Renovating & Restyling Older Homes
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Introduction | Table of Contents | Back Cover

Chapter One
Maximum Value Remodeling

I've looked at just about every book on the market on the subject of remodeling. I've found they fall into two types. One is the "do-it-yourself" book. These give you detailed instructions on how to spend all day repairing something you could have replaced for $2. The other type of book is for contractors and building professionals. They tell you to rip out fixtures worth thousands of dollars, and toss them in the trash. "Why should you care?" they say. "It's the homeowner's money, not yours!" That's fine if the homeowner is rich and doesn't care about cost. But most of the people I deal with do care. They want to get the best value for their money. They can't afford to toss valuable items in the trash.

My objective in writing this book is to offer contractors with small remodeling businesses, or even homeowners who want to do some remodeling or repairing themselves, alternative approaches to remodeling or renovating older homes. By older home, I mean any home built before 1930. I feel that a home built after 1930 is essentially modern, and doesn't need the special attention to detail that earlier homes need. My work is based on common sense, and dollar-for-dollar value on what you do and what you get. I also have a great admiration for the quality and the beauty that went into building homes 75 or 100 years ago. I don't like the idea of throwing away the past just because it's old. Restoring older homes to their original beauty gives me a great sense of satisfaction. Not only am I preserving the past, but every item I save is one less item that ends up in the dump to clutter up our future.

This book is also an ideal guide for those considering the purchase of an older home. If you're a buyer, take it along and use it to help recognize potential problems. Old homes can be very deceptive if you don't know what you're looking at. Some things that are relatively simple to repair may look like they'll cost a fortune, while other truly costly repairs can be hiding behind old wallpaper or paneling. Use this book to help you determine which is which. Knowing what to look for and where to look for it will help you come up with an accurate price when making an offer on the house. Not only will I point out situations that you want to avoid, but I'll tell you how to identify items of particular quality that add to the value of an older home.

For the most part, this book deals with recognizing the potential value in the older home and tells how to use sensible repair, remodeling and renovation techniques to bring out that potential. The best way for anyone to get maximum value for their remodeling dollar is to take a balanced, reasonable approach. My recommendation: Don't waste time on items that are cheap; just replace them. Items that are valuable, on the other hand, should be repaired, not thrown away. Throughout this book, we'll discuss which items fall into which category, and the most cost-effective way to deal with them. I'll tell you about the common problems you're likely to come across while working on older homes, how to handle them, and what it's likely to cost you to correct them, both in materials and in labor.

We'll also discuss the options that the small professional remodeler can offer homeowners, especially those choices that will give owners working with a modest budget the most "bang for their buck." This is something you won't find in many other books. And, even though I'm writing for the remodeling professional, there is plenty of information here for the buyer, the homeowner, the handyman, and the tradesperson who wants to expand into the remodeling business as well.

Why Older Homes?

Remodeling an older home can be both rewarding and challenging. If you're used to working only on newer homes, you may not be familiar with many of the unique features or special problems that you're likely to run into when working on an older house. This book will give you an idea of the types of things you'll find, and help prepare you to deal with them.

Many people have negative attitudes about working on older homes. They think these houses are a lot of trouble, and not worth their bother. That's too bad, because many older homes contain features such as oak woodwork, hand-carved detailing or elaborate decorations that you rarely find in newer homes. The beautiful woodwork and detail of the stairwell and hall that you see in Figure 1-1 is an example of the exceptional workmanship that went into many older homes. Some details that were once commonplace can now only be found as luxury items on houses built today - and then only on homes selling in the million-dollar-and-up category! You'll never see them in an average house - they're way too expensive. Yet in the old days, ordinary people enjoyed the kinds of features that only millionaires can afford now. If you can preserve these features, you're performing two very valuable services. You're giving the homeowners something they wouldn't otherwise be able to afford, and you're saving a piece of history for future generations.

A Simpler Time

Older homes have a special feeling about them that few modern homes can equal. There's a quiet graciousness, even in the smaller homes, that cannot be duplicated today. Figure 1-2 shows the beautiful tile and woodwork around a bedroom fireplace that I found in one small home I worked on. This home also had hardwood floors and detailed moldings throughout. Homes like this one were built with care. They were built for a calmer time and a more relaxed, slower-paced lifestyle.

Standing on the street and looking at one of these older homes, you can get a feeling of what life must have been like for the people who first lived there. Many homes have wide, spacious covered front porches where friends and neighbors gathered to socialize on long summer evenings. Families spent more time at home. They ate big dinners together in their formal dining rooms, had guests over for tea on Sunday in their parlors, and spent cozy evenings reading or telling stories around the fireplaces. This is the kind of life these houses were built for, and it's clearly reflected in their design. Figures 1-3 and 1-4 show the characteristic charm you find in well-maintained older homes. As you can see, some homes are much more elaborate than others, but they are all distinctive in their own ways.

Of course, this kind of lifestyle doesn't appeal to everyone. If you crave action and excitement, the modern style homes are probably more to your taste, both for living and for working. However, for many of today's overworked and stressed-out people, an older home offers a quiet, peaceful retreat into a different world. Those who yearn for a simpler lifestyle love old homes. To them, these houses aren't just a place to live, they're part of a way of life. It's important to understand this if you intend to work on older homes. The work you do should always be in keeping with the spirit of the house.

That doesn't mean that the homeowner won't want modern conveniences. Even though an antique house is charming, nobody really wants to duplicate life in the 1890s (or even 1920s). If you've ever tried it, you'll know that cooking dinner on a wood-burning stove gets old real fast. A kitchen and bath with modern equipment is a must. But not all of the old features need to be removed. Some are still useful, or at least decorative. Which should be saved and which should be torn out? And how can you add modern conveniences without destroying the beauty of the house? These are the real challenges. The most difficult aspect of remodeling the older home is adapting it to modern lifestyles.

Older Homes and the Community

The atmosphere created in a neighborhood of well-maintained older homes is so important to the communities that some have enacted zoning ordinances requiring that all building must be in keeping with the style of the existing buildings. This has forced people who wanted new homes in those areas to build replicas of older homes. The idea is that it's okay if it isn't old, as long as it looks old. This can be done, but it's very expensive. Old-time craftsmanship doesn't come cheap today. The home in Figure 1-5 is a new home built to blend with the style of the historic district in which it was built. Notice the narrow windows, roof accents and gingerbread porch rails. These are all typical of Victorian architecture.

Older homes are so desirable in some areas of the country that many new subdivisions are being built in older styles, such as the Victorian style of the 1890s, or the Craftsman style of the 1920s. Some subdivisions are even attempting to replicate complete towns, right down to the old-fashioned downtown with its main street. Many homes in these subdivisions are very nice, but they're not quite the same as a genuine older home.

With the costs of new homes soaring and the demand for older homes increasing, doesn't remodeling older homes make a lot of sense? In Europe, people live in houses that were built a thousand years ago. A 200-year-old house is considered "new." Our older homes were built as well as theirs. They can last for centuries too, if they're properly maintained. Houses that have been around a long time may have a lot of things that are worn out. Other items may not be worn or broken, but may be obsolete. Still others may be entirely usable, but not in keeping with modern lifestyles. That doesn't mean you should tear down the whole house and start over. All of these problems can be dealt with. Yes, it can be a lot of work; but you're not just fixing up a run-down old house, you're restoring a treasure!

Gaining Homeowner Trust

When it comes to remodeling, the homeowner will consider you the expert, and look to you for advice. You might tell him, for example, "It's going to cost $300 each to replace your windows." And he may answer, "Gee, I don't know if I should spend that much. Maybe I'd be better off doing something else with the money?"

What that customer really wants is for you to sit down and discuss the options with him. He wants advice, not just a price quote. Do his windows really need to be replaced, or can they be repaired? Is this a good place to put his money, or would he get more for his money with some other improvement? If you can discuss this intelligently with the homeowner, letting him know what options he has and what each will cost, you'll win his trust. Trust, according to a survey by Remodeling magazine, is absolutely the number one factor in getting jobs. It's more important than speed, service, or even price. More than any­thing else, homeowners want to hire someone they trust.

Emphasizing Resale Value

It's worth taking a moment to consider what effect remodeling has on resale value. This is a subject that's very important to me because I make my living buying and renovating houses for resale. If I don't increase their resale value, I don't eat. (I discuss this in detail in my book Profits in Buying & Renovating Homes, also published by Craftsman Books.)

Resale value should also be important to the homeowners that you'll be working with, though they may not be thinking about it at the time they're considering remodeling. They may be planning to live in that house the rest of their lives. However, what they plan to do and what they will actually do is often quite different. They may get transferred to another part of the country and have to sell the house, whether they've planned on it or not. Most homeowners are aware of the possibility that they may have to move someday. It might just be a dim worry in the back of their mind, but it's there, along with all their other worries.

You can make this worry work for you by showing homeowners that remodeling can raise the value of their home. It isn't just an expense, it's an investment, like putting money in the bank. The added value will be there any time they need to draw on it. You'll find it easier to sell jobs if you discuss this with the homeowner. Most people worry about spending large amounts of money. I'm one of them. However, you can make the point that since the money is invested, not spent, it isn't really gone. It's just taken another form. Instead of cash, it's now in the form of increased property value, or equity. It's there, like money in the bank, and it can be recovered if necessary. This will usually make homeowners feel a lot better about the entire project.

It's possible for homeowners to "withdraw" this money without having to sell the house. Home-equity loans allow owners to borrow on the value of their property. The more it's worth, the more they can borrow. Work that increases the value of a house will increase the amount they can borrow as well. Most homeowners appreciate this advice. However, they don't really know what items will increase the value of a house and what won't. They expect you to know this. As far as they're concerned, you know everything there is to know about houses.

In order for you to retain the trust that homeowners have placed in you, concentrate on jobs that really do enhance value. Preserve beautiful features - don't destroy them. Avoid weird, quirky modifications that a future buyer will hate. Don't use bizarre colors and styles. Throughout this book, I'll identify work you can do that will raise property values, and point out the bad ideas that will lower them.

Of course, if the homeowner insists on making changes you know will detract from the home's value and you can't dissuade him, you'll have to go along with him. But let's face it, money spent this way is not an investment - it's money gone forever. No future buyer will pay extra for odd modifications. Such changes actually lower the value of the house, because another owner will have to spend money to tear them out. Modifications that fall into this category are pass-through bedrooms or other poorly-thought-out additions that create layout problems, strange color combinations, and odd wall paneling materials such as mirror or cork.

Other modifications that will not add to the value of the home, but that you may be hired to make, are handicap access ramps, extra wide doorways for wheelchairs or lowered countertops. The homeowners wouldn't put money into these changes unless they needed them, but unless they sell to someone with the same need, they will never recover the remodeling expense. For the most part however, homeowners in this position are more interested in improving their lifestyles than adding extra value to their home.

Offering Good Value to Your Customers

What you should try to do is give your customers good value for their remodeling dollar, without cutting your profit margins! I call this "maximum value remodeling." This is something a lot of remodelers don't understand. They think they can get more jobs by offering exactly the same services as everyone else, but for less money. This doesn't work. You need at least a 50 percent markup if you want to survive in the remodeling business. If you try to undercut the competition by cutting your profit margin, you'll eventually go broke.

Instead of trying to undercut prices on the same services, why not offer better services for the same price? If you can offer customers a better, cheaper solution to their remodeling problems, and give them better value for their money, without cutting your profits, you'll get the job every time. In fact, in many cases you'll be able to increase your profit margins and still save the homeowner money!

You can do this by focusing on the jobs that give the customer the best return on his dollar - the ones that make the biggest improvements for the least cost. Instead of just trying to do the most work, concentrate on doing the best work. When you're done, you'll have a satisfied customer who really feels like he got a lot for his money. Your competitors may leave their customers feeling like they got what they paid for, but your customers will feel they got more than they paid for. Customers like this will want you to come back and do more work for them. They'll brag to their friends about what a great deal they got, and that will generate more work for you.

How do you do this? Here's an example. According to Remodeling magazine, the average bath remodel costs $7,207 and recoups 85 percent of its cost. This means the job adds about $6,125 to the value of the house (85 percent of $7,207 is $6,125). What if you could do a similar job for $3,000? It would still add $6,125 to the value of the house, but your return would be 200 percent, not 85 percent. This is the secret of "maximum value remodeling." If you can figure out a way to do an equivalent or better job for much less money, there'll be a lot more profit in it for everyone involved.

In this book, we'll explore every possible way to get the maximum effect for the minimum cost. We'll carefully go through all the alternatives, looking at anything that might allow us to save money without sacrificing quality. I put a lot of emphasis on repairing things instead of replacing them. Most building publications don't cover this very much. They stress replacing things because it sells more products. For instance, they'd rather see you spend $1,000 on a new door than $10 on refinishing the one you've got. I'm not advertising or selling anything but my expertise. I'll tell you what's best for you and the homeowner, not the manufacturers.

Of course, sometimes there's just no good, cheap way to do a job. We'll look at those situations too.

"Restyle" Instead of "Remodel"

Most remodeling magazines and brochures are loaded with pictures of beautiful, high-priced remodeling jobs. They cost hundreds of thousands of dollars, and it shows. That's fine if you have customers with unlimited budgets. It's easy to make a house look wonderful if you have lots of money to spend. It's a lot harder to take a house that looks like a pit and turn it into a nice home for $10,000.

For $10,000, most contractors would offer a complete remodel of only one room. I can restyle an entire house for that much! The reason I can do this so inexpensively is because I don't do a lot of extensive work. Instead, I concentrate on:

• items that really need replacing,

• items that attract the most attention, and

• inexpensive redecorating.

Concentrating on a few key items can totally change the look of the house. Without doing much work, the house will look and feel completely different.

Customers with small budgets are really underserved by the remodeling community. Many companies won't even quote small jobs. Those that do, often can't offer good value for the money. As a result there are millions of customers who would like to have some work done, but can't afford what's currently available. They just have to go without - and nobody makes any money. However, by using "maximum value remodeling," you can offer them substantial improvements for moderate amounts of money. This creates jobs where none existed before.

There are millions of customers that this type of remodeling can serve, and they can all be yours, because nobody else is interested. For example, if a homeowner doesn't like the way the house looks from the outside, there are a few things you can offer that won't cost a huge amount. Rather than saying they need new siding and windows (standard remodeling ideas), you can suggest adding some new trim and a new front door. These items, if coordinated with the style of the home, can provide a whole new character to the house at a very reasonable cost.

Work Smarter, Not Harder

Amazingly enough, you can often make more money on these small jobs than your competitors are making on big ones. That's because you're working smarter, not harder. By zeroing in on certain key items, you can make tremendous improvements that won't cost your customers a fortune. What they pay for is your cleverness and your creative solutions to their problems. In other words, you get paid for your brains, not your brawn. Nobody else will be bidding against you for these jobs, because nobody else will think of doing them.

This method works because frequently the problems in a house, or even in a room, are localized. The trouble spots make the whole house look bad, especially if they are the natural focus of attention, like the front door, the main windows or the facing wall as you enter a room. A house is so big that you can't look at the whole thing all at once. Therefore, the eye focuses in on certain key items. If these items are ugly, you perceive the whole house as ugly. On the other hand, if they're especially beautiful, they can divert attention from the fact that the rest of the house is plain. A little bit of work in these key areas can make a tremendous difference in the overall look of the house. You can get most of the effect of a complete remodeling job at a fraction of the cost. The average remodeler, one who concentrates on large jobs, will overlook this because it's too simple.

The same principle applies to each room, as well as to the house as a whole. Every room has its own focal point and this should be something beautiful, like a fireplace, a chandelier or an elaborate trim. This item can set the tone for the entire room, sometimes even for the whole house. People may remember the "fireplace room" or "the room with the exquisite chandelier." The rest of the room may be ordinary, but that one item will establish it in people's minds as a special place. If a room doesn't have any special features, you can add one. You can often get almost as much effect by installing one key item as you can by remodeling the entire room, but at a fraction of the cost.

This may seem confusing at first, but if you look at houses in this manner, you'll see what I mean. The main reason you'll be able to focus in on the particular needs of a house, and your competitors won't, is that they simply don't look for them. They don't even think of things like this. They’ll either want to remodel the entire room, or turn down the job. It never occurs to them to try to zero in on the single most effective item, and just do that.

Use Your Design Skills

Many remodeling contractors approach jobs as though the customer has already made up his mind about what he wants. They assume that the design has been finalized; all they have to do is build it. This may be true for large, expensive remodeling jobs, where design consultants are called in to coordinate colors and styles. But what about customers with low-budget jobs? Paying a design consultant would probably use up their entire remodeling budget. And the design-build services offered by major remodeling firms may be more than they can afford as well. Therefore, they turn to you, the small contractor.

Even though a customer doesn't have a lot of money, he still deserves the best design he can afford. Can you help him? Yes, if you know something about design. You can offer him a nice-looking, style-and-color-coordinated design, for a price he can afford. You don't have to be an interior decorator to do this; you just need to know some basic facts about design. Most contractors with small businesses don't want to spend the time to do design work. You won't have to compete with them on price, you'll compete with them on quality. You'll get the job, not by offering cheaper services, but by offering better services.

It's unfortunate how many small contractors don't bother learning a little about design. That's one reason so many of them fail in just a few years. It takes more than skill with tools be successful, it takes ideas too.

My Favorite Jobs

My favorite kinds of jobs are the ones where everybody makes a profit. You make a profit, because you get paid good money for the job. The homeowner makes a profit because the work raises the value of his house more than the job cost. He makes money for you, and you make money for him! Everybody's happy. If you can make this point to a homeowner, you'll have an easier time selling your job.

There's a simple criterion to use to decide which jobs will best increase the value of any house:

The house should be brought up to the standards of the neighborhood.

Any job that brings a substandard house up to neighborhood standards will increase its value. On the other hand, if you fix up a house beyond the standards of the neighborhood, you're throwing money away - at least as far as resale value is concerned. Homeowners may be willing to over-improve their house for their own use, but they won't be able to get the money back when they go to sell the house.

Every neighborhood attracts a certain type of buyer. If the house is in a middle-income neighborhood, it will attract middle-income buyers. They will be looking for a house that is neat, clean, in good repair and has a few special features. If you've loaded the house with luxury features, they'll be thrilled, but they won't be able to pay extra for them. If they want to get their money back for luxury features, they'll need to sell to people who can afford luxury features. If someone can afford to pay for luxury, they won't be looking to buy in a middle-income neighborhood.

A Good Example

I recently looked at a house that offers a good example of what I'm talking about. It was in a very expensive neighborhood. Most of the houses in the area were selling for $500,000. However, this one was priced at $300,000 because it wasn't up to the standards of the neighborhood. It had two major drawbacks. The first was the kitchen, which was bright and spacious, and had been recently remodeled. It was filled with lots of brand-new cabinets. Unfortunately, the cabinets were the cheapest kind you can buy, poor-quality particleboard. The drawers weren't even center-guided. Rather than being an upgraded feature, they actually lowered the value of the house. Whoever bought the house would have to tear them out and replace them. What a waste of time and money!

The other drawback was the lack of an upgraded bathroom. It was a large house with five bathrooms, but they were all cramped, dark, 1950s style baths. There wasn't a single modern, spacious, bathroom in the house - not even in the master bedroom. This wouldn't have been a problem in another area, but this was supposed to be luxury housing. All the neighbors had luxurious spa-type baths. This house should have had one as well.

Other than these problems and some rather tacky decorating, there wasn't much wrong with the house. It could have easily been brought up to the standards of the neighborhood. Even if the owner had invested as much as $150,000 in improvements (and it wouldn't have taken nearly that much), he would have gained 100 percent on that investment. Because he didn't or couldn't put the money into the house, he was selling it for $200,000 less than similar houses in that area. Why couldn't a buyer make the improvements and profit from them? They can, but it will cost them considerably more than it would cost the seller to do it. Remodeling a newly purchased house with a home-improvement loan is very expensive for a buyer. With no equity to borrow against, the buyer will be stuck with paying high interest rates.

A house can be bought with a mortgage which gives the buyer a low interest rate and payments spread over 30 years. Home-improvements loans, on the other hand, don't get such advantageous treatment. They're usually at a much higher interest rate, with the payments spread over only five years. It will cost a buyer more in payments to take out a mortgage on a $300,000 house and add to that a $150,000 home-improvement loan, than it would to take out a mortgage for a $500,000 house that is complete and ready to live in.

Let's look at the numbers: a 30-year mortgage for $300,000 at 7.5 percent gives you a monthly payment of $2,109.98, not including taxes. A home-improvement loan for $150,000 at 10 percent for five years, gives you a monthly payment of $2,124.70. The home-improvement loan payment costs more than the house payment! Compare this with the payment on a 30-year mortgage for $500,000 at 7.5 percent. It works out to be $3,516.64, not including taxes. As you can see, a buyer could pay $200,000 more for a house that needs no improvements, and wind up with a payment that's $718.04 per month less, at least for the first five years.

So who can afford to make these improvements? The seller. If the seller of this house took out a $150,000 home-improvement loan and brought his property up to the standards of the neighborhood, he'd be able to raise the asking price to $500,000. He'd get double his money back for this job, essentially making $150,000 more profit. The payments on the home-improvement loan might be steep, but he'd only have to make them for a few months, just until the house sold. The new buyer, on the other hand, would be able to buy the improved house on a mortgage, and get a favorable interest rate. Everybody's happy, including the contractor, who just got a nice $150,000 job out of the deal.

If a homeowner has a substantial amount of equity in his house, he might be able to take out a home-equity loan to pay for the remodeling, rather than a home-improvement loan. This will give him a better interest rate. Or, if he does take out a home-improvement loan, and wants to stay in the house instead of selling, he can probably refinance his house once the job is done, and pay off the home-improvement loan out of the proceeds. Since the house will be more valuable, he can refinance for a larger amount. Neither of these options will work for the new buyer. They don't have any equity in the house to work with.

This doesn't mean that buyers should never remodel the houses they buy, only that it will cost them more and take longer for them to recover the expense than it does for sellers. However, in the long run, it'll still pay off. The house in the example has a $150,000 profit in it for somebody. It may be the present owner, or the next owner. Whoever has the foresight to make the investment will reap the rewards. It could be you.

Introduction | Table of Contents | Back Cover

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