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Serving families by providing affordable housing to build strong communities

Finding Properties With Equity or Create Equity

Forget “Finding” a Great Deal!  “Make” a Great Deal!

There are many times where you just cannot find a “distressed” property or are unable to negotiate a low enough offer to buy a house with equity.  In these situations, you must be able to figure out how to create your own equity or “make your own deal”.  

Sometimes, you just have to create your own strategy.  Before implementing this new strategy, research your local construction costs, mainly in the realm of building additions, such as adding a new family room, bedroom, bathroom, etc.  

So, let’s explore the following scenario.  The proposal is that we intend to create equity in a property in order to make it a profitable investment.  

Project

Job Cost

Resale Value

Cost Recouped

Attic Bedroom

$51,696

$39,908

77.20%

Backup Power Generator

$12,135

$7,263

59.89%

Basement Remodel

$65,442

$47,637

72.79%

Bathroom Addition

$39,578

$22,875

57.79%

Bathroom Remodel

$16,724

$11,707

70.00%

Deck Addition (composite)

$15,912

$10,816

68.00%

Deck Addition (wood)

$10,048

$8,085

80.50%

Entry Door Replacement (fiberglass)

$2,926

$2,107

72.00%

Entry Door Replacement (steel)

$1,230

$1,252

101.79%

Family Room Addition

$84,201

$53,955

64.09%

Garage Addition

$52,382

$33,938

64.79%

Garage Door Replacement

$1,595

$1,410

88.40%

Home Office Remodel

$29,066

$14,155

48.69%

Major Kitchen Remodel

$56,768

$38,485

67.80%

Manufactured Stone Veneer

$7,150

$6,594

92.20%

Master Suite Addition

$111,245

$68,596

61.70%

Minor Kitchen Remodel

$19,226

$15,255

79.29%

Roofing Replacement

$19,528

$13,975

7.16%

Siding Replacement (vinyl)

$12,013

$9,694

80.70%

Sunroom Addition

$75,726

$36,704

48.50%

Two-Story Addition

$161,925

$103,848

64.09%

Window Replacement (vinyl)

$11,198

$8,163

72.89%

Window Replacement (wood)

$11,341

$8,937

78.79%

First, research a certain zip code or local area.  Let’s say the analysis calculates the cost of a house (purchase price) in that area as $200 per square foot.  The best target area, is an area that may be an up and coming area.  Now, target your direct marketing letters to residences that are 2 bedroom and 1 bath style.  The intention here is that you can make a nearly full price offer for their home BUT your plan is to “CREATE EQUITY” after purchase.

If the cost of construction can be managed at $100 per square foot, to add a family room, bedroom, bathroom (maybe a “true” master suite) that will retail at $200 per square foot.  Adding another 1000 square feet to a 1350 square foot house will push the retail value of the home by over $200,000!  This strategy works really well in older neighborhoods with large lots.

Midrange 2015 National Averages:

Lunarpages Internet Solutions

Upscale 2015 National Averages:

Project

Job Cost

Resale Value

Cost Recouped

Bathroom Addition

$76,429

$44,750

58.59%

Bathroom Remodel

$54,115

$32,385

59.79%

Deck Addition (composite)

$36,385

$21,437

58.89%

Garage Addition

$85,592

$46,791

54.70%

Garage Door Replacement

$2,944

$2,429

82.50%

Grand Entrance (fiberglass)

$7,548

$5,099

67.60%

Major Kitchen Remodel

$113,097

$66,747

59.00%

Master Suite Addition

$236,363

$126,860

53.70%

Roofing Replacement

$36,329

$22,840

62.89%

Siding Replacement (fiber-cement)

$14,014

$11,816

84.29%

Siding Replacement (foam-backed vinyl)

$15,184

$11,790

77.60%

Window Replacement (vinyl)

$13,837

$10,365

74.90%

Window Replacement (wood)

$17,422

$12,533

71.89%

Upgrading a property may sound appealing, but is it an enhancement that provides a good return for the money or is it a negative investment providing a return somewhere else?  The following 2015 Cost vs. Value Report by Remodeling Magazine provides some insight to the age old question.  


Please remember, these are national averages and not everyone is a project manager.

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