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I think the problem with this analysis is the assumption that rental units and owner occupied units are identical to one another. In most places, rental units

by keltex 12y ago

I think the problem with this analysis is the assumption that rental units and owner occupied units are identical to one another. In most places, rental units have more basic fixtures an amenities and tend not to be upgraded. It can easily cost of $100K to upgrade a kitchen or bathroom with high quality cabinetry and appliances. And this happens all the time with $1M+ units. I have a house for sale in Mexico and I'm intentionally not renting it out. Why? Because renter occupied units are perceived by buyers as having more wear and tear and low-end than a place that's owner occupied.

knieveltech 12y ago
I am totally fascinated by the concept of a $100k kitchen renovation. What does that even look like? Where I live you can build a small house for $100k.
- mds 12y ago
  Go to houzz.com, click "Kitchen"
- _delirium 12y ago
  Depends heavily on materials (also on size). Granite countertops are in a totally different price range from Corian or laminate, for example (in both cost of materials & cost of installation). Tile floors are also expensive-ish compared to lineoleum, though not as expensive as stone.
- patio11 12y ago
  It's basically a $100k diamond ring, except with more granite countertops. The stock kitchen for a middle-class house in suburban USA and a kitchen with $100k of work done to it are functionally identical for 98% of people who buy them, but the one with $100k spent on it looks like $100k was spent on it (if you're in the know). Less sardonically: "professional-grade" appliances, granite countertops, redone cabinets which were custom-built by artisans out of exotic-but-sustainable wood as opposed to something which came out of a factory in China, etc, will all let you spend arbitrary amounts of money in a kitchen.
  - _delirium 12y ago
    $100k is going way overboard, but I do think a nice kitchen with nice materials makes a significant difference in usability and comfort (a nice kitchen can be had for in the $10-20k range). I've lived in all three of: 1) an all-linoleum cheap suburban house; 2) a nice apartment where the kitchen had tile/stone surfaces; and 3) a recent prefab-via-IKEA wooden-countertop kitchen ensemble. Of those, #2 really was the nicest to use, followed by #3 and #1. Lineoleum and wood are just much less practical countertop materials than any kind of stone. They're fragile and mark easily, so you have to be really careful with knives and hot items. Of the two, linoleum is worse on heat-sensitivity, while wood is worse on picking up stains. Granite has the advantage of being hard to stain or mar, so even though I don't like the look of those black-granite countertops, they are nice to use and maintain. Marble can be cheaper in many places (esp. Europe) and imo actually looks nicer, but is more porous so has to be frequently resealed to avoid stains. If a kitchen is cheap enough, granted, it could be a reasonable strategy to just treat it as disposable and replace the surfaces every few years, if you don't mind it always looking beat-up. I grew up in a home with all linoleum and we did exactly that right before we sold it: put in all-new countertop and floor when we were about to sell and then avoided using it to avoid marring it, so it'd look quite misleadingly nice for the realtor showings. But it wouldn't be my first choice in surface, if I had any spare cash.
    - mechanical_fish 12y ago
      I call upon the over-the-top stylings of professionally trained chef Alton Brown: http://youtu.be/iKkf9YYwmGQ http://youtu.be/iKkf9YYwmGQ ... to explain, kinda painfully, that you can't use a sharp knife on a stone counter or you'll dull the knife. You need a cutting board. Or a wood countertop. I understand the concern about heat but I've cooked with linoleum counters for my entire life, mostly as a baker, and I don't remember damaging one. It's just a question of not getting into the habit of setting hot objects on arbitrary surfaces. I and every cook in my family has a nice little collection of trivets, which cost a few dollars each and often come with college logos or bad jokes on them. Of course, this probably makes us look lower-class. See above under "status symbol". We also have the confidence that, should we make a mistake, we can always buy a second or even a third linoleum countertop and still be saving money over granite or engineered stone. That said, there's a good chance I'll end up owning a stone counter someday anyway just because, in the Massachusetts market, status symbols matter, and signals of recent renovations matter even more. We have a lot of lead paint, buried asbestos, hidden knob-and-tube wiring, and sixty-year-old hack-job plumbing around here, and anything you can do to suggest that your kitchen's walls have recently been opened and pronounced up-to-code is worth doing.
- ChuckMcM 12y ago
  Well lets start with the appliances, Miele double oven $6,000, sub-zero refrigerator and freezer, $8,000. Wolf range $4,000. Kohler faucets, $400, dual in-sink-erator disposals $500, dual dish drawer dish washing machines $5,000, granite counter tops $8,000, red oak cabinets, $8,000. Tile floor and back splashes, $5,000, microwave $1,500. Note I've not added any installation costs or contracting costs or demolition costs. If you want a kitchen that looks like it would be at home in Sunset Magazine its going to cost you quite a bit of money. That said, Sear's appliances, linoleum floor and countertops and Home Depot cabinets? You can do the whole thing for probably $20K tops :-).
  - FireBeyond 12y ago
    As someone who likes high end kitchens... this? "dual dish drawer dish washing machines $5,000" Like what? My "high end" Bosch dishwasher retailed at $1,500 for ultra-silent, low water consumption operation (but was purchased for just over $950) - http://dishwashers.reviewed.com/features/2013-best-of-year-dishwasher-awards http://dishwashers.reviewed.com/features/2013-best-of-year-d... Even double drawers as far as I could see had an RRP of <$2,000. Just curious, not argumentative!
    - ChuckMcM 12y ago
      You are correct, I blew it on that one. My memory of the bid we got way back when they were the new hotness was $2,500 but presumably that was both drawers not each drawer of a two drawer unit. Looking at the Fisher Paykel site they seem to have come down a bit in price too, which is nice. How do you like your Bosch dishwasher? I was pretty disappointed using some of their laundry products I didn't even seriously consider their dishwasher when we remodeled.
      - FireBeyond 12y ago
        I absolutely love it. It really is quiet - to the extent that you can be standing in the kitchen and not know it's on (other than the under door light). To me, the sole downside (and it's subjective, because I actually like it) is that the design of the the cutlery try is not particularly flexible - it has an opinion on how it should be loaded. But everything is great. Low water consumption. Excellent cleaning. Good looks.
- secabeen 12y ago
  Labor costs in CA are also very high. In the area I live, the general price for a new build custom home starts at $300/sqft. Obviously professional builders building a tract pay less than that due to economies of scale, but not dramatically less.
- tptacek 12y ago
  Get unfascinated, because it's easy to spend $100k on a kitchen. I don't know how close we just came to that, but it probably isn't far. I would be embarrassed by the cost, but the stuff that dominates that cost is so basic that none of it seems extravagant. Kitchens are just expensive. In order of cost significance: 1. We demolished the entire HVAC stack, including knocking out an old chimney, and replaced a furnace and hot water heater. The new appliances were nice bonuses, but were a rounding error compared to the labor. That work got us a range hood sufficient for our new stove. 2. We tore the kitchen down to the studs and replaced the windows and backdoor, and created a pass to our dining room. 3. Cabinets. Holy fuck are cabinets expensive. [ huge dropoff in expense happens right about here ] 4. We had an architect plan all the details of the renovation, which sounds silly except (a) the kitchen is better as a result, (b) it prevented us from fighting over feasibility of things we wanted in the kitchen, and (c) it made it easy to get permits. 5. New appliances. For normal people, you'd have to work pretty hard to find reasonable appliances that would significantly impact the cost of a new kitchen. It's not the "professional" appliances that make kitchens cost $100k. 6. Countertops (we wanted something cheap that ended up not working out, so this turned out more expensive than we planned). 7. Tile. We live in a not-particularly-expensive part of town (there's a significant amount of section 8 on our block, which is directly adjacent to the West Side of Chicago). Our house isn't expensive relative to houses in Chicago. But renovation --- real renovation, not just replacing a fixture and putting in new backsplashes --- gets nosebleed expensive fast. My impression is that people used to be able to do stuff like this regularly by taking out home equity loans, on the premise that improving the house increased its value and so was a little like investing on margin. Incidentally: to anyone considering improving a kitchen: get a foot pedal sink. The plumbing for them is cheap (like, a couple hundred bucks installed). It makes a huge difference.
FireBeyond 12y ago
Another issue, bias... "This post is focused on how much a real estate investor should be willing to pay to get out of the shitty deal he or she signed." Realize that the deal wasn't shitty when signed. After many years, along came supply and demand, drove prices up astronomically. Whose obligation is it to free someone from their commitment? This is just an ETF for a landlord.
- tedunangst 12y ago
  I don't think many landlords voluntarily committed to lifetime leases with effectively no rent increases.
  - DmitriRavinoff 12y ago
    The rent control laws were known to the landlord at the time the lease was signed in most cases; the rent control laws in San Francisco haven't changed materially since 1994.

by keltex 12y ago

knieveltech 12y ago

I am totally fascinated by the concept of a $100k kitchen renovation. What does that even look like? Where I live you can build a small house for $100k.

mds 12y ago
Go to houzz.com, click "Kitchen"
_delirium 12y ago
Depends heavily on materials (also on size). Granite countertops are in a totally different price range from Corian or laminate, for example (in both cost of materials & cost of installation). Tile floors are also expensive-ish compared to lineoleum, though not as expensive as stone.
patio11 12y ago
It's basically a $100k diamond ring, except with more granite countertops. The stock kitchen for a middle-class house in suburban USA and a kitchen with $100k of work done to it are functionally identical for 98% of people who buy them, but the one with $100k spent on it looks like $100k was spent on it (if you're in the know). Less sardonically: "professional-grade" appliances, granite countertops, redone cabinets which were custom-built by artisans out of exotic-but-sustainable wood as opposed to something which came out of a factory in China, etc, will all let you spend arbitrary amounts of money in a kitchen.
- _delirium 12y ago
  $100k is going way overboard, but I do think a nice kitchen with nice materials makes a significant difference in usability and comfort (a nice kitchen can be had for in the $10-20k range). I've lived in all three of: 1) an all-linoleum cheap suburban house; 2) a nice apartment where the kitchen had tile/stone surfaces; and 3) a recent prefab-via-IKEA wooden-countertop kitchen ensemble. Of those, #2 really was the nicest to use, followed by #3 and #1. Lineoleum and wood are just much less practical countertop materials than any kind of stone. They're fragile and mark easily, so you have to be really careful with knives and hot items. Of the two, linoleum is worse on heat-sensitivity, while wood is worse on picking up stains. Granite has the advantage of being hard to stain or mar, so even though I don't like the look of those black-granite countertops, they are nice to use and maintain. Marble can be cheaper in many places (esp. Europe) and imo actually looks nicer, but is more porous so has to be frequently resealed to avoid stains. If a kitchen is cheap enough, granted, it could be a reasonable strategy to just treat it as disposable and replace the surfaces every few years, if you don't mind it always looking beat-up. I grew up in a home with all linoleum and we did exactly that right before we sold it: put in all-new countertop and floor when we were about to sell and then avoided using it to avoid marring it, so it'd look quite misleadingly nice for the realtor showings. But it wouldn't be my first choice in surface, if I had any spare cash.
  - mechanical_fish 12y ago
    I call upon the over-the-top stylings of professionally trained chef Alton Brown: http://youtu.be/iKkf9YYwmGQ http://youtu.be/iKkf9YYwmGQ ... to explain, kinda painfully, that you can't use a sharp knife on a stone counter or you'll dull the knife. You need a cutting board. Or a wood countertop. I understand the concern about heat but I've cooked with linoleum counters for my entire life, mostly as a baker, and I don't remember damaging one. It's just a question of not getting into the habit of setting hot objects on arbitrary surfaces. I and every cook in my family has a nice little collection of trivets, which cost a few dollars each and often come with college logos or bad jokes on them. Of course, this probably makes us look lower-class. See above under "status symbol". We also have the confidence that, should we make a mistake, we can always buy a second or even a third linoleum countertop and still be saving money over granite or engineered stone. That said, there's a good chance I'll end up owning a stone counter someday anyway just because, in the Massachusetts market, status symbols matter, and signals of recent renovations matter even more. We have a lot of lead paint, buried asbestos, hidden knob-and-tube wiring, and sixty-year-old hack-job plumbing around here, and anything you can do to suggest that your kitchen's walls have recently been opened and pronounced up-to-code is worth doing.
ChuckMcM 12y ago
Well lets start with the appliances, Miele double oven $6,000, sub-zero refrigerator and freezer, $8,000. Wolf range $4,000. Kohler faucets, $400, dual in-sink-erator disposals $500, dual dish drawer dish washing machines $5,000, granite counter tops $8,000, red oak cabinets, $8,000. Tile floor and back splashes, $5,000, microwave $1,500. Note I've not added any installation costs or contracting costs or demolition costs. If you want a kitchen that looks like it would be at home in Sunset Magazine its going to cost you quite a bit of money. That said, Sear's appliances, linoleum floor and countertops and Home Depot cabinets? You can do the whole thing for probably $20K tops :-).
- FireBeyond 12y ago
  As someone who likes high end kitchens... this? "dual dish drawer dish washing machines $5,000" Like what? My "high end" Bosch dishwasher retailed at $1,500 for ultra-silent, low water consumption operation (but was purchased for just over $950) - http://dishwashers.reviewed.com/features/2013-best-of-year-dishwasher-awards http://dishwashers.reviewed.com/features/2013-best-of-year-d... Even double drawers as far as I could see had an RRP of <$2,000. Just curious, not argumentative!
  - ChuckMcM 12y ago
    You are correct, I blew it on that one. My memory of the bid we got way back when they were the new hotness was $2,500 but presumably that was both drawers not each drawer of a two drawer unit. Looking at the Fisher Paykel site they seem to have come down a bit in price too, which is nice. How do you like your Bosch dishwasher? I was pretty disappointed using some of their laundry products I didn't even seriously consider their dishwasher when we remodeled.
    - FireBeyond 12y ago
      I absolutely love it. It really is quiet - to the extent that you can be standing in the kitchen and not know it's on (other than the under door light). To me, the sole downside (and it's subjective, because I actually like it) is that the design of the the cutlery try is not particularly flexible - it has an opinion on how it should be loaded. But everything is great. Low water consumption. Excellent cleaning. Good looks.
secabeen 12y ago
Labor costs in CA are also very high. In the area I live, the general price for a new build custom home starts at $300/sqft. Obviously professional builders building a tract pay less than that due to economies of scale, but not dramatically less.
tptacek 12y ago
Get unfascinated, because it's easy to spend $100k on a kitchen. I don't know how close we just came to that, but it probably isn't far. I would be embarrassed by the cost, but the stuff that dominates that cost is so basic that none of it seems extravagant. Kitchens are just expensive. In order of cost significance: 1. We demolished the entire HVAC stack, including knocking out an old chimney, and replaced a furnace and hot water heater. The new appliances were nice bonuses, but were a rounding error compared to the labor. That work got us a range hood sufficient for our new stove. 2. We tore the kitchen down to the studs and replaced the windows and backdoor, and created a pass to our dining room. 3. Cabinets. Holy fuck are cabinets expensive. [ huge dropoff in expense happens right about here ] 4. We had an architect plan all the details of the renovation, which sounds silly except (a) the kitchen is better as a result, (b) it prevented us from fighting over feasibility of things we wanted in the kitchen, and (c) it made it easy to get permits. 5. New appliances. For normal people, you'd have to work pretty hard to find reasonable appliances that would significantly impact the cost of a new kitchen. It's not the "professional" appliances that make kitchens cost $100k. 6. Countertops (we wanted something cheap that ended up not working out, so this turned out more expensive than we planned). 7. Tile. We live in a not-particularly-expensive part of town (there's a significant amount of section 8 on our block, which is directly adjacent to the West Side of Chicago). Our house isn't expensive relative to houses in Chicago. But renovation --- real renovation, not just replacing a fixture and putting in new backsplashes --- gets nosebleed expensive fast. My impression is that people used to be able to do stuff like this regularly by taking out home equity loans, on the premise that improving the house increased its value and so was a little like investing on margin. Incidentally: to anyone considering improving a kitchen: get a foot pedal sink. The plumbing for them is cheap (like, a couple hundred bucks installed). It makes a huge difference.

FireBeyond 12y ago

Another issue, bias... "This post is focused on how much a real estate investor should be willing to pay to get out of the shitty deal he or she signed." Realize that the deal wasn't shitty when signed. After many years, along came supply and demand, drove prices up astronomically. Whose obligation is it to free someone from their commitment? This is just an ETF for a landlord.

tedunangst 12y ago
I don't think many landlords voluntarily committed to lifetime leases with effectively no rent increases.
- DmitriRavinoff 12y ago
  The rent control laws were known to the landlord at the time the lease was signed in most cases; the rent control laws in San Francisco haven't changed materially since 1994.