What does it cost to remodel an old home?

 

It’s been a couple months since my last entry.  Why has it been so long?  We stepped in some turds and had to scrape them off our boots.  Time to catch you all up to date.

Before I start, I want to make a promise to all of you that I will not get angry as I write this.  I will not use foul language and I will not be mean, sarcastic or condescending.  Some of you who have known me for some time will probably be disappointed.  You like it when I get worked up because I say wrong things and behave like a drunken ferret.  I will remain calm and not disappoint my lovely wife.

To talk openly about what’s been going on these past weeks, I have to talk about money.  I know it’s inartful to do so but I can’t really explain this to you without including some numbers.  And let’s be honest; you already know that Jenny and I paid 700k for a home that was buried in junk and falling apart so I feel like we’ve already crossed that bridge with y’all to some degree.  Now we just need to become full-fledged friends so this talk of money between us won’t be so awkward.

To facilitate this change in our friendship status, I picked up this case of friendship bracelets for all of you.  I’ll give you yours next time you drop by.  Either way, we’re all set now and I can move on with this story because bracelets.

When Jenny and I first saw the Going Queen, we couldn’t help but notice she’d seen better days.  Due to the fast-paced housing market in Portland, we had to act quickly if we were to buy her.  Most homes only stay on the market for a few days and for some it’s just a few hours.

We made a full-price offer on the Going Queen, which was accepted, and we had about 10 days to bail out of the escrow contract before all our contingencies expired.  We sought professional guidance to better understand the scope of the project.  We talked to a dozen general contractors and picked one.  We set to the task of determining if this restoration project was viable or not.

The contractor we selected gave us a ‘drive by’ estimate of $700,000 to remodel the house.  The formula he used to develop the initial estimate was:

Ask us what we paid for the house and then say that number back to us as the remodel estimate.

It was explained to us that the general rule-of-thumb is that you will spend the same amount on a remodel as the purchase price of the house.  I’d not yet heard of this rule but our contractor seemed certain of its efficacy.

Our assumptions about this 700K remodel estimate were:

a. It was totally arbitrary and unreliable because of the way it was pulled from one's ass
b. It possibly applied to a ‘high-end’ remodel and therefore did not apply to our modest plans

Either way, we couldn’t afford a 700k remodel nor were we willing to pay that.  Getting an actual estimate wasn’t feasible in the time we had to work with so we decided to go forward with the assumption that we could work this out later.

We closed on the home and started the project.  Phase 1 was the property clean up and the interior demolition.

Our contractor gave us an estimate of 35K to clean up the property and demo the interior.  That seemed high but we went with it.  By the end of February, our contractor had already gone through more than half that budgeted number.

We met to discuss the budget with him.  He confirmed it was going over budget and we agreed to a 50K maximum to finish phase 1 and get plans completed so we could submit to the city for permits.  At this point, we were neck deep in the clean up and didn’t have much choice.

At the end of March, we got a second invoice for an additional 40K.  On top of that, we were told that there was still more work to be done and the total would be more like 75K.  We told him we were surprised about this.  He said he was ‘surprised’ too.

My reaction to his surprise was similar to if someone were to punch me in the mouth and then tell me how surprised they were that they’d just done that to me.  We were starting to get a sinking feeling.

Even before this happened, we were starting to have our doubts that this contractor was going to work out for us.  He seemed a little disconnected.  We had a several incidents where we felt like our contractor was only pretending to listen to us and then he would move on with his own plans for our project as if we weren’t participants.  I would go into more detail about that, and you would find it entertaining, but I’ve already committed to not going to a dark place. 


We asked our contractor to stop work, complete the designs, gather all the estimates from his sub-contractors and get a final construction estimate to us.


About four weeks later we were holding his project estimate in our hands.  I jumped right to the last page.  It came in a little higher than expected:

 $1,425,118.15

We were surprised about this estimate.  He then explained that this was for a “B+ level remodel”.  For instance, at this price, we could only afford vinyl windows and a some accent tile.  He then went on to explain that this price didn’t include any landscaping work and excluded some of the interior items such as appliances.

We were surprised about this as well.  Just to be sure I was understanding, I had to repeat back what I’d just heard.

“So, the 1.4 million dollar cost doesn’t include a dishwasher?”
“No.”
“or a fence?”
“No fence”
“What will it cost to include the things that you left out?”
“About two-hundred and fifty-thousand more.”
“So, the actual remodel cost is a little over one-point-six-million not counting the money we’ve already spent?”
“Yes."
"Why did you leave those costs out?  They seem to be essential."
"Yeah, they are, but it was getting so expensive."
“I’m surprised”
“Me too”

Out of morbid curiosity, we went through the estimate line by line with the contractor.  Oddly, he gave very detailed explanations for small items like a $350 fee for reprographics but moved very quickly through the numbers with 5 or 6 digits.  I could see Jenny fuming over this surreal tapdance performance we were witnessing.

What?  You want to see the estimate yourself?  Well I don't know about that.  It seems like the kind of thing we should keep private.  Ok here it is.

To be fair, I obscured the name of the contractor.  I don't know what kind of conclusions you might draw from all of this and the last thing I want to do is suggest that he wasn't above board.  He handed us this estimate with a straight face and patiently answered our questions.  I think mine where mostly rhetorical such as 'what the fuck?' and 'are you serious?'.

There, I've answered the question I posed in the title of this blog post.  I offer this estimate to you only as one example of what a full house remodel might cost you if you were nucking futs.

Later that evening, loaded up with a few bourbons, I tried to understand what had happened here.  Where did the already astronomical 700k price-tag go?  How could our remodel project add up to this amount?

First, I tried to determine what using a general contractor had added to our project cost.  This isn’t that easy to do.  The contractor is being paid by:

  1. Charging for their time

  2. Adding a project overhead fee

  3. Adding another project overhead fee on top of that other one I just mentioned

  4. Marking up the cost of materials and services

The first three are easy.  The labor being charged directly by the general contractor is on the first page under ‘General Conditions’.  It’s 76k.  Then, if you jump to the end, you see 180k in overhead and another 41k in that other kind of overhead.  So the first three categories total about 300k.

As an aside... my investigation showed that Kyle, our job site supervisor, was doing a really great job.  I know this because his time was billed at $35 an hour in February, $40 an hour in March and estimated at $50 an hour in April in the construction proposal.  Congratulations to Kyle on the rapid promotions.  Really amazing job.

The not so obvious fees are added as markup on all materials and outside services.  It’s hard to know what is being marked up and what isn’t.  To take a guess, I took a known cost that was provided by the contractor and estimated the markup.  During the clean up, we had 10 forty-yard drop boxes delivered, filled and then hauled away.  I called the most expensive looking company I could find (other than my contractor) to get an estimated cost for a forty-yard drop box.  It was $427.  I then multiplied this by 10 and then compared that the price I was actually charged for the drop boxes by our contractor.  $6,900 - $4,270 = $2,630 markup on the 10 drop boxes.  So in this case, it appears we got hit with about a 60% markup.   Maybe this percentage markup is what we should use for our calculation or maybe our drop boxes were just super special.

I then looked at the clean-up crew labor fees.  The total cost of the labor to clean up the property and do the interior demolition work was $25,531 for 916 hours at $35 per hour for the unskilled laborers.  There was another $11,302 charged for the people that told those laborers what to do, but let’s ignore that for now.  I called around for labor rates for these services and found that it lands somewhere between minimum wage and $12 an hour.  Lets just bump it to $15 because we are cool and progressive.  Adding for employer payroll taxes and insurance costs, we need to add another 15% which gets us to $17.25 an hour.  Since we were charged $35 an hour, this gives us about a 100% markup on this type of service.  I think we can all agree that I got a deal on those drop boxes.

To be fair, the 100% markup on unskilled labor had some hidden costs embedded in it.  For instance, each day, every worker got to request their preferred type of muffin.  The supervisor would then go pick them up and then initiate a muffin break.  Custom muffin breaks aint free yo.  The cost of the muffins were not added to our invoice which was quite nice!  So, in fairness, the effective unskilled labor mark-up was probably more like 99.5%.

Obviously, I’ve had to make some assumptions about the markup percentage, but I’m going to go out on a limb and say there’s probably an average additional markup on all materials and services of around 25% across the entire project.  That adds another 300k.

So, it seems that the cost of having a general contractor, at least in this cost proposal, comes to around 600k.

So, if we remove that unnecessary fee from our estimate, you would get to 825k for the work identified in the cost proposal.

I don’t mean to be harsh, but I’m suggesting that it’s unnecessary because the 600k general contractor fee is a lot of money to pay someone to not pay any attention to most of what you’ve asked for and then say odd shit to you such as “most of my clients have code names” and “this is where the piano goes” right after you just said you have zero interest in a piano.  Uh oh… I gotta reel this in a little.  Stay out of the dark places.

Going forward, to better adhere to best practices regarding code names, Jenny will be henceforth be Maverik and I will be known as Goose.

Anyway, back to that remaining 825k.

Inside that number, there is over 100k to replace the foundation.  When I challenged our contractor about this he kept saying that this was the ‘right way’ to do it.  I asked what makes it the right way and he said things like “the city likes to see this” and because “it brings the house up to modern standards”.  I couldn’t help but notice that the Going Queen is not a modern house.  It actually seemed quite aged.  And I also noted that we were standing inside it while he was telling me how dire it was.  I felt like if the house was in such bad shape as to justify dropping 100K on a new foundation then we should all immediately get the fuck out and run for our lives.  It occurred to me that people have been living in it for over 100 years.  And I couldn’t help but notice that many of my neighbors homes are also old and nevertheless their homes persisted.

 The way I imagine the scene the day the ‘big one’ strikes, is that we are all standing out in the street together looking at our old damaged homes.  Holding each other tightly every time another aftershock rumbles through.  Someone bravely runs into their home to fetch a bottle of hand-crafted artisanal local bourbon made in an illegally parked RV in old slab town, sprints back out into the street and we all revel in our misfortune as we pass the bottle around.  If I wanted a modern earthquake-proof home, I would build one or buy one of those obtuse boxes that keep showing up on nearby lots.  I want this old home to stay an old home and if it falls down in a major earthquake then we can all commiserate together.  Ironically, I was debating this point with my contractor, who I know lives in an old home a few blocks away.  I asked him if he would rebuild his foundation and like a carnivore selling vegan hot dogs he said “no, I’d just move in”.  Seems like I’m not the only one who doesn’t buy into this ‘right way’ business.

There is over 200k in the project for framing and structural steel.  I was told the house had to be reframed and the floors had to be rebuilt.  Hmmm.  So, the foundation has to be removed and rebuilt, most of the framing has to be redone, each of the interior floors have to be rebuilt and the exterior siding needs to be replaced?  The funny thing is that what I actually asked for was a new roof.  I was told this was not in the budget.  What I ended up getting was a project where the only thing that didn't get updated was the thing I asked to have updated.  So funny Ha Ha right guys?

There is over 100k in the project to build a grand staircase that would be the ‘architectural piece’.  It was explained to me that this staircase was both the focal point of the house but instead it was the focal point of my anger with the design.  This all started because I said “what if we move the staircase away from the front door?”  I think that must have been translated to “OMG I need a new staircase so bad I’m willing to go full stupid for it.”  The staircase idea morphed into this giant monstrosity that ran up the center of the home, taking up over 20% of the total interior square footage, creating new structural engineering challenges and taking away from just about everything we said really mattered to us like a large open kitchen area.  The defining moment was when my contractor said “Trust me, when you go to sell this home, this staircase will sell it for you”.

Correct me if my math is wrong, but this is fucking stupid.  If we did this remodel he’s proposing, and built this cockamamie staircase, at a total project cost of 1.6 million (+ the 700k we bought the house for), how much do you think we'd get for it? Maybe the house would sell for one million tops?  So the benefit he was promoting is that the staircase will ‘sell itself’ for a massive loss.  I've never been a great with personal finances but even I am starting to think this is a bad idea.

 Also, I don’t recall anyone ever saying “well honey, it’s got a tiny kitchen and small bedrooms but OMG that staircase has stirred up such a hankering in me that I just gotta have it”.   In fact, if I meet that person, I would desire to push them down the staircase for being dumber than a bag of hammers.

There is 50k in the proposal to paint the house.  Let’s all pause for a custom muffin break over this one.  I guess we brought this on ourselves.  We should not have said we wanted the home painted by master artisans, in 50 different colors, using very small brushes.

Just pulling your leg there friend.  We said “paint it white”.  He said “everything?”.  We said “yea, every little bit of it should be white”.  While you might judge us for our ultra-homogenized color scheme, you would think that we’d get at least a small discount for that, right?

Custom muffin break over guys.  After all, I’m quite certain that while the muffins are free, I’m paying for the labor to eat them.

Actually, we should stop here.  Working together, we've called out 450k of questionable items in the cost proposal.  Based on our careful analysis of this project, as proposed, I believe we've able to determine that it’s an unmitigated nonsensical disaster in terms of design and fiscal responsibility. 

I told our contractor that we would not be executing this plan.  I also suggested that while I'm no expert it seems a tad insane.

In the end, he graciously offered us our “only other option” which was to sell the property at a loss and get out from under it.  Hmmm.   Seems like we have more options than just these two.  I was hitting myself on the head just saying "think Goose, think!.  There has to be at least one other option!"

Like fire this contractor.

So, with that, we parted ways.  Everything I described above took about eight weeks to work through.  Maybe that explains our prolonged silence.  And frankly, I didn’t much feel like writing about it until now.  Goosies bum was hurting.  We had to pick ourselves up and dust ourselves off.

I don’t think our contractor failed to perform or behaved unethically.  This is my fault.  I got a estimate from him day one that I though was bullshit and shouldn't be surprised that I was right.  However, I do feel that we were ultimately misled and that the project costs were poorly managed and for that I’m thoroughly annoyed.

As I look up and down the street of my new neighborhood, I see many other old homes.  Some have been restored.  Some of them are possibly waiting their turn.  Many more of them have been lovingly and thoughtfully escorted forward through time by their owners and are doing just fine.  I simply just don’t believe that it costs that amount of money to restore an old home.  If it does, then all these cool old homes in Portland are doomed.  And there are thousands of them.  All utterly doomed.  Or maybe not.

Maybe these numbers are just a wicked conspiracy designed to insult our beautiful old homes so they’ll all just give up and become square pre-fab looking boxes of modernist infill.

At some point in the project, our contractor was ruminating on how if The City had their way, with all these regulations and such, only rich people would be able to afford to remodel their homes.  He said it was something he was passionate about.  Like he was a crusader for the common man.  And then he gave me that estimate.  My code name for him is 'The City'.

So, my new close friends, let’s find out the answer.  What does it cost to remodel an old home in Portland?  Maybe I’m wrong and it’s 700K or 1.6M.  Or maybe it’s just some normal sounding numbers that don’t make your ass pucker shut.  Maverick has a beautiful and practical vision for the Going Queen.  I’ve just been hired as her general contractor.  We’re making different plans.

I’ll share that with you next time.

UPDATE: 

My ex-contractor contacted me directly and rebutted some of the claims in this blog post.

He gave me these clarifications and corrections:

  • He told me from the beginning that the Going St house was going to cost more money than you might get out of it and recommended that I not move forward with the project.
  • His company did not mark up any of the materials and services, that is why they charge an overhead fee. Most construction companies are 20% markup on their materials and outside contractors.
  • Portland Disposal, chosen because of its close proximity to our project, charged $8,168.32 for 14 various size dumpsters.  He did not mark up any costs other than the standard profit and overhead that was indicated in the Master Agreement we signed.
  • We were made aware in advance that his company charges $35 an hour for labor.

He said many other things in his response that were opinions or could best be described as the commingling of cherry-picked facts organized into a condecending lecture.  I'm not able to share them with you with out being a reprobate.