Do You Have $25,332 to Remodel Your Kitchen Before Selling?
And the renovation you do to sell your home is then enjoyed by someone else?
A basic remodel in this kitchen was quoted at over $25,000! That does not include removing the popcorn ceiling!
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Does that make sense to you?
On average, a kitchen remodel costs $25,332 or $150.00 per square foot. You can only imagine how high it can go. Performing any renovation to prepare your house to sell can easily cost 10’s of thousands, as you can see. So what about selling to us?
Selling your house to Watson Buys in Denver can be a great choice for a lot of people. Let’s do the math.
The house you see above needed a total of $65,000 worth of renovation to sell it on the MLS. After renovations, the value of the home was $430,000. Now, if you sold a house in Denver for $430,000, you would pay $43,000 in commissions, fees, and closing costs.
Therefore if you sell your house for $430,000 and take out the closing costs, you are left with $387,000.
Next, we have to take out the cost of the renovation. The entire remodel of this property to get it ready to sell $65,000. This leaves you at $322,000. This is the “break-even point.”
The break-even point is if someone bought your house for $322,000, then did a renovation that cost $65,000, and sold the house for $430,000, they would make exactly ZERO DOLLARS.
Think about this. Someone buys your house for cash and renovates it. That real estate investor has just spent almost $400,000! Not to mention how long a remodel is going to take. Then they have to list and sell the home. This process could take a year. This process 100% has a lot of risk in it for the cash home buyer.
Wouldn’t you agree?
OK, this leads to account for the risk factor. The question I pose to you is:
If you spend almost $400,000 buying and renovating a house and using your own cash, how stressed out would you be?
Would you sleep at night?
I’m pretty sure I wouldn’t– Right?
So, how much would you need to make it worth your while? How much profit is fair to the real estate investor?
This question of what is fair has been answered over the years and can be calculated if you run all the numbers. The team at Watson Buys did this for you, and what we found is this. For a real estate company to pay rent and stay in business, they must aim for an 18% profit margin and by a real estate company, I am talking about a “we buy houses for cash” company.
What does an 18% profit margin look like in our case study?
Please don’t quote me here, my math isn’t always the best, but 18% of $322,000 is $57,960.
That is a big number for sure. I would be pretty happy every time someone wrote me a check for $57,960. However, we both must remember that profit is the best-case scenario. What if house prices drop, and many people think they will. In the last recession, house prices went down 30%. For this house, that is a drop of over $120,000!
What if the cost of labor goes up? Did you know labor costs have gone up 50% over the past few years in the building, renovation, and construction industry?
Do the cost of renovation materials increase? They certainly do. Just in the last 6 months, the cost of wood has gone up over 60%.
Ok, so where were we?
How much profit is fair? You should know that labor and material costs can go up so much makes the profit number look a lot smaller. We agreed, also, that house prices at some point will go down. I’m starting to think that $57,000 and change might not be enough.
Well, let’s move on and finish the calculations. Let’s say we decide that is enough. That means a fair price to purchase this house based on fair market value is $264040.00
Know my last thought is to give you two choices. Let me say both choices are correct. It comes down to which one is best for you. I would love you to comment and tell me which one you would choose.
OPTION 1: Spend $65,000 renovating your house before listing it and hopefully selling it on the MLS, knowing what we have discussed.
OPTION 2: Sell us your home for $270,000 (that’s what Watson Buys paid for this property – we paid cash above what is fair based on market value 🙂
Thanks for reading. All comments are appreciated and will be answered or responded to.
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Did you watch the video? Do you have any questions about how we buy houses or what happens when you sell us your home?