Remodeling Pros and Cons

Old front of house

Old kitchen.

Six years ago we wanted to get into the hot San Francisco Bay Area housing market. Unfortunately this was one of the few houses that was in our price range. It is crazy that we paid close to $500K for this dilapidated house. I knew the only way for us to afford a home was to put sweat equity into something someone else didn't want. We kept getting outbid for other homes that only required minor remodeling, but there was hardly any competition on this house. I didn't anticipate putting so much work into the house, but after pulling down some walls I quickly realized the house was crap. I gutted it down to the studs and removed the shoddy addition in the back. I had some plans drafted to remodel the house and add 500 square feet off the back of the house. The city of San Jose had a policy that if you did not add more than 500 square feet to your house one would qualify for Express Check, which included having plans approved over the counter and only having to pay $1500 for permits. Turns out that, due to the fact that we were remodeling the existing house, they added the entire home's square footage to the 500 square foot addition. The result was the plans went to planning for 3 months and the permits increased to $8,500! I should have taken this as a warning sign not to embark on such a major project without the right amount of time and money to complete it.

Since I did about 80% of the work myself, it took a good year to complete the project. It looks great after everything is said and done, but I learned a lot of lessons for any future projects I might do. You might be able to learn from my mistakes.

1. Do not pull a permit unless it increases the square footage. Looking back, I wish I remodeled the house first, then applied for a permit for the addition. This could have saved $7k in permit fees. Cities gouge residents for permits which is why so many people avoid them. If cities made the fees more reasonable, more people would use them and more revenue would come in.

2. Compare and calculate the cost of doing the work yourself (saves money but increases time) vs. subcontracting and having work completed more quickly. If subcontracting can complete the project in 3 months instead of 12, you can save 9 months of mortgage payments if you plan to sell the house, or it could be 9 months of rental revenue if you planned to rent it out.

3. Consider a room-by-room addition over time so you don't have to leave the house and you don't financially burden yourself if you go over budget. Going over budget for the bathroom is small compared to going over budget on the entire house.

In the end, I'm proud of the work, but I couldn't have timed things any worse. As soon as I completed the house, the housing market tanked. The house is now on the market, but there is no way we will see a return on our investment. Looking on the positive side of things, we didn't lose our house and this has been a good learning lesson for our next project.

New front of house.

New kitchen.

New living/dinning room.