Real estate investor Paul Locatelli learned one of his first property lessons the hard way. He says never start renovations before the house gets appraised.
A Costly First Lesson
Back in 1998, Locatelli bought his first home and jumped right into a remodel. Excited to make it his own, he tore out the kitchen before the appraisal took place. He remembered thinking, “Hey, it’s my house now. I’m going for it.”
Then the lender called with news that would make any first time buyer nervous. “They said, ‘We’re going to come by and do an appraisal,’” he recalled. At the time, he did not realize how important that visit was. The lender explained that an appraiser checks to make sure a property has the essentials, like a working kitchen and bathrooms, and verifies that everything is in usable condition before finalizing the loan.
That is when it hit him. “Uh, there’s no kitchen. So what now?”
The Home Appraisal Scare
Without a complete kitchen, the property might not qualify for financing. Locatelli and his partner began to worry. “We were freaking out going, ‘Do we have to put down all $250,000 to buy this house?’” That was the full price of the home back then, and paying all cash was not an option.
Fortunately for him, the lender worked some magic. Instead of doing a full interior appraisal, they opted for a simple drive by inspection. “They just measured the outside. They didn’t look in the house,” he said. “So I got lucky.”
The Takeaway for Buyers
The experience taught him a memorable rule for buying real estate: wait until after the deal closes to start renovating.
As Locatelli put it, “When you’re looking to buy a house, don’t ever tear out the kitchen first. Just make sure it’s yours. Close it. Meaning you got the lending, you got the money, you got the appraisal, and it’s your house.”
His story is a reminder that in real estate, timing is everything. Even small missteps, like removing a kitchen too early, can put your purchase at risk. Although you may be excited to get started, always wait until everything is finalized to renovate.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
