How this family’s first renovated home generated a profit of $ 177,000
As an independent online entrepreneur, Luke Barber embarks on a wide range of businesses: developing mobile apps, running his own car rental platform, and selling digital products, to name a few. some.
Her favorite way to spend time, however, is to document her family’s adventures on the Barberet YouTube channel. In late 2016, a video of Barber and his wife, Hollie, building a triple bunk bed for their three daughters racked up more than 2.7 million views.
However, there was one issue that kept Barber from sleeping at night: The family owned the bunk bed, but not the house.
“I knew I shouldn’t be hiring,” Barber says. “I needed to put on big boy’s pants and buy a house.”
A long-term mindset
As Barber pondered how to leave the rental world, the family prepared to welcome a fourth daughter.
“We bought the house at the perfect time,” Barber says with a laugh. “We closed the last week of August and had a baby a week later.”
Despite their growing family, the home the barbers bought in Panama City Beach, Florida was about 700 square feet smaller than their rental. While downsizing was necessary to afford the house and start building equity, the property was the opposite of the move in, which was actually part of the appeal. The couple love to watch home improvement shows and wanted a renovator.
“The carpet was all destroyed,” Barber said on a video tour. “This place hasn’t been kept up at all. It smells like wet dogs.”
Go to work
Barber was ready to add to the destruction. In fact, he says that within an hour of going to the title company and getting the keys to the new house, he was smashing the walls with a hammer. His plans weren’t just a wild outburst: his eyes were always on the budget.
“We bought most of our materials from Home Depot with a six-month line of credit,” says Barber. “I did most of the work, carving out the tiled floors, tearing down the walls and putting the sweat in equity.”
Even for jobs that required outside help – Barber hired a friend to take care of some plumbing needs, including moving the water heater – the family pondered how to cut expenses.
“The water heater was hard work that required going through the ceiling,” says Barber, “so I asked if I could save money by climbing up into the attic to run the pipes.”
Renovation plans called for about 60% of the house to be emptied over a three-month period. While the focus of the project was on beautifying the home, the upgrades were also designed to make living more affordable. For example, the previous owner had finished the garage and converted it into a bedroom, but there was no insulation. Utility bills averaged $ 450 per month when temperatures were hot. Barber’s addition of insulation made a huge difference in the monthly budget: monthly electric bills dropped to $ 150.
However, “like most renovations, it ended up being more work than expected,” says Barber.
The project was not complete by the time their lease ended, so the barbers moved in with no doors or floors. The first rounds of dishes were washed in the tub. Barber’s dad, who helped out with some of the work, was electrocuted along the way – something Barber can laugh at now, since his dad was fine.
Gallery: 7 Easy Home Renovations for $ 5,000 or Less (GOBankingRates)
In the end, the DIY approach saved the family at least $ 30,000. From videos of birthday parties and movie screenings on the family’s YouTube channel, it’s clear the house has quickly become a home.
“Let’s list it high”
However, a first home isn’t often home forever, and in June 2020, barbers welcomed their fifth daughter. At the same time, Barber watched house prices soar as the pandemic pushed real estate values to record highs while mortgage rates have fallen to all-time highs.
“The market we’re in is crazy,” says Barber. “People are paying well above the asking price.”
Barber had already thought about how to get involved in real estate investing. By teaming up with a friend, he figured he could put his home improvement skills to work, buying home improvement furniture for cash and then flipping it in a process called selling in. large.
Barber started working on a trial property over the summer. Then he realized that maybe he didn’t want to sell it to someone else.
“It has an additional 500 square feet and a huge yard,” says Barber. “I thought maybe we should go for it. Financially, it seemed like a very smart move.”
Hollie agreed with the decision, but it had two conditions: They had to sell their current home themselves to avoid paying commissions to realtors, and they had to list it high.
“People buy on emotion,” she told him. “Let’s list it up. “
After settling on an asking price of $ 399,000 – nearly $ 40,000 more than neighborhood prices – the couple put the house up for sale on Zillow and received three offers on day one. One of the offers came from a couple of realtors, and Barber offered them a 1% commission to handle all the administrative tasks.
Thinking back to that realization in 2016 of the need to start building equity, barbers did more than modernize a home. Calculations show that they also dramatically improved their finances: They bought the house for $ 188,000, invested $ 30,000, and paid their buyers just under $ 4,000 to take the headaches out of paperwork. It all added up to a boost of $ 177,000 – Barber’s “big boy” profit, realized.
For your next project: Home renovation tips
If you are considering your own home improvement or home improvement project, you are not alone. A recent DEWALT survey found that more than 70 percent of homeowners are planning or considering a home improvement project in the next six months. Some of these projects are also important: almost 30% plan to spend at least $ 30,000 on the work. Remember these five key considerations before you start knocking down walls:
1. Prepare to spend
Home improvement prices have skyrocketed in 2020, and those higher costs persist for the time being. Compare different types of supplies to see if using different materials can help lower your price. If you aren’t doing the job yourself, be sure to get multiple quotes for the project so you can find a licensed professional who can help you save money.
2. Know what adds value – and what doesn’t
It’s your house now, but do you plan to sell it later? The renovation of the Barbers clearly has added value. Do your homework to find out which improvements will have the most positive impact on your list price down the road.
3. Take into account additional expenses
Your budget likely includes supplies and contractor fees, but you’ll need to factor in surprises like permits, cleaning fees, and other hidden home improvement costs.
4. Research all your borrowing options
The Home Depot line of credit has served Barber well, but he admitted that he would have liked to know about loan options that included funds for renovations before applying for his mortgage. Options like the Fannie Mae HomeStyle or FHA 203 (k) loan can help homebuyers secure funds for a purchase and home improvement project at the same time for a low interest rate.
Beware of putting too much money on credit cards: While a Bankrate survey last year found that the majority of homeowners use credit cards to improve their homes, high interest rates can quickly turn your dream home into a debt nightmare.
5. Expect to wait
If you hope to start your project now, be prepared for a delay. The disruption of the supply chain due to the pandemic and the rush to renovate has created a big wave of business for home renovations. The DEWALT survey shows that the majority of homeowners who work with contractors have to wait at least three months to get started.