15. IMPROVING PROPERTY FOR ACCESSIBILITY

Intro  0:02 

Welcome to the get rich, slow podcast. This is the stuff we and our expert guests Wish we knew a decade ago to get the most out of our financial life will provide insight into wealth-building activities and practices that can expand your net worth exponentially. get insight from top professionals who will reveal how to build wealth the long way, work smarter, not harder and identify your financial blind spots. With over 25 years of experience as licensed real estate professionals and a long track record of winning for their clients. Robin Adrian will teach you what it takes to be an everyday real estate millionaire.

Adrian  0:44 

Welcome back, future millionaires. Adrian SHERMER here with my co-host, Robert Delavan. Good morning. Good morning. Good morning, Rob. And today we’re going to hit on the subject of improving a house, whether it’s during the process of purchasing, or I think more often, you know when you already own the property, you want to improve it. And the often brought up the subject of adding an edu, an accessory dwelling unit, or adding space that is mixed use for maybe having an in-law in there. And also touches on accessibility, everything from those classic railing. You know, what do you call those things, the railing seats that motorized climb up the stairs, all the way through to an actual elevator install in a residential property, what that does to value and what it costs you to do for an improvement. Yes, so this is a fun subject. And it came up with my general contractor, and designer Jen, who works within my company and so on this morning, and it’s specifically came up on a house that we’re working on to get ready for, for a sale, it’s probably about a six month process in that we’re taking a early 90s home that’s like almost 5000 square feet in the Portland metro area. And it has multiple floors. It’s on a hill, and it backs up to a creek and a green space, and all sorts of things that make it just absolutely beautiful. But it’s the late 80s; early 90s finishes that all need to be upgraded, are to give you some baseline numbers, if we sold it absolutely as is even in this hot Portland market for you, other regional listeners, it would have sold for roughly like 725 750, something like that in just original condition. It’s actually in decent shape. It’s only 30 years old. But it’s been reasonably well maintained. But it’s just, you know, 9092 called and once it’s finished back, which is surprisingly common in these bigger houses, actually happens quite a lot, right? Five hundred square feet is a lot to make over. When my wife and I were looking at the house recently, I got

really excited about high square footage places because I thought, you know, I split this up into a bunch of little rentals. Don’t forget

; renovation is a per square foot kind of concept. When you

boil it down. It’s not exactly every foot that has to be covered.

Cost money. Right? And the more significant, Yeah, exactly. The bigger it is, the more hardwood flooring you have to refinish, right? This is a lot for this. There are a lot of retro mansions out there for sure. Exactly. So for this particular situation, we were looking at a close to $200,000 renovation. Where we’re right up there, and the question that was asked after we got some bids as if on the fourth floor, Yes, the fourth floor of this home is would it be a good idea to put in basically a not an additional dwelling unit traditionally, which is Edu is the vernacular we use for it. Because it’s not like a completely closed-off separate living rental. Real quick to that’s, that’s really the breaking point. You know, many homes are multigenerational, which is an awesome concept very functional for many families. You know, grandma can live upstairs and take care of the kids. When parents are at work or whatever. It’s It’s uh, you know, it’s a functional setup that’s worked for, for real people who’ve been doing this for a very long time. Right? Right, historically, but an au has a separate closed door. So it’s an ultimately rentable space, generally by, you know, local codes tend to allow you to rent that space to someone individually. But if you’ve got a door between the spaces even that can’t be secured from both sides At least there’s some gray area there sometimes, then it’s it’s not in this case, right, you know, might not have individual laundry, or it might not have certain amenities that you would expect to be normal, but a kitchen or kitchenette might be up there sort of a pseudo-private living space, but with conjoined, you know, the ability to to get into each other space. Right.

Adrian  5:22 

So this one the play here is is basically for about $26,000 extra in the renovation. And I can break that down for you in a moment. Will it add at least $1 a square he or $1 for dollar investment in dollar out from a sale price, and our target is sale price was in just trying to keep it right under a million bucks. So that would it push it? You know, $26,000 up? Would it push it $50,000 up? Would it push it to $100,000? up? The short answer is it’s probably closer to dollar for dollar. But it checks a big box, where you’re opening up a new set of buyers or a bigger buyer pool. Yeah, which is somebody who wants to live multigenerational, possibly with some ADA, Americans with Disabilities Act, you know, accommodations in the in the sense that in this particular house, it’s actually served by an elevator. So with very minimal ramping, you could actually get a wheelchair from the garage up two steps to the main level where there’s an elevator that goes down to the next four or three levels below. And the idea is, you’d have accommodation for someone who has a physical handicap, or just maybe somebody who’s aging in place, like, say a grandparent who wants to live share some costs, all of that sort of thing, maybe part-time, maybe they’re retired elsewhere, you know, all of these different concepts, independence, of being in a facility, exact closeness, the ability to still interact with your family, not just on visiting day. Exactly, which is a huge thing. And and frankly, there’s an element with the pandemic that we’re, you know, going, Yeah, that this has become a huge thing. And there just isn’t much property that can do that. Yeah. So that there are there are things that you can make your property unique, right, that make it harder to sell. And we see that all the time when people do especially let’s call them unique styling choices, you know, stuff that’s trendy seems exciting. I think the most recent one is Pete a lot of people are putting strips of wood on wall and painting it, you know, dark colors that can be polarizing to people. This sort of stuff, though, really opens you up. This is desirable enough. Maybe another example would be would you say like shops and garages, especially as you move into heavy, heavy metro areas, you know, inner city, you got a shop behind a house, and you’re in a really dense area. Yep. Boy, you know, you’re gonna be there’s people just waiting for that house to hit market. And I think the at you and the shared living space, you know, multifamily thing. The demand just exceeds supply. And finding like, concepts like that, where the demand exceeds supply is where you can get more bang for buck, I guess, let’s hear, right. Especially considering, hey, we’re going to redo this bathroom in this floor anyways. So we might as well do it with a zero threshold shower, right? Yeah. Do it and make sure that the doors are wide enough, which they already are. And of course, this house in particular, and every every property is going to be different. We have the benefit of already having a probably an 80 to $120,000 elevator, serving the entire home, versus, you know, like the people that have two floors, like my current home, or your current home, Adrian, you know, you see Apple do the little lift that they advertise on TV, you know, the kitschy? Yeah, you know, hey, grandma can go upstairs, right? I shouldn’t, I shouldn’t make fun, but it’s important. I mean, mobility is is important, right? I mean, right? It’s, it’s make or break. And if you’ve ever faced this problem, which, you know, Rob, I’m not going to dive in your personal life, but I know you’ve had to consider Ada access for your home. It’s, it’s a deal breaker, there’s no you know, well, maybe we can hoist Grandma, you know, it’s you have to be able to get up and out and you got to be able to do it quickly. And having again, this accessibility is it’s something that you should even consider and design even if it’s not important to you, but you’re thinking about my house as an investment. Right. Single Family or single level properties are notably more valuable per square foot. Not Just because they take up a big space like that, it’s nice to not have to walk up and down stairs. But because, again, like you’re saying, Rob, it spreads to a much wider audience. It’s highly desirable.

Adrian  10:10 

So to get to be specific about the scope of this, basically what we’re doing is taking a big bonus room with a bedroom next door and a bathroom. And we’re adding a kitchen and a washer dryer on that level. Small but you know, enough for somebody to have a full pH in and out yeah. So just to give you numbers we went through and the cabinets were 4860 bucks, we have an exact bid for it. countertops were 2500 those were matching countertops of the beautiful stone that was gonna go up and in the main kitchen, which is also being renovated. h vac venting for hood to have a stove in this kitchen and dry and then for the dryer. For the washer dryer combo is about 1000 1050 appliances, were priced at about 6300 bucks. That was fridge, washer, dryer, stove, hood, and I believe there’s a microwave and that one plumbing was going to be 50 $300 for washer and dryer drains all of that sort of thing. So that’s that was substantial, but you can’t go around that that’s what plumbing was there was already a bathroom up there. And yes, it well it’s it’s the next level down is the drain. So there’s there’s ways to get get it but you know, it’s a job plumbing is not easy, especially when you’re going through walls and different floors and that sort of thing. And then electrical was about $6,000 because there was gonna end up being a sub-panel for for that area. Make sense? Um, so all at all said and done. It was $26,000. And the question became on this home, and I won’t publish or say the address or anything like that. But the question became, you know, should we do this, there was one other additional benefit to it above and beyond the concept of just what will get me on resale is it also they’re doing this first, and the owners are actually moving down there while we completely got their kitchen, the primary or master bedroom and all that’s a really clever way to go. So they’re moving down putting most of their furniture in a pod. And then and then basically going to have the entire house, you know, floors, refinished, walls painted, trim, redone. Bathroom all finishes redone. A number of bathrooms. And that’s where you get close to a $200,000 rent. Oh, yeah, I think I gotta say that does deserve some pause there. Because that is one of the benefits that I think people don’t necessarily realize about doing an edu or what do you what are you calling this here, it’s not I’m calling an in-law or family suite in-law suite, is that that does give you that flexibility. If you do have two places in your house that you can prepare food, you now have the ability to refinish that house while you’re living there. Which is pretty major if anyone’s ever you know, we’ve had clients who’ve tried to redo the kitchen while they’re in there. Oh, boy, the sorrow in their eyes as they tell you about the month delay that caused them, you know, pure chaos, and they’re just microwaving burritos and living out of a mini fridge. Yeah, it’s pretty. It’s a pretty big deal.

Adrian  13:34 

Well, and the other way, just by crunching the numbers is the other thing that I was where I was talking to the client about with Jen was okay. So if you had to move into an Airbnb during this time to renovate the whole house, which were speed up the process, because the contractors aren’t working around you. Yeah, then what would what would that cost? And they said, Well, you know, if it took four months, at $3,000 a month, you know, yeah, yeah, there’s 12 grand of the 26. Right there. So it’s, it’s just a, it’s not a simple decision. But if you consider the cash flow of that, the fact that you’re at a million dollars or give or take, you’re checking off a box, for for potential buyers, that people that have been looking for a in law or family suite, with some ADA, conceptual things in it. Yeah, it probably only saves you dollar for dollar or makes you I’m sorry $26,000. You put 26 in you’re probably going to get 26 out it’s probably going to take your value from 975 to a million, you know, maybe 990 to 1,000,025 you know, something like that. It’s not this huge $1 in $4 out, but in this scenario, it was a no-brainer because it allows them to renovate, still live there not have extra cost of secondary housing. And then, in addition to checking the box of a million-dollar home, that’s the better part of 5000 square feet. And now we’ve repositioned 1000 of that square feet as benefiting population that would not otherwise be served with this property, which would be anybody with any disability or mobility challenges. So sure, um, so you get a financial gain, right, the value of the property going up sounds like at least dollar for dollar. And then from the back end, especially, you know, and this is something we might expand on. But you know, Jumbo space is generally more days on the market, it’s harder to sell these homes just like it’s harder to sell, plenty of luxury products take longer to sell, then, you know, and that’s what I’m going to call anything that’s up in the jumbo space luxury product, essentially is, you know, you’re paying for something special, which means you got to find someone else who’s willing to pay for something special. You’re not in the pool with the average first-time or family home buyer who’s looking for that, you know, half million and down generally, space where people want to have a home to raise their family and with an average income in the United States. So right. This does give it some special cases. But it sounds like this makes it more marketable. Someone who wants to spend that much money, you know, you’ve got to know your buyer, right? We talked about this a bit. But I want to I bought my home, you know, you convinced me to do a four bedroom, instead of a three-bedroom, I don’t need four bedrooms, but boy, is it gonna pay dividends in rent a lot more than that bigger walk-in closet would have. It’s the same square footage, I had the option. And you know, these are the little decisions that can have, you know, a ripple effect through your finances. Exactly. And then the last thing I would say we should we should touch on, is in a scenario like this from a lending standpoint, ADA accessible, some improvements, whether it be the cheap lift, you know, that goes up the stairs, or an elevator, the different things, and we don’t have to dig into specifics, we could probably get very specific with a whole nother episode here. But what’s that look

Adrian  17:23 

like? So there are special financing products that will allow you to roll that in, and they’re a lot more flexible than it seems. We talk about renovation or rehab loans. They’re out there; there’s lots of options, there’s a lot to unpack there. But just know that especially for things that improve accessibility to a home, there are special laws that promote lending, allowing you to roll it into your purchase in an extremely efficient way. And this stuff is getting cheaper, it’s going to depend on your area, right? There are certain pockets of the country right now, big pockets of the contrary. We’re just finding a contractor to do anything is hard. And an elevator can be a big expense, depending on what you’ve got for space, right, you’re gonna have to. Obviously, you need a footprint that can clear the floors without ruining the dynamic of every room. But there, I would say that for the folks that I’ve had who have looked into this, they were surprised by how cheap it was. And how it does seem to again, add this dollar for dollar value to the home because there’s only so many houses that have elevators and then you know, that’s it, if you want to live on the hillside, Portland has a beautiful hillside with lots of luxury homes, you cannot live in that area. If you don’t have an elevator, there are no single fan, you know, single-storey homes on the hill, that’s just not gonna work. So providing that accessibility can be a huge benefit, especially if the person buying needs it. And then, from a financial end, doing this in-law suite, like you’re talking about. The same type of thing. Generally, there are two ways we go here there is financing products that will pay out contractors for work done. But one of my favorite hacks on this is what I think I might go so far, Rob is to say that this is my favorite financing product of all time outside of the actual home loan itself is the home equity line of credit. Right? Super powerful products, you pull the money only when you need it. So if you got a project that’s going to take, heck even a couple of years to do because you’re gonna do it in chunks, you’re pulling the money that you need, right when you need it, you’re paying the contractors directly, they don’t have to pay right and have to bid you on invoice, which is an important part of many of these rehab and Renault loans. You know, they they’re going to pay the contractor 3060 days out, you’re going to pay that contractor is within the bid that they’re going to place they’re going to build in the fact that they’re not getting paid upfront. So you know, these are little hacks and it all adds up and then you can refinance. If you want to at the end if it makes sense. You can refinance as one big package or if you’re gonna sell in a short amount of time and refinancing doesn’t math out You got to run the math, by the way, you know, always run the math don’t make assumptions, I can give you rules of thumb. But at the end of the day, your situation has to be analyzed individually, right? We’re doing yourself a disservice, it doesn’t take that much time. And you just, you just run the math, then, you know, you can roll it in, and you can have one big loan at the end, just like you had done a renovation loan. Except you didn’t have to pay interest on the whole chunk of money quite as soon, necessarily. So. Right. lots of advantages to be had there. The home equity loan leveraging, though, is such a sweet way to go about it. It sure is. Okay, well, let’s let’s wrap this up. And there’s, there’s obviously more topics that we could we could go all day here. But yeah, this is a fun one. As this, maybe we’ll do another episode in six to eight months to tell you all how it went. And what what the scenario was, and all of that sort of things. And we’ll we’ll break down. These these specific examples are fun. So until next time, appreciate everybody who’s listening. And yeah, thank you, Adrian. Good luck out there. See you next time. Take

Intro  21:09 

care. Bye bye. Thank you for listening to the get rich, slow podcast. If you like what you learn, please subscribe, rate and review so we can grow wealth for even more families.