The “fixer” buyer pool no longer exclusively consists of contractors and small-scale developers. Instead, deep-pocketed buyers looking to purchase a fixer and turn it into their dream home are increasingly becoming the dominant players in this property category.
A small Noe Valley Victorian recently hit the market (see above photo, left) and attracted multiple offers within a week. The listing agent reported that all offers were from “end users”—industry speak for buyers who will eventually owner occupy the property as their primary residence. There was a time when the only purchasers for a property like this would’ve been contractors looking to flip.
But contractors are stepping back a bit due to rising construction costs and limited investment funds. The end user, on the other hand, can decide how to renovate within his or her budget, and not have to worry about trying to make a resale profit. And that buyer also has the opportunity to design the home in a much more personal way.
End user renovators pop up most commonly in coveted neighborhoods like Noe Valley and Liberty Heights, where tech money flows freely. Prices for fixers in premiere neighborhoods average at least $2M-$2.5M (more if there are views). And newly renovated homes seem to be starting at around $5M these days. For an end user, it’s sometimes more appealing to spend that money to tailor a home to fit with their specific needs and tastes.
A recent, high-profile end user example is 714 Steiner. One of the Painted Ladies on Alamo Square, the home sold to a tech exec for $3,550,000 at the end of January. The new owner plans to spend another $3,000,000 on renovations and is excited about living in one of San Francisco’s iconic homes.
I had clients who purchased a fixer home in the Haight a couple years ago and did a wonderful job with renovations. They were able to pick and choose which changes to make, and stuck to a budget they could afford.
The end user journey is not without its pitfalls, and isn’t for the faint of heart. Many unexpected problems can arise, and you can easily find yourself exceeding your budget. In that spirit, I wanted to offer a few tips to help you stay on track:
Be realistic about renovation possibilities. If you’re planning to go up, out or do anything that’s beyond the envelope of the existing structure, definitely consult with an architect on site before you write an offer. Your big ideas for a top-floor master suite may not be something that the Planning Department will approve for one reason or another. And adding a garage is its own animal.
Have a general idea of renovation costs. Doing an interior renovation—for example, new kitchen, baths, moving a wall here and there, electrical/plumbing upgrades, adding a deck, adding a master suite, and new flooring—can run several hundred thousand dollars. Vertical or horizontal extensions will cost more than that, and they often trigger seismic upgrades.
Understand the renovation timeline. If you’re working within the envelope, the permit process is a lot faster. But you still need to draw up plans with an architect and nail down very busy contractors. Estimate at least a year from purchase to completion if you have your peeps ready to go by the time you close escrow. For horizontal or vertical additions, the process will be longer due to neighborhood notifications and a more complex permit process. That timeline has implications for where you’ll live until your project gets the green light, as well as during construction.
Talk with more than one contractor and architect. Costs vary widely, so it’s worth consulting with two or three contractors. Who you work with will come down to personal recommendations from friends, overall cost estimate, and availability. And don’t forget to check license details with the Contractors State License Board and the Better Business Bureau.
Decide whether you need a designer. Though it’s great when you can take a hands-on approach to a renovation, personally selecting all the materials and finishes yourself. But if you don’t envision having time to do everything on schedule, it’s best to hire an interior designer. There are some excellent ones in San Francisco, including my favorite, Catherine Kwong Design.
Give me a shout at email@example.com | 415.823.4656 if you’re in the market for a fixer to renovate. I can search for possibilities on and off market, and guide you through the purchase process.