Fixer-uppers get new lease on life
Revive Real Estate is part of a new breed of “presale renovation” companies that help consumers do simple makeovers before putting their homes on the market
Fixed-up homes tend to sell faster and for more money than fixer-uppers.
But some owners would rather sell their home as-is than face the hassle of getting it into turnkey condition.
“People don't do it, mostly because they've had bad experiences with renovations. There's lots of anxiety,” said Michael Alladawi, chief executive and founder of Revive Real Estate, an Irvine company that helps homeowners refurbish their properties. “It's not uncommon to hear horror stories, or to hear (it took) double the time and double the cost.”
But those sellers, Alladawi said, “are leaving money on the table.”
Revive, founded four years ago, claims its business takes the hassle out “presale renovations.”
Revive helps homeowners evaluate the cost and potential value of revamping kitchens and bathrooms and renovating floors. If refurbishing boosts the home's value enough to make it worthwhile, Revive hooks clients up with contractors and oversees the construction. They even pay for the work, getting reimbursed from sale proceeds.
If the homeowner needs cash fast, Revive will buy the home at 80% of its value, using the remaining equity to cover renovation costs. After the home sells, Revive gives the owner a second check, handing over all the profits minus renovation costs, closing costs and a 6% fee.
Since its founding in 2020, Revive has expanded to Texas, Florida, Washington and Tennessee. It has renovated about 2,000 homes, most of them in the Bay Area and Southern California.
We sat down with Alladawi recently to learn more about his company and the benefits of giving homes a facelift. The interview was edited for space.
Q What inspired you to create this company? A The mission is to automate home flipping for the consumer. And by flipping, I mean strategically update your home to bring it to market that maximizes sales value.
Consumers usually leave about 15-20% of the money on the table by not maximizing the value of their homes when they sell.
And in California, that's a lot of money. If we're talking about a milliondollar, entry-level home, that's $200,000. Or for a $2 million home, that's $400,000 that people are leaving on the table, simply because we have an aging inventory.
Everything is built in the `70s, `80s or the `90s. Even the 2000s is dated.
They have homes that are dated that would greatly benefit from some strategic upgrades. Q Why don't more sellers renovate homes?
A The renovation space has had no innovation ever. The contractors still put contracts together on a paper napkin. Their wives are coordinating material procurement.
The types of contractors that people hire, they're good guys, but they need support. And they don't have it.
Essentially, we can be the consumer-facing entity that takes care of all the front- and back-office tasks of a contractor, letting the contractor focus on one thing, which is man-powering that job.
Q How exactly does your service work?
A (We help with) the evaluating, planning and execution.
First of all, (we assess) what the after-renovated value of a home could be and what the as-is value of the home is today.
Is there a delta between after-renovation value and as-is value?
Sometimes there isn't. Maybe you have a really nice house. And sometimes that delta is very big.
The second step is planning. Once you understand there is an opportunity to increase the value, you have to decide what is your scope and what is your budget.
Are you going to paint the kitchen or replace the kitchen? Are you going to remodel all the bathrooms or one bathroom? Are you going to refurbish the floors or change the floors?
And then the third part of the equation is the execution.
Revive helps homeowners figure out those things, and then Revive matches you with a contractor that is supported, that can execute predictably on your project. And Revive pays that contractor upfront, so you don't have to until your home sells.
Q
How do you make money?
A
We're doing (support) work for the contractor, and for that we charge the contractor a fee. And Revive purchases that contract. For giving them money up front, they give us a discount of 3-5%.
And Revive only takes on projects in a market where homes move in 6090 days or less, and we only take on renovations that can be completed in a maximum of 60-90 days.
We keep it simple. Cosmetic renovations (where permitting) can be done over the counter (at city hall). And these are the biggest value-add items. Kitchens. Bathrooms.
Q Does Revive build ADUs (accessory dwelling units)?
A Not today because we haven't figured out how to do it in 90 days or less. Q What does a typical job cost?
A Our average budget for renovation is $80,000 to $160,000. And the average scope is a new kitchen, a couple bathrooms, floors, baseboards and paint.
Q How much can remodeling add to the sale price of a home?
A Typically, 15 to 20%. Of the homes we've remodeled, that's how much value we're adding.
And a good rule of thumb for consumers is if you can put $1 in and get $2 out, it's a good deal.
Q What are the most common pitfalls when remodeling your home?
A Finding and vetting a contractor is a very difficult thing for the general consumer.
They all use different contracts. They all write their bids differently. Sometimes it's really hard to understand what you're getting when you're looking at a bid. What's included, what's not included.
Sometimes what looks to be the lowest bidder ends up costing the most because it excludes so many things that you may not even know are necessary.
The only guy that gets hired is the cheapest guy. So, contractors have figured out how to manipulate their bids to appear cheaper by excluding things that they know will need to be added in later.
That's why it's common to hear people say their budget doubled. Well, yeah, because they went with the cheapest bidder that excluded things that they knew needed to be included.