the whole roof at the same time. You can't just do one half or something like that. Right. So- Yeah, but- … you do have to get approval on that … Varun: outside of those couple of nuances, I think- Yeah … for the most part, you should be able to… I- inside the walls, it's- It's up to

Varun: [19:40] you … it's up to you. Free

Christian: [19:41] rein.

Varun: [19:41] Yeah. Um, but, uh, when you're doing exterior changes and if it's a community, you need to definitely go through a approval process there. Uh, and then- And

Christian: [19:49] it's usually very simple to get approval, too.

Varun: [19:51] Yeah, m- most people are- Yeah … easier to kind of deal with and manage. Yeah. Um, and then the most intense, obviously, is a single-family home. Mm. Everything is… You can update anything and everything you want to, but that also means it can quickly balloon up into this laundry list of updates and a huge time suck and, uh, a cost. So you just wanna be aware of- Uh, uh, what you're taking on within the, within the, within a single family home.

Christian: [20:23] Yeah. All right, so let's go over what improvements actually make you the most money, meaning the most equity. Um, because they're not all created equal. So the best return on your investment for a remodel are kitchens and bathrooms. I'm sure you've heard that. That's what everyone has always said because it's true. So kitchens, they're the heart of the home. Um, you can take a small closed-off outdated kitchen and make it feel open by removing a wall. Now, when you remove a wall, everyone's like, "Well, can I get rid of this wall?" Yes, but the but is usually there's often a structural beam that is helping to hold up the load of the ceiling, the roof, the next level above, whatever it is. Yeah. If you have to remove that beam- Mm … then you have to re-engineer things to, to handle a load, the weight that is above. Right. If you just keep that beam in place, it's fine. You can open up the rest of it. You can make a cool arch or something in between. Like, there's different ways to do it, where you open up the wall, but you don't remove everything- Yeah and you keep that beam. So

Varun: [21:32] that's something you can do. We- we've seen where, uh, people have left… In order to not trigger any structural changes, they've left a post in a corner of an island where it doesn't seem intrusive. Yep. Ties in with the space anyways. But now instead of having a wall, they have an island with a post, which is still a lot more functional and open- Yeah than having a wall, uh, between the dining and the, uh, kitchen. So think about creative ways to, uh, keep the structure of the home as it is. Keep one or two post and work around it. Yep. That way you're not kind of triggering a lot of different things.

Christian: [22:07] Yeah, exactly. When it comes to bathrooms, people want something, uh, most people want something that feels kind of like a spa. Like you're walking in and you feel like, "Ah, this is nice." Not like, "Ew, this is grungy-

Varun: [22:20] Yeah … Speaker: and old, and the, the caulking's all gross and moldy," and stuff like that. No, you want something clean, modern generally, um, newer, and just bright. Uh, you also want it warm. Like having heating in a bathroom, one, is a requirement, but two, if you can do heated floors, that's a huge plus. Most buyers love that. Yeah. Um, taking a single sink and making it a double sink, that's usually huge. Mm-hmm. Especially for like a primary bathroom. Um, having a nice walk-in shower, especially in a primary bathroom, that's huge. Um, and just making sure it's clean, bright, and updated, which again, is not a very expensive thing to do- Yeah if you're just keeping all the plumbing in the same spot. Yeah.

Christian: [23:05] Another one is adding an additional bathroom. Now- The caveat here is this isn't always a huge undertaking, but it sometimes is. The time where we think that you can actually find a lot of value in a house is when you s- take a smaller house, around 1,000 square feet, probably usually built in the '40s, '50s, '60s, these two bed, one bath, three bed, one bath homes. If you can see that there is space to take it from a one bath to at least a one and a half bath, uh, so just a toilet and a sink, you're going to increase your buyer pool when you go to resell that house by a lot. 'Cause most people now, they want at least two toilets.

Varun: [23:47] Yeah.

Christian: [23:48] So if there is space, so let's say this is the back wall of a bathroom right now, and the toilet and sink are generally on the same wall or maybe the shower and the toilet's on the same wall. Either way, they're right there. The plumbing's on one wall. If you can add a bathroom to either side of those walls very easily with not, without, like, taking away a bathro- or a bedroom, um, you can really increase the value of the home pretty simply. Yeah. So a lot of times there's a laundry room or, like, a hallway leading to the exterior with laundry next to this bathroom. I've seen that in so many houses. If you get rid of that door to the exterior Make it into a half bath with a laundry room or something like that. You can really increase the value. You're not moving the plumbing a ton, because you're just- you're on the wall that already has all the plumbing. Um, and so for pretty inexpensive, you can often add at least- Yeah a half bath.

Varun: [24:45] In a lot of the older homes, what, uh, I've come across is there are usually multiple linen closets, because back in the day- Yeah … they built these linen closets in the hallways. Yep. So if you can delete those linen closets and essentially just create a mirror bathroom-

Christian: [24:59] Yeah … Varun: that would add a lot more value. Half bath or a quarter bath. Three-quarter bath, yeah.

Varun: [25:04] Right. A three-quarter bath, sorry. Yeah. That- that would add a lot more value, uh, to the home. But again, be cognizant about where your plumbing is, because moving plumbing can get real expensive real fast. Yeah. So if it's on the same wall, just mirroring that layout- Yep will add tons more value.

Christian: [25:20] Yeah, for pretty inexpensive too.

Varun: [25:22] Yeah.

Christian: [25:22] Uh, another one is layout improvements. So if you can, we talked about moving or removing walls. If you can do that in a way where you're not having to redo the beams, that's where you can really open up a space, make it feel much bigger, much more open, um, and not have to get, uh, a very big permit that takes a long time to get from the city. Yeah. Um, if, in Seattle at least, if the span is under 14 feet, you can get an over-the-counter permit versus if it's under 14 or over 14 feet, then you have to get a much bigger permit that takes way more time. So-

Varun: [26:03] Yeah … Speaker: if your span in Seattle is under 14 feet, you can get, just get an over-the-counter, very quick to get permit, um, to open up some walls and kind of redo the structure. Um-

Christian: [26:12] Yeah.

Varun: [26:13] Yeah. Just be careful because, again, um, I think, uh, most of you have heard this over and over again. You don't know what you'll find behind the walls. So- Yeah … be careful about that. Uh, hire good contractors. They'll be able to tell you and guide you. Mm-hmm. Um, but, uh, yeah, you don't wanna create, uh, or you don't wanna kind of get into a situation where you need now a structural engineer to come in and- Yeah stamp your plans and do all of that stuff. Mm-hmm. Um, a- and that's kind of what Christian is alluding to. What we had.

Christian: [26:39] Yeah. Yep. All right, let's go over funding, permitting, we kind of talked about that, and then also the construction management side of things.

Varun: [26:47] Yeah, yeah. A- and these are kind of, I would say, the non-glamorous things of, uh-

Christian: [26:52] Not at all

Varun: [26:53] of the- They're not glamorous … of the whole process. Yeah. But these are, I feel, the foundation of the process. Like, you need to have these things in place before you can think about doing any renovations. Let's talk about funding first. Um, uh, we talked about trying to get a loan that pays for some or all of your, uh, rehab. These are rehab loans, very common. You- Purchase a home which includes, uh, funding for rehabs. But considering closing timelines and time it requires to scope out a project, vet different contractors, you might not be ready-

Christian: [27:28] Yeah … Varun: with the full scope of the project, and you might have to close on the house before you're ready. So if you are very organized and you have a longer closing, then you might be able to get a rehab loan. But it is safer for you to plan to have all of the funds needed, plus some contingency for budget, uh, uh, uh, budget overruns, uh, uh, in your pocket when you close on the home for the renovations. Yeah. Uh, that'll make sure that you don't have unfinished projects. And once you're done with all the renovations and you've paid for it, there's always an opportunity for, for you to go back and refinance the loan- Yeah … because now you've added a ton of equity, which means you can refinance at a higher value. Mm-hmm. Pull out some or all of the f- C- um, money that you put into the renovations. Uh, option two is create a, a home equity line of credit- Yep … where you pay yourself back and use some of that equity to pull money out and keeping the original loan in its place. Yeah. So- For example, if you spent $75,000 doing all these remodels but you increased your property's value by $200,000, which seems very doable, um, you could then theoretically get that $75,000 back out and still have equity left over in your home.

Varun: [28:47] Right.

Christian: [28:47] Right. Um, and that's where, again, you could refinance your entire loan or pull out a home equity line of credit to access that if you needed it.

Varun: [28:55] Right. Right. But again, from a funding standpoint, always safe to have those funds in hand so that you can complete the renovations you need to, uh, without having to depend on the rehab loan. Yeah. Um, second-

Christian: [29:10] I'll, I'll add in real quick- Yeah … too, um, if you are planning to buy a cosmetic fixer or even a big, big fixer, um, and you're planning to pay out of pocket for these repairs- Probably smart to do a lower down payment and have a little bit added cushion cash-wise- That's smart … in your pocket at closing- Yeah versus sinking it all into the house. Um, yes, your monthly payment's gonna go up a little bit, um, but you're gonna have more cash in your pocket because as we'll go over in a little bit, there's a lot of decisions to be made during this process. When you make these decisions, a lot of times you're choosing to spend more money.

Varun: [29:52] Yeah. Uh, most homeowners will, yeah- Yes … err on the side of picking nicer things- Yes … nicer finishes, nicer tile, and that all costs.

Christian: [30:01] Yep, exactly.

Varun: [30:02] Um-

Christian: [30:02] So just wanted to throw that in there.

Varun: [30:03] Uh, so that- that's a great point about down payments, so just keep that in mind. Mm-hmm. Um, and then the next thing you wanna talk about is permits, right? Yeah. We always recommend pulling permits for all of your projects- Mm-hmm … irrespective of the scope, from- Yeah … smallest of projects to the largest of ones. Uh, the reason for that is, uh, when you do go to sell a house, you need to disclose all the work performed to that house, whether it's permitted or not. Having those permitted projects helps you with creating value in that listing, showing that you did everything by the book. Yeah. It protects the largest purchase you're gonna make in your life. Y- you have some legal protections when you've done the permitting because you have a third party, like a city or a county, checking the work of your contractor, so it's not on you to make sure they're doing everything correctly.

Christian: [30:55] Yeah.

Varun: [30:55] And you might not even know how to check for it. How would

Christian: [30:57] you know if you've never done this before? Like-

Varun: [30:58] Right, exactly. And so always, we recommend always, always pull permits. It might add a little bit of time to your whole project- Mm-hmm … but it adds a lot more peace of mind. Um, and then lastly- Mm which is I think a very important piece, is the team. Uh, usually, you'll need some or all of these following trades, right? Yeah. You'll need an architect, um, a contractor, and potentially a designer if you don't wanna pick finishes, uh, or you're bad at picking finishes like I am. So you would need a designer who can actually design the house based on what your preferences are and what's in style right now, or it's, or it's timeless, whatever your preference is. Um, but when you're picking any of these team members, you wanna make sure you vet them- Yeah … go through an interview process, um, ask for past client referrals, ask your real estate agent for, uh, trusted recommendations. Um, tho- those will help you get a jumpstart. Um, picking these team members will feel like dating. Yeah. You need to meet, meet a few people before you find the right fit. Yeah. But that's the essential part of the process because this is where it'll be a make or break. If either of these, uh, folks slip up or make a mistake, you are the one who's bearing the burden of the cost overrun or the timeline.

Christian: [32:17] Yep. Okay, let's, let's answer the big question. Do these fixes actually help make you more money? And the answer is most likely yes- Yeah … if you do it right.

Varun: [32:32] Yes.

Christian: [32:33] And that's where, like, if you don't do it right, um, you can really get screwed.

Varun: [32:37] Yeah. So when we say do it right is you have to buy it at the right price- Mm-hmm add the right improvements, and then you have to manage your cost and timeline. All of these three, uh, are not always the easiest things to do. Mm-hmm. And so be cognizant that you're keeping this in mind. Um, you can create a lot of equity by doing renovations small or big. Uh, uh, but you kind of have to understand the project, make sure you're not underestimating your costs, um, because once you start going down that route, the margins can disappear very quickly, and now you're in the hole.

Christian: [33:14] Yeah. Let's go over some of the things that you really need to think about upfront bef- to help you decide if you really wanna do this. So you need to realize first that there is a big financial reality- Yeah … to all of this. Um, it's probably gonna cost more than you think, gonna take longer than you think, and you need to add a buffer for both timeline and budget into your thought process. Right. Um, are you planning to live in the house while you're doing these projects, or are you gonna be moving out and now paying both a mortgage and rent? So that's something to figure out. Um, if you are gonna live in it, you're, you gotta strategically figure out how you're gonna do it, 'cause there's gonna be times that the plumbing is gonna have to be turned off and the electrical is gonna have to be turned off. So if you work from home, that's not gonna work very well- Right … if you're home all day. If you're gone all day, and you just come home in the evening and they're already done with their work for the day, and they can turn everything back on, maybe that's something you're willing to deal with.

Varun: [34:16] Yeah.

Christian: [34:17] Um-

Varun: [34:18] But there will be a lot of dust.

Christian: [34:19] There's gonna be a lot of dust. A lot of noise, yeah. Uh, yeah. And so containing that is a possibility. You just need to plan ahead. So, um, and then another one is stress and relationships. This is a huge one. Uh, renovations definitely test relationships. There is no question about that. Um, there's a lot of decisions to be made. Um, budget conversations are a daily occurrence. Like, if you're deciding versus, you know, initially you had planned to do a $30 light fixture, and now your partner wants to do this $200 light fixture 'cause they like it better, uh, okay. Well, you do that for 10 different decisions in a day-

Varun: [35:01] Yeah … Speaker: that adds up real quick. And you add that up over all the conversations and all the decisions that you have to make throughout this entire project, and, um, now you've just ballooned your budget big time. Yeah.

Christian: [35:14] Um, and then timeline frustrations. There are always delays, and they can mount. Sometimes they're your fault, and they're gonna be your fault because you're not making your decisions quickly enough.

Varun: [35:26] Right

Christian: [35:28] Another thing is decision fatigue is real. Decision fatigue happens. When you're doing a remodel, you're making so many de- so many decisions on what exact faucet you're gonna do, and countertop, and cabinets, and flooring, and grout color, and paint color, and all these things, and after a while you're just worn out and you're tired.

Varun: [35:51] Yeah. So- It could be as simple as, hey, where do you want the cabinet, and where do you want the island? How many feet from the countertop? Like, it's, it's a lot of small and big decisions. Where do

Christian: [36:00] you want the light switch for this light?

Varun: [36:02] Right. Like, that's a… Yeah, you have to do an electrical walkthrough. Yeah. Yeah.

Christian: [36:07] Yeah, so you, if you have a partner, you need to be aligned, and you need to realize that there are going to be a lot of decisions that need to be made, and you're gonna disagree on some of them, and you need to, um, just be open to working on your relationship during this process. Uh, another one is what can your personality handle, and do you have the bandwidth for taking on something like this? Yeah. Are you someone that makes decisions quickly or takes forever? Do you have to do a ton of research before you make every decision? I used to be like that on some things, and now I've just given up and I'm like, "That looks great. Let's go with that." 'Cause I realized it took… I was the bottleneck slowing everything down.

Varun: [36:51] Yeah.

Christian: [36:52] Um, can you handle uncertainty? Like Varun said, you open up a wall, you don't know what's behind that wall or within that wall sometimes, most times. And when you do open it up, you're gonna go, "Oh, crap, we didn't realize that a vent pipe for the sewer line goes through here."

Varun: [37:10] Yeah.

Christian: [37:10] Okay. Well, now we need to pay to reroute this vent pipe. How are we gonna solve this problem? There's a lot of problem-solving involved with this.

Varun: [37:20] Yeah.

Christian: [37:20] Um- P- And then can you manage projects and people? 'Cause that's a big part of this as well. Or do you just want something move-in ready and forget about all of this ? Varun: Yeah, that- And s- and that's the big thing is like d- d- know what you're walking into, and that's the whole point of this whole episode is educating you on what it takes to do a, a, a- Remodel

Varun: [37:43] remodel- Or whatever … or m- m- live-in flip or whatever you wanna call it. But, uh- Yeah … uh, you wanna be ready for it, um, and at least have some understanding of what it takes to do a remodel- Mm-hmm … so that you are educated enough to make that decision when the time comes. Yeah. Um, so here's the bottom line. Um, do fixers make money? Absolutely they do. Yeah. There's no question about that. They will make money. Uh, but you require the right deal, the right plan, and the right mindset. If you have all of those, then you can absolutely buy a fixer. We would recommend for first-time home buyers, even second-time home buyers as well, um, buy a cosmetic or a light fixture- Yeah fix fixer. Heavier fixers are usually a lot more difficult on homeowners than- Mm-hmm … and we've seen that over and over again. Yeah. Um, if you're trying to figure this out- Come talk to us. Yeah. We help clients figure this out every day. Mm-hmm. We do it ourselves. We are investors. We flip homes- Mm-hmm … in Seattle, so we know what it takes, and we can identify problems early on in the process, uh, and help you navigate the, the, the project scope or what you need to do versus what you can avoid.

Christian: [39:00] Yeah. Yeah, our team is a little unique, and by team I mean the Awesome Nossum group. We're a little unique as real estate brokers, agents, whatever you wanna call us, um, because we actually do this ourselves. Yeah. And most agents don't. Um, and so leaning on us for this expertise if you're taking something like this on is going to make it a lot less heavy and burdensome for you, and it doesn't cost you anything more.

Varun: [39:28] Yeah.

Christian: [39:28] So you might as well choose someone that can help you during this process. Um, if you're still after hearing all of this thinking that you might wanna take on something like this, schedule a strategy session with us and we can kinda walk you through personally one-on-one how this would work and what to look for and what to stay away from, um, based on your budget and the neighborhoods you wanna be in, and the type of project that you're willing to take on. Sure. So their strategy sessions are completely free. There is no obligation to actually use us at that point. Um, it's just a conversation to see if we're a good fit for each other. Um, and r- we actually turn people away as well. It's gotta be a two-way street here- Yeah … where we wanna work with you and you wanna work with us, and, um, and it, it's, it's a cohesive plan at that point. Right. So you can schedule those right on our website AwesomeNossumGroup.com. It'll be in the show notes. Um, and, uh, and yeah, that's it for this episode. Is there any last-minute things you wanna throw in there, Varun?

Varun: [40:34] No, I would say just, uh, make sure you know what you're getting into. Yeah. Um, I know if I, I… While I flip homes, I know I would prefer to have a move-in ready home so that I don't have to lift a finger. No, yeah. But I also see the flip side of that coin on creating equity and- Yeah … long-term wealth. Uh, so just, but go in with eyes wide open.

Christian: [40:57] Yes, yeah. It's not for everyone. If it is right for you, go in with your eyes wide open so that you do understand what you're getting yourself into, and if you're getting a cosmetic fixer or a big fixer. That's really the deciding factor h- here, and figuring out which one it is that you're actually buying. Um- Cosmetic fixer is way easier Absolutely Way, way, way easier. Absolutely.

Varun: [41:22] Yeah.

Christian: [41:22] So we recommend that for most people, unless you're experienced and you wanna take on something bigger. Um, otherwise, just try to find a cosmetic fixer, and we can help you identify those, uh, as you go through this process. So that's it for this episode of the Awesome in Seattle Podcast. Hope you had a good time learning all of this. Again, if you have questions, just reach out to us. Um, and other than that, we'll see you next time. Bye.

Varun: [41:48] Yeah, bye.