Should I go through with my renovation during the coronavirus outbreak?

As New York City remains on "pause" while it continues to face the novel coronavirus (Covid-19) pandemic, many homeowners are reevaluating their renovation plans.

Below, Bolster weighs the pros and cons of renovating during these challenging and uncertain times, and offers advice to homeowners on what steps they should take to ensure a successful renovation.  

Scenario #1: You are planning to start your renovation in the near future

You own your home, or just closed on a home, and you are about to start the design phase of your renovation project. This situation works like a charm for you, as there is almost no downside—only upside! However, it’s worth noting that homeowners that are not under pressure of a timeline may choose to (or be required to) reevaluate their renovation during this public health crisis.

Pros

There may be deals to be had. Property values may drop, and you may be able to get a better deal if you are closing on the property now. Likewise, your design-build team may be able to negotiate across the board with all subcontractors, which may bring the cost of your renovation down. Many of Bolster’s preferred subcontractors expressed that they would be flexible with pricing in solidarity with the stock market decline.

Compass real estate agent Jessica Hirsch, who has worked with multiple Bolster homeowners, offered her insights into the NYC real estate market. “This year, the spring market started out strong with very low interest rates and a good amount of new inventory,” she said. “There are great real estate opportunities for investors and first-time home buyers alike.”

Ian Katz of Ian K. Katz Group, echoed a similar sentiment. “Interest rates were already low before the virus story sprouted, and now they are even lower,” he said. “A few of my purchaser clients are using the low rate environment as an opportunity to increase their loan size when purchasing, and recent clients are using the opportunity to refinance mortgages.”

Ian also noted that as the equities markets continue to fall, his clients' liquid asset portfolios are moving downward in tandem, and it is changing how they navigate purchase opportunities, as well as the scope of the projects they’re willing to take on with a bit less liquidity to spend on them. Particularly with post-close reno, clients nearly always fund their projects with savings stuffed away in securities portfolios, as renovation loans aren't easy to find.

The timeline works for you. You are about to begin the design phase of your renovation, which can take four to six months on average (with six being the average at Bolster). Although NYC is still on “pause” through May 15th, this will eventually (albeit slowly) be lifted. Other states that are starting to open back up have cited industries like construction to open up first. Architects and procurement specialists will know which products should be specified or not as a result of having handled renovations that were further advanced in the process. Relax, breathe, and enjoy the design phase! 

Scenario #2: You are in the final design phase and are starting construction soon

You’ve spent months planning your renovation. Armed with plans and permits, you are ready to start with construction.  

Pros

The early stages of a project are easier to manage. Good news: your project has not started yet, and therefore you are likely to be at a low-impact stage of your renovation. You are either about to start asbestos removal or abatement, or about to start demolition.

The early stages of a project are easier to coordinate, and your project manager will have plenty of time to kick-start it again while working from home. This means that you will not have to deal with your subs being halfway through your project. This is a good thing because it’s less risk.   

Private companies are agile. Government guidelines may differ from private company guidelines, and while both should take the CDC seriously, private companies are more nimble. Therefore, if you are doing a brownstone renovation, you are likely to get less inspections from the DOB, as they will also have to start and stop, and that requires coordination. 

Cons

You may run into backorder issues. You spent ages doing your specs and choosing your FF&E (furniture, fixtures, & equipment), and now you have just found out some of these are on backorder. Your team may recommend alternatives—for example, that you select similar scope items from national suppliers. This may ultimately mean more work for you. 

The response from Bolster’s preferred vendors regarding this challenge has been mixed, as it is still unclear what the ultimate impact of Covid-19. So far, most vendors have not had any significant disruptions, but some are seeing slightly longer lead times on certain items and occasional shortages on items that would normally be in stock.

Additionally, with the uncertainty surrounding possible extensions of the "pause" order, it's very difficult to predict what the next few weeks will look like. As such, vendors recommend placing all orders sooner rather than later to avoid any issues.

Costs may go up. Your FF&E may become more expensive as a result of scarcity and unusually high demand. 

Scenario #3: You are already renovating—in other words, you’ve ‘broken ground’  

You are well underway on your renovation—either finishing design, or about to start construction.

Pros

Your project will advance faster. A major pro of having started the renovation process is that your project probably advanced faster as the situation developed. All contractors (including Bolster) did well to double down on the energy and coordination necessary to give your project a higher than average pace. 

You likely have your fixtures and fittings. Your product orders may have already been placed. Therefore, if there are supply chain issues further down the line, you are likely top of the list and/or your products are already stored in a warehouse. 

The hardest decision has been made. Sometimes the hardest part of a renovation is actually deciding to commit to one. Since your renovation is already underway, you won’t waste additional energy on considering whether you should do it now or hold off! Reach out to your team if you have specific questions, and be sure to know what the contingency or remobilization plan is. Bolster has released its Covid-19 Remobilization Guidelines to its homeowners, partners, and subcontractors, and encourages sharing this resource with those in the industry in order to promote safe and effective work environments.

Cons

Your project is likely currently be on hold. Due to the “pause” order, all non-essential work, including construction, has come to a halt. There are always cost implications to demobilizing and mobilizing a project, which comes with its own headaches. The programming of subs can be the hardest one here because your project was probably on a roll, and a start-and-stop means that your project manager will have to re-book all of your subs. However, as mentioned above, good contractors already have in place an accelerated plan, and those with volume will get priority for remobilization.

You may pay more for protection. Your site, whether it’s a single-family brownstone or in an apartment or condo building, will have to be protected accordingly from the risks of Covid-19. Unfortunately, there may be additional costs associated with this.

Your project may be more at risk for overtime or injuries. If your general contractor is moving faster than normal, there may be overtime implications and/or the risk of injuries (overworked field teams are more likely to be injured due to fatigue). 

No matter what, NYC will see this through.

A positive outcome is that when disaster hits the city, the community comes together. New York City is a vibrant and resilient city that will see this public health crisis through—something Bolster understands and feels deeply.

“We specialize in lowering the risk of all our renovation projects,” said Anna Karp, Bolster’s COO and co-founder. “As such, we’re an established and trusted team that provides transparent pricing and communication to our homeowners, ensuring they feel secure and protected in pursuing what is likely the largest investment they’ll ever make. During uncertain times, homeowners need to know that they have a true partner in their renovation. We are happy to be here for them in good times and the bad!”

Jessica expressed similar sentiments about the real estate industry. 

“Although everyone will be affected by the coronavirus worldwide, in a city that never sleeps, the real estate market will continue to transact,” she said. “I'm extremely impressed with the level of preparedness and precaution real estate professionals are taking to ensure the safety and well-being of our clients.”

It’s very difficult to predict what the next few weeks will look like—both for the industry and the world. Whatever happens, NYC homeowners should feel informed and empowered in making the best decisions for their renovations.

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