Homes that have been fixed up tend to sell more quickly and for a higher price compared to homes that need fixing.
However, some homeowners prefer to sell their home as it is, rather than dealing with the effort of making it ready for sale.
Michael Alladawi, the CEO and founder of Revive Real Estate, mentioned that people are hesitant to renovate their homes due to past negative experiences with renovations, which often involve delays and additional costs.
Alladawi believes that these sellers are missing out on potential profits.
Revive, established four years ago, claims to simplify the process of pre-sale renovations.
Revive assists homeowners in evaluating the cost and potential value of upgrading their kitchens, bathrooms, and floors. If the refurbishments increase the home's value enough to justify the expense, Revive connects clients with contractors and supervises the construction. They even cover the cost upfront, and get reimbursed from the proceeds of the sale.
If homeowners need quick cash, Revive can purchase the home at 80% of its value, using the remaining equity to cover renovation expenses. After the home is sold, Revive provides the owner with a second check, delivering the profits minus the renovation costs, closing costs, and a 6% fee.
Since its establishment in 2020, Revive has expanded to Texas, Florida, Washington, and Tennessee. It has renovated approximately 2,000 homes, with the majority located in the Bay Area and Southern California.
We recently spoke with Alladawi to learn more about his company and the advantages of enhancing homes. The interview has been edited for brevity.
Q: What motivated you to establish this company?
A: The goal is to streamline the process of home flipping for consumers. By flipping, I mean strategically updating your home to prepare it for the market in a way that maximizes its selling price.
Homeowners often leave about 15-20% of the potential value of their homes on the table when they sell.
In California, this amounts to a significant sum. For instance, in the case of a million-dollar home, that's $200,000, and for a $2 million home, it's $400,000 that people are not capitalizing on due to the aging inventory of homes.
Most homes were built in the '70s, '80s, or '90s, and even those from the 2000s are considered outdated.
There are homes that require updates and would benefit greatly from strategic improvements.
Q: Why do more sellers not renovate their homes?
A: The renovation industry has seen minimal innovation. Contractors still put contracts together on paper napkins, and their spouses handle material procurement.
The contractors that people hire are competent, but they require support, which they currently lack.
Essentially, we can be the consumer-facing entity that handles all the administrative tasks of a contractor, allowing the contractor to focus solely on the labor aspect of the job.
Q: How does your service operate exactly?
A: (We assist with) the assessment, planning, and implementation of renovations.
First, we evaluate what the home could be worth after renovation and what it is worth in its current state.
Is there a difference between the value after renovation and the current value?
Sometimes there isn’t. Perhaps you already have a very nice house. And sometimes that difference is significant.
The second step is planning. Once you realize there is an opportunity to increase the value, you have to decide on your scope and budget.
Are you going to paint the kitchen or replace it? Are you going to remodel all the bathrooms or just one? Are you going to refurbish the floors or change them?
And then the third part is the execution.
Revive helps homeowners figure out these things and then matches them with a contractor who is supported and can reliably carry out their project. And Revive pays that contractor upfront, so homeowners don’t have to until their home sells.
Q: How do you make money?
A: We’re doing support work for the contractor, and for that we charge the contractor a fee. And Revive purchases that contract. For giving them money up front, they give us a discount of 3-5%.
Revive only takes on projects in a market where homes sell in 60-90 days or less, and we only take on renovations that can be completed in a maximum of 60-90 days.
We keep it simple. Cosmetic renovations, where permitting, can be done over the counter at city hall. And these are the biggest value-add items: kitchens, bathrooms.
Q: Does Revive build ADUs (accessory dwelling units)?
A: Not today because we haven’t figured out how to do it in 90 days or less.
Q: What does a typical job cost?
A: Our average budget for renovation is $80,000 to $160,000. And the average scope is a new kitchen, a couple bathrooms, floors, baseboards and paint.
Q: How much can remodeling add to the sale price of a home?
A: Typically, 15 to 20%. Of the homes we’ve remodeled, that’s how much value we’re adding.
And a good rule of thumb for consumers is if you can put $1 in and get $2 out, it’s a good deal.
Q: What are the most common pitfalls when remodeling your home?
A: Finding and evaluating a contractor is a very difficult thing for the general consumer.
They all use different contracts. They all write their bids differently. Sometimes it’s really hard to understand what you’re getting when you’re looking at a bid. What’s included, what’s not included.
Sometimes what looks to be the lowest bidder ends up costing the most because it excludes so many things that you may not even know are necessary.
The only guy that gets hired is the cheapest guy. So, contractors have figured out how to manipulate their bids to appear cheaper by excluding things that they know will need to be added in later.
That’s why it’s common to hear people say their budget doubled. Well, yeah, because they went with the cheapest bidder that excluded things that they knew needed to be included.
Michael Alladawi Profile
Job Title: CEO and founder
Organization: Revive Real Estate
City of Residence: Irvine
Education: Bachelor’s degree in biology
Previous jobs: Manager for One Legacy, president of Umbrella Capital Group, broker at The Plaza Group Realty.
