The “Three Packages” Approach To Renovation

Completion of 5 projects has provided results showing a definite pattern that results from this

approach to renovation. 1. Your mileage may vary. (but dont let that stop you)

within 50 miles of any point in this state, there are some neighborhoods with similar demographics to the neighborhoods that we are discussing in these

examples. (you mainly just need to move inland from the more expensive coastal neighborhoods.)

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My Favorite Demographic for Energy Wise Renovation

30 to 50 year old homes (tract homes)

1000 to 1500 sqare feet 3-4 bedrooms 2 baths

4x12 pitch roofs, 8 foot ceilings, single story,

usually on a slab, usually stucco.

In a desirable area.... people want to live there

Not the lowest priced zip code in the area

Median home value for this Zip is about median for the whole City (93727 is $145,000, City is $145,000)

Includes “anchors” that attract buyers

(jobs, shopping, parks etc)

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Reasons This Is A Good Place For This Type Of Investing

1. These homes usually have everything worn out:

Roofs, AC, Windows, Carpet, Paint, everything can benefit from renovation.

2. Newer homes dont need enough.

3. Older homes may need too much and become a money pit.

4. The tract will all be built the same. Stay in a tract and get economies of scale and knowledge of prices

and start controlling your own comps and appraisals.

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Reasons This Is A Good Place For This Type Of Investing

5. The 8 foot ceiling and slab and stucco make this an easy home to get significant energy savings

6. Three Bedroom Two Bath is what sells. It’s what first time home buyers want. 4 is even better

7. This type house, all fixed up will have great appeal to first time home buyers.

8. There are a lot of first time home buyers and the current administration is determined to get as many as possible into home ownership.

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Reasons For 3 Packages1. Big Energy Packages for significant reductions are hard to sell unless combined with more “visible” things that first time buyers are emotionally attracted to. (Granite Counter Tops etc)

Thirty Years of Contracting has proven it for me

Customers who will buy “everything” are rare.

Small number of complete jobs sold by the new Home Performance Industry shows the same conclusion

2. Complete Packages set your homes apart. Finding Buyers has not been difficult.

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Reasons For 3 Packages3. Big Energy Packages can make a serious dent in Energy Consumption. Two ways to accomplish this are

1. Government Mandated and Funded Programs

or

2. This Three Package System which will still sell in America, unaided by incentives, rebates or government coercion.

(if rebates or incentives come along, this method will just work that much better)

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The Hamburger AnalogyWe liken the Three Package System to feeding a dog a pill that will certainly be good for it.

But have you ever tried to feed a pill to a dog?

The Good Pill by itself, you will get bit. Wrapped in Hamburger it goes down easily.

In Energy-Wise Renovation, the Energy Package is the pill that is good for the Planet and the Buyer and the Neighborhood.

The Granite Counters and Nice Remodeling is the Hamburger that makes the Energy Package palatable to buyers in this market without incentives.

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The “Cliff’s Notes” Formula ForThe 3 Package System

The Energy Package $20,000 (hard cost)

The Wow! Package $20,000

The Done Package $20,000

Soft Costs $20,000

Profit $20,000

Total Buy-Sell Spread $100,000

These are rough numbers but reasonable targets.

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Implications From The Formula1. If there isn’t a 100k spread from buy to sell you must modify your cost structure or pass and wait for a better deal.

That’s the bottom line, all there is to say....

Let’s look at the Packages in more detail

But First a Reminder.........

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Reminder: Realtors & CMA’sFor this math exercise to make sense you MUST have a good idea of your final sales price.

To get clarity on this, you must have a well done Comparative Market Analysis (CMA) from your realtor.

Some realtors want to wing it and give you their

opinion without doing the CMA.

They are the wrong realtor, Keep looking.

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The Energy Package (typ) 1. Redesigned, Sealed R-8 Ducts. 2nd Return

2. New HVAC Equipment (2 ton,13 SEER, 80% package units are typical) Or Mini Split

3. New Vinyl Dual Pane Replacement Windows

Low E 140 on East - West Windows

4. R-50 Cellulose Attic Insulation

5. R13 Cellulose Wall Insulation

6. Ceiling Fans

7. CFL’s everywhere

$20,000

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The Energy Package #28. Plant a Shade Tree (s)

9. Ventilation plan Panasonic ERV FV-04VE1

Or Panasonic Bath Fan Minimum

10. Shell Seal Attic

11. Shell Seal Under Floor

12. And/Or Seal Crawlspace & poly on ground

13. Energy Star and Gas Appliances

14. Gas run for Dryer and Stove

15. Photo Cells and Motion Sensors

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The Energy Package #317. Duct Test is done by HVAC subcontractor

18. AC sub also does blower door test

19. AC sub also does combustion air testing

(These are the Test Out Procedures.

There is no Test In in this method as all systems are deemed “Catastrophic” and there is no value in testing what is going in the dumpster)

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The Wow! Package1. New Cabinets,

2. Granite Counters, (from blanks)

3. Deep Stainless Sink

4. GooseNeck Faucet with Spray

5. Stainless Appliances

6. New Dishwasher and Disposal

7. Hood Micro Combo Unit

8. All new designer light fixtures

$20,000

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The Wow! Package #29. Travertine or 18” floor tile

10. Designer glass tile at backsplash

11. German Engineered Laminate Flooring (not Pergo)12. Designer fixtures in bathrooms

13. New Panel Interior Doors

14. New Hardware15. New Taller baseboard

16. Crown Molding17. Chair Rail

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The Wow! Package #318. Custom Tile at both bathroom showers

19. New Front Door with Leaded Glass (low E)

20. Upgraded Entry Handle & Dead Bolt.

21. Two and Three Tone Paint.

22. Foam-Stucco moldings at windows and doors and on building corners. see photos.

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The Done Package1. New Grass, front and back

2. New Sprinklers front and back

3. Automatic Sprinkler Clock

4. New Roll Up Garage Door with windows

5. New Garage Door Opener with controls.

6. New Electrical Switches, Plugs & Covers

7. Outdoor Living Option Covered Patio

8. New or Renovated Fence and Gates

9. Other Landscaping

$20,000

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The Done Package #210. New 30-50 year comp roof

11. New (possibly relocated) water heater

12. New 100 amp service

13. Grounding of all wiring.

14. Gutters as necessary

15. Proper drainage away from house.

16. Dash Coat or complete exterior paint

17. Premium Carpets over 6 lb pad

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Soft Costs1. Interest Expenses

2. Insurance

3. Taxes

4. Shrinkage, Waste, Theft

5. Oops Factor, You missed on your estimate

6. Realtor Fees

7. Escrow & Title Fees and other Closing Costs

8. Buyers Closing Costs you may have to pay.

9. Utilities

$20,000

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Foam at Windows and Corners. Painted FireplaceNotice effect of long overhang. It has kept sun off western glass.

Now the deciduous tree is about to take over for the rest of the day.

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Designer Sink and Euro Faucet will set you apart from the homes

in the neighborhood.

Counter Top is left over granite

from the kitchen.

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This has evolved to be our typical kitchen. Granite Counters from 2’ & 3’ blanks, not slabs, Glass tile back splash, Deep Sink, Designer Faucet,

Stainless appliances, Real Wood Cabinets (plywood backs, not OSB or particle board, Travertine Floors, Under Counter Lighting, Downlight, Efficient Ceiling

Light. One error is visible here. Can you spot it?

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kitchen backsplash for

accent.

Inset shampoo alcove

These are not expensive but definitely say

“Custom”

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Foam Blocks and Window & Door Trim. Garage Door with windows & Auto Opener 30 year roof was existing

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Chair Rail, Crown Molding, Panel Doors & Trim, Oil Rubbed Bronze Hardware is popular now. Three tone paint, (lighter ceiling, medium high wall, darker low wall)

The dark was bolder than usual but it worked. Ceiling Fan, Outdoor patio.

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