by Michele Gillis
Staff Writer
An uncertain market has led many homeowners to decide to remodel rather then move. With the big inventory of new homes, that has been a big opportunity for homebuilders.
The Domino Theory, however, is in play. As homebuilders have become remodelers, long-term remodelers are hanging on. Even more competition has come from newly-formed remodeling companies, started by licensees who have been downsized.
It’s just another dynamic in a rapidly-evolving world.
“Unless you have lived through a depression, no one in our industry has ever seen it like this,” said incoming Northeast Florida Builders Association president Michael Bourré of Bourré Construction. “It’s good and it’s bad.
“It’s bad because a lot of good people have fallen by the wayside and a lot of good people are struggling.
“It’s good because we’ve all learned a lesson that we otherwise wouldn’t have learned. The lesson is to control overhead, watch cash flow and manage your margins.
“When times are really good and you have projects coming in from every direction, you can have fun with it. When things are tight and lean like they are right now, you have to be a good manager.”
The changes in the market have led many potential buyers to choose to stay in their home and remodel rather then try to buy or sell.
Jerry Linder, owner of the J L Linder Group and Property Solutions Alliance, has been a builder for over 20 years. Formerly of The Vintage Group, Linder started his own construction and remodeling company in 2009.
“I’ve been doing remodeling ever since I got into the construction business,” said Linder. “We’ve done remodeling off and on. I wouldn’t say it was our core business for many of those years.”
During the building boom, many new homes were being built and remodeling was targeted to certain parts of the home.
“People are not upgrading their homes by buying a new home,” said Linder. “We are seeing a lot more repair work verses big jobs. We are seeing updating. People have settled in with the idea that it is going to be very hard to sell their home in this market, or the equity that they had in their home has dried up. They understand it may be awhile before they can move into a new home or a different home. We are seeing a lot more updating of their existing kitchens and bathrooms.”
Since the homebuilders have thrown their hat in the remodeling ring, it has affected the business of long-term remodelers like Larry Murr of Lawrence Murr Remodeling. He has been in the construction business for over 30 years, has been dedicated to remodeling since 1992 and is still hanging on despite the new competition.
During the boom, Murr ramped up his company to handle all the business. When the market slowed, he had to downsize and learn how to run a tighter and leaner business.
“More people are looking back at their homes and reevaluating their situation and deciding that they like it but they don’t have a big enough bathrooms or their kitchen is outdated,” said Murr. “I think before people said ‘It costs too much to remodel my kitchen so I’ll just go out and buy a new house’ and we competed against that a lot.
“Today, it’s a reevaluation where people feel they are better off to remodel than to go out and buy a new home. Rather than investing in your home as a profit center, they are now looking at it as far as value. They are also more discriminatory as far as what jobs they do and how much money they spend.”
Murr’s company does the entire scope of remodeling from minor repairs to whole house renovations, though the new competition has hurt his business.
“When things were really busy, the reason we were busy was because the builders were busy,” said Murr. “Builders didn’t want to do remodeling and referred their business to us. Now, builders have started going into remodeling and have a market in their previous customers. We are not getting those referrals.”
Dean Russell Construction has been in the remodeling business for over 30 years.
“I think consumers have chosen remodeling due to the difficulty with selling their current residence at a price that makes sense to them,” said Kim Rose. “Also, remodeling gives them the ability to design and craft a space tailored to their exact specifications.”
Bourré Construction has been open for almost seven years and has been remodeling for about two years.
“When the market turned, I had to reduce staff, cut overhead and find other ways to bring in revenue, so I went into remodeling,” said Bourré. “We do all the components of renovation in new construction outside of the demo. So we were already familiar with the entire scope. It was a very easy transition for a builder to step out of only doing new construction into the renovation work.
“The biggest thing I think everyone has learned out of this is diversification. When there is adversity, you either diversity or you shut your doors and walk away. I think diversification is the key to doing business right now.”
Linder agrees that diversification is the key to surviving in this market.
“The majority of the homebuilders or contractors have their hats in the remodeling arena because, let’s face it, there is a limited amount of new construction work out there,” said Linder. “I think most builders have thrust themselves in any and all forms of construction work to try to make ends meet and try to survive this downturn.”
Shawn Starr of Dreambuilder Custom Homes was downsized from a builder so he started his own company. The new company has been open for a year and is going strong.
“We build custom homes as well as remodels, renovations and additions,” said Starr. “As a newer company, it was planned from the beginning to offer remodeling services. This diversification helps us take advantage of multiple opportunities to earn revenue and build our body of work and by extension, our reputation.”
An issue facing contractors who become remodelers is the difference between new home construction and remodeling. Bidding correctly is an issue that the Northeast Florida Builders Association is trying to address by focusing on the liability surrounding remodeling.
“You really don’t know what is behind the walls until you start tearing them out,” said Bourré. “One of the things we talk to the new guys about is to make sure they know what their real costs are because we all can’t compete in the same industry if you are pricing something out and you end up not covering all of your costs. Then you cut someone else who knows what they are doing out of a job because they priced it higher and properly. We have had new remodelers come in and price it so low that they end up not doing the job right.”
Education is the key to helping the new remodelers, said Bourre. NEFBA is offering classes in paint and remediation, stucco installation, water intrusion control and mold remediation.
The foreclosure market has opened up a whole new door for the remodeling industry.
“With the foreclosure market the way that it is, people are looking at those opportunities and most of those homes are in need of repair, updating and sometimes completion,” said Linder. “That is a large part of the remodeling market.”
Linder created Property Solutions Alliance to solve a need in the market to service the foreclosed and bank-owned properties.
“The purpose of that company is to strictly deal with the distressed asset market,” said Linder. “Our typical clients are banks and private equity groups.”