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Importance of Market Analysis When Creating Value in Residential Construction

By Pat Cardoni

I am starting a new blog series will focus on creating value through custom construction.  This can be done by completing projects on your existing home, a potential purchase of an existing home, or buying a building a new home.  You will notice that I will have a lot of focus on creating value through 2 flat conversion to single family homes.

At SG Home Builders we have developed homes for the past 10 years all over the Chicago area.  Each location that we ventured into we had inquiries from potential clients looking for their own custom construction services.  However, the volume of projects per year we were doing in did not allow us to spare any of our crews or specialty contractors.  With our transition to custom and semi-custom construction we now have the ability to bring 10 years of existing and new construction experience and value creating systems and share them with our clients who have their own project ideas. 
 
Experience and Problem Solving
Before you buy, gut, de-convert, tear down or add on to any potential project you really need to define a few parameters.  OK my nose is growing, there is only one major parameter that you need to define, MONEY! Can you afford to do what you want to do?  This is a tough question to answer, where are we going to get the money to fund our construction project and start creating value?  The fact is that most of us have fixed incomes with incremental raises, Article from USA today. If you are planning to save for years filling up your shoebox with cash, the likelihood of us having the cash to put into our value creating project is slim to none. However, you can take advantage of raising property values in your area to fund your project. 

The good thing about living in the 3rd largest city in America is that gentrification and development means that sometimes we can get swept up in property value increases of double or even triple of what we originally paid. This is when you can use the equity in your house as cash in hand to build that second story or de-convert that two flat into a two story modern single family home. Where most people get lost or frustrated is when they try to put it together. Putting your homes value to work is complicated as it involves valuation and complex lending guidelines.  Oftentimes one industry expert will not understand the process and tell you the best thing to do is to sell your existing home and buy another one.  Certainly it is a great idea, because you are now paying for two real estate transactions, that sounds like a great way to create value.  

I am currently working with multiple families dealing with issues such as this. Property values have increased but they have found very little guidance as lenders are not Real Estate Brokers nor are they builders. Lenders are good at lending, not property evaluation or value creating through construction. Talk to a professional Real Estate broker or an appraiser to get an idea of how much value creation you will be making by completing your customized construction project.  
If you are not looking to remodel an existing project, then the next step in your process will be sight selection to when looking at creating value in real estate.