Staging and fixing houses are rarely profitable. They are usually a waste of your money.

It is easy to demonstrate its cost effectiveness. Look at the sale prices of unstaged homes or condos and staged homes or condos with the same floorplan in the same building or development.

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My Sunday paper today has a big article about a staging company named Revive. The owner says sellers who do not use his services leave 15% to 20% of the home value on the table. That’s a lot. So prove it. They charge $80,000 to $160,000! Jesus H. Christ on a crutch!

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Do they proves it works? Not in the article. He says it adds 15% to 20% of the sale price. Actually, that is breakeven compared to his leave-on-the-table quote.

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You don’t have to take my word for this. Remodeling Magazine does an annual survey on the payback you get in increased resale value from various common improvements like redoing a kitchen or adding a powder room.

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Here is their 2023 report:

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The Revive owner says the seller should get back $2 for every $1 they spend. That is a widely used rule of thumb in real estate. My friend Bill Nickerson had the same rule in his book How I Turned $1,000 in a Million in Real Estate In My Spare Time.

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The Remodeling Magazine report shows what percent of the cost of the renovation you get back on resale. I doubt they are deducting the commission or other seller expenses raised by the renovation.

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To meet the $2 for each $1 spent target, the percent increase in sale price, the percent in the report needs to be 200% or more. The best four range from 100.9% to 103.5%—breakeven. and the breakeven projecting question are minor jobs that cost $2,000 (new front door) to $17,000 (HVAC conversion electrification—whatever that is). Your own common sense should tell you that a new front door alone is not going to jack the price of the median $400,000 house by 15% ($60,000) to 20% ($80,000). Indeed, the magazine says the new front door costs$2,214 and only raises the building value $2,325. The other 19 projects all cost more than the amount by which they increase the value of the house.

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So Remodeling Magazine provides proof of the value of their services. I said above how stagers could do the same. Crickets. The reason is they tried and found that the cost of staging is not cost effective. If it was cost effective, they would show you the proof. That fact that they only vaguely imply it, tells you they are lying.

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If your Realtor® says staging will raise the sale price, tell him or her that you will do the staging therefore only will pay the commission on the sale price minus 20% of the sale price. They won’t go for that. Fine. No staging.

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Is it possible to make a profit on fixers which is a similar process? It is extremely difficult to make a profit by fixing up a house. I wrote two books on how to actually do it.

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Zillions of investor claim they profit from fixers. They lie. Get the address of the property. Find out the cost of the fix-up. get the purchase and sale prices (they are in the deed recorders office). Find out what the average house in that neighborhood sold for when this house was bought and what they sold for when it sold. That percentage increase is call beta. It is what your bragadocious fixer would have got if he had done nothing. Then calculate the percentage increase he actually got. Then subtract the fix-up costs. Any amount by which it exceeded the do-nothing average appreciation, is called alpha. That is profit made by the fix-up efforts of the braggart. In the vast majority of cases, the braggart’s purchase price plus fix-up costs produced a sale price about the same as the neighbors who did nothing in the same time period.

A fixer is only profitable if the appreciation exceeded that of neighboring comps that were NOT fixed up AND exceeded the cost of the fix-up. In other words, the braggarts are falsely claiming a house that went up in value same as its neighbors who did NOT fix up BECAUSE of the fix up. No. They just went up same as if no fix up had been done because of marketwide appreciation.
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