New Builder Itis

What it is

New builder-itis is the sickness of walking into a house and only seeing what needs to be ripped out. Every cabinet has to go. Every stick of trim. Every drywall. The disease is a lack of creativity, not a lack of budget.

Here’s the thing about drywall specifically: once you take drywall off, you need to bring everything underneath up to code. A lot of houses built in older times were built to the codes at the time. They weren’t built badly — they were built right for when they were built. Part of being a successful, profitable flipper is understanding what grandfathering is and not opening things up that are going to cost a bunch of money. That separation between new building and rehabbing — if you open everything up and start everything new, you might as well tear the house down and build something brand new. Then every house on every block would look exactly the same.

If you keep ripping things out, at some point you become a new builder. And being a new builder puts you the furthest possible distance from the livability threshold on the scale of livability. That means maximum risk.

Why it matters

I had a contractor come in and not follow the plan on one of my houses. He tore all the drywall down — dropped the insulation from the attic space, exposed all the old wiring. Now I had to pay for new drywall, new insulation, new walls had to come up to current electrical code, all the framing had to get headers. He turned what should have been a straightforward scope into a project that probably added $20,000 to $25,000 to the budget. And some of the money already spent was wasted, because if the walls had just been open from the start, all that work would have gotten done within the original $25,000 we were already spending.

The principle is real estate’s version of recycling. Take what’s there and figure out how to reuse it. It’s not cutting corners. Cutting corners is knowingly leaving unsafe, liable things inside a house. Grandfathering is understanding that something was built right to the codes of its time and not disturbing it unnecessarily.

When you do rip everything out, you don’t just pay for the new thing. You pay for the demo, the haul-off, the prep, the install, and the risk that you open a wall and find something worse. Every unnecessary tear-out is money you didn’t have to spend and time you’re adding to the schedule. Every additional week in the house is more holding costs.

How it shows up

The question to ask in every room is: “Can I keep this?” If paint and hardware fix it, keep it. If a $50 repair saves a $5,000 replacement, make the repair. Reserve tear-out for the big three and for anything actively bleeding. Everything else earns its way to stay in the house.

The cousin of new builder-itis is the hgtv dilemma — wanting everything to look like a design magazine. They often travel together. New builder-itis is wanting everything to be new. HGTV dilemma is wanting it to look custom. You can catch one without the other, but when they travel together, the scope creep is brutal.

Tenant turnovers are where this shows up most expensively. A turnover should cost $3,000 to $5,000: paint, a bit of flooring, maybe a toilet. A new-builder-itis investor turns that same turnover into a $25,000 job because the cabinets felt dated. None of that shows up in the rent. None of it changes the comp.

Related

hgtv dilemma, over renovating, baseline, big three, scope creep, grandfathering