Front Page Forum: To Close or Not to Close?

To the OP:

I think you are right to have second-thoughts on this purchase – it is a lot of money and clearly a mountain of work needs to be done. Trust your inspector on this one. You will get naysayers who will tell you that $300K is overestimating, but do not listen to them. I did a similar project about 3 years ago – a total top to bottom reno of a 2fam. And I cannot tell you how many contractors came in and told me that I would only need to spend $200K – $250K tops, even for a top quality reno. Other home owners told us the same thing, and even our broker, whom we liked very much and is a homeowner gave us essentially the same estimates. We even hired a contractor for the sole purpose of helping us prepare estimates – and even he was wayyyyy off.

We hired an architect and spent many many hours of research, and came up with a budget in the $350K range. My wife managed the project full-time for over 1 year scouring the globe to find the best prices on materials, applainces, etc. We even hired many of our own subcontractors to avoid paying the GC mark-up. In the end, the project still ended up at the $450K mark – and we’re not even totally finished yet – still have about 10% before I can claim every inch of the bldg has been reno’d.

So, what happened. Why can’t anybody give you a straight answer on reno costs??? I think there are several different reasons. First of all, contractors underestimate as a practice. I only know of a couple of very high quality guys that tend to over-estimate (and adjust if they come in under budget). The vast majority of contractors are optimists by nature (I’m being polite). To protect yourself, you must have an architect create a contract with plans and every conceivable detail, you must get bids in writing, and you must have your architect sit down with each bidder and walk them page by page thru the plans and specs. Once the GC must put pen to paper, you’ll notice the written bids will be nearly double the verbal estimates.

Even so, contractors will try to adjust the cost in the middle of the job. Admittedly, there are times when things could not be anticipated. You open up the walls in these buildings and you find crazy stuff in there – like missing structural elements, dry rot, etc. But not too many contractors would reimburse you if the job went better than expected – it’s pretty much a one-way street. You pay for the f-ups.

Anyhow, the other reason I think people give you unrealistic estimates is that many homeowners, brokers, etc. simply do not understand the level of inflation that has occurred in construction costs. Plus, most of them never bothered to actually track every last dime they’ve spent on their bldg – especially if they do it bit-by-bit. Lastly, each contractor tends to look at the project in fairly narrow terms of what they are going to get paid – not what you will actually have to shell out. There are many incidental costs that nobody ever accounts for – some large, some small. And one more thing: code requirements have changed. I’d say code compliance cost me at least an extra $25K above what was anticipated. Oh, and one more thing: DIYers of course can trade their sweat for reno costs. If you’re in a position to do that great, if not, then you gotta pay up.

In summary, it is just plain expensive to reno an old building that has not been cared for. IMO< $250K is the starting point – not the ceiling.

Also, there are a number of houses for sale on between New York and Nostrand on Dean street in Crown Heights (a great block) They surely need some work, and probably need the C/O changed but I believe they are under 700k. You could go by and take a look.

I’ve walked away from two potential purchases in Bed-Stuy for the same reasons (in one case, after paying for appraisal and inspection).

This housing market is priced to perfection, and unless you feel this house is perfect for you and yours, you’re going to despise it as you shell out more than you expected to renovate it(and, even more so if housing prices ease).

Sleeping at night is more important to me than getting caught up in the hype. So, if uncertainty (as opposed to exhiliaration) is keeping me up at night, then I walk. You may consider doing this also. (BTW, I did buy an investor property in Bed-Stuy last year, so I’m not completely averse to purchasing, but I’m still looking for my HOME and, so, I’m being very selective.)

I suspect that more and more potential purchasers will begin to have these experiences (realizing that they could be paying top dollar for properties of questionable value) and, when they do, prices will ease. Unfortunately, I do not know when the market psychology will change.

Good luck!

I’m the original poster for this thread. I really appreciate hearing from so many people. I had planned on needing to renovate the rentals, renovating in stages, leaving the work on my duplex till last etc., as many here have suggested.

Unfortunately, the inspector feels that it would be foolish to open up the walls to do plumbing, heating, and electric for those units, and not to do the whole house at the same time. Pus, there are several immediate repairs needed, including a replacement roof and skylights, facade work, replacement of a few beemas and reframing work, replacing old inadequate electric service and old cloth covered wiring in the whole house, lead paint removal, lead pipe replacement. And more. I just don’t have the money to cover doing it all at once, and renting an apartment to live in. In conclusion, the purchase price plus the renovations, as projected, make this a $1M house, and I believe I can get much more house for a lot less $$$, even in today’s crazy market in Bed-Stuy.

As I come to this decision, I’m also starting to notice the things about the house that I didn’t like in the first place, and I’m more easily inclined to leave the deal.
THe best thing about the house isn’t even the house, but rather the block it’s on, which is one of the best in Stuyvesant heights.
The next best thing is that is has _some_ nice details. after that, I start to feel badly that it’s only 16′ wide, and that the back yard looks like a vacant lot, and is half cement. And other quibbles.

This has been a continuing learning process, that’s for sure.
So far, all it’s cost me is the inspection, and the appraisal for the house. Not cheap, but a lot better than making the wrong decision and being in the hole for a long time.