HGTV Dilemma

What it is

The HGTV dilemma is when somebody watched a little too much HGTV and now they know all the design styles. The problem is they want to use them all in the same house, maybe in the same room.

There’s mid-century modern, farmhouse, ultra-modern, craftsman. A lot of people have been looking at all these styles and they get excited about it. They buy their first flip house and they end up just doing all of the styles. What that actually does is confuse buyers. To demand the best price, you need the biggest market. Mixed styles make the house feel small because instead of somebody coming to buy a house, they’re buying rooms. Each room is a separate style. It doesn’t feel cohesive.

When I first started out in this game, like a lot of people, I thought: I want to make this house just like I would want to live in it. I’m going to be the designer because I know about colors and shapes. That seems great. It feels like the right thing to do. But the reality is what most people end up doing is over-renovating for that specific neighborhood.

Why it matters

Once you over-renovate, you have to price the house in a way that makes sense for you — which just prices out whoever was going to buy in that specific neighborhood. You might think you’re doing the right thing, but you’re actually doing a disservice. And if you really do have good intentions for the people who are going to be buying or living in your homes, the best thing you can do is stay in the game. If you over-renovate houses, you are not going to stay in the game.

There’s a limit, the range of comps, and you just can’t push past it no matter how nice your cabinets are. Every extra dollar you spend past the baseline has an ROI under 1:1. You buy that house and you bought those cabinets at what they’re worth in that neighborhood. When you rip them out and put in nicer ones, you are literally throwing the original investment away.

The scope drift is also what kills margins. A good scope of work planned on the front end, held to through the project — that’s the protection. The minute you start saying “while we’re in here we might as well…” you’re feeding the HGTV dilemma. I call it the give-a-mouse-a-cookie problem. You put in new floors, then the trim looks old against the new floors, so you replace the trim, then the walls look grimy against the new trim, and now you’re doing a humongous renovation when you planned on spending a few thousand dollars.

How it shows up

I’m not knocking the creative types that want to hodgepodge. But you have to understand that if you are hodgepodging, you’re focusing more on creative expression than on your ROI.

The countermoves: the buy box keeps you in median-priced houses in B-class neighborhoods where the ceiling is known and over-renovation gets punished obviously. The scale of livability tells you exactly where in the comp range you’re aiming. Construction comps — looking at what other comparable sold houses actually had in terms of finishes — tell you what the baseline is for that neighborhood. If they had shaker cabinets and butcher block, you do shaker cabinets and butcher block. If they had painted cabinets, you paint cabinets. You don’t decide what you’d do if you lived there. You decide what the sold houses in that neighborhood had.

The litmus test: would a buyer in this neighborhood pay for this choice? If the answer is no, you’re designing for HGTV, not for the market.

Related

baseline, big three, hodgepodger, over renovating, scale of livability, range of comps, the gentrifier, speculation