The good deal: building salvage

Bet this owner got a great deal on those windows...

Have you ever walked in to a friend’s house that they just finished remodeling and nothing matches? Your friend will then proceed to tell you about the “good deal” they got on everything.

Most of what you will find in your typical "building salvage" stores falls in to this category, quality tile but not enough for the entire bathroom. High end light fixtures but just one of them. Individually, these items might indeed be a good deal, the problem is that they will look chaotic and uncoordinated.

Building salvage stores often have lots of items that “just need a little work”. The door with the damaged casing, the cabinets with the miss-matched hardware. While individually these all seem like a good deal, the problem is they inevitably turn into a time suck tracing down replacement pieces and hardware that has a corrosive effect on your schedule.

While there are many products that lend themselves to E commerce, books, music, electronics, building materials do not fall into this category.

Case in point, plumbing fixtures, especially high-end brands like Grohe are notoriously confusing to order.  The chances of getting this wrong are high, and then you’ll have delays, re-orders and an aggravated plumber.

When an owner supplies materials to the contractor, the contractor will not warrantee them and if there is a defect or you ordered the wrong thing, then it’s the owner’s problem to resolve.

BuildSmart take away: Building salvage isn't always the "good deal" it seems. With BuildSmart, we can turn you into an informed buyer when it comes to your remodeling project. Contact us today.

Understanding transaction costs

The question is often asked, how long to hold should I hold on to my property. It’s impossible to answer this question without first understanding the concept of transaction costs.  Transaction costs are part of every economic exchange, if you’re selling some stocks that you own, when you sell them, the brokerage (on-line, in person it doesn't matter) deducts their fees from what you sell.

So, unless the stock price increases more than what you paid, including the transaction cost value, you would not make money on the sale of your stock (we will ignore the tax consequences at this point).

While there are more components to real estate transaction cost, the concept is still the same. Unless your gain is more than the value of the transaction costs, you will not make any money.

When prices were steadily rising every quarter, the appreciation would help offset the transaction costs, making it possible to profitably sell. In our current environment of flat prices, this obviously isn’t the case.

The only way to predictably account and mitigate transaction costs is to create value when you buy.

We’ve never seen a real estate transaction where the transaction costs came in less than the estimate. Seems like they are always more. The temptation is to ignore them as a “cost of doing business” but this is precisely what you don’t want to do. In fact, on any project you work on, you should include a contingency on these items also.

The other items that should figure into any analysis of how long to hold your property are the tax consequences of selling and rate of appreciation in the market area.

More about this important topic to come.

Let BuildSmart help you analyze the market for your home and help you make good choices around building value in your property.

Your friendly neighborhood bank?

Since, the old model of building value in real estate relied on appreciation or long term holding of a property, and neither of those conditions exists in the current market, then there needs to be a new model to take its place: a new paradigm to participate and win in the new real estate market.

Is your bank looking out for your interests?

If life were life a marketing piece from one of the national banks:

• The college kids are all quietly reading in the sun drenched library alcove - not outside smoking while they check their iPhones
• Every new car would come with a giant red bow attached
• Smiling families would be moving into their sparkling new home, as opposed to inside with the lights out, wondering how long they cannot stop paying their mortgage before going into default

As an industry, the financial services industry spends over $10 billion on advertising. This is on par with the auto industry. The reason they can spend this much on advertising is how insanely profitable this industry is.

Think about it, you deposit your money at 1.5 %(maybe) and meanwhile the fees on your credit card are 23%, with that kind of spread they can pay for a lot of feel good advertising. The financial services industry is implicit in the financial meltdown. Looking for them for a solution is ridiculous.

With BuildSmart, we'll help you understand all the options available to you as a home buyer and home owner - options that are helping you build value - not lining the pockets of millionaires.