Remodeling to Build Wealth

Walking with remodeler Steve Jordan through a once-dilapidated, modest-sized home that his firm, Rebuilding America Inc., renovated in Pensacola, Fla., you hear a certain pride-of-ownership in his voice as he explains the work that was done to improve the condition of the home, and how quickly it all came together.

“People don’t believe us when we tell them how efficient we are,” says Jordan. “But when we show them, they understand how quickly and inexpensively it can be done.”

The once-dilapidated home is steps from Pensacola Bay and during the storm surge from Hurricane Ivan in the fall of 2004, the home was flooded with 3 ft. of water. Rebuilding America ripped out the soaked wall boards, replaced the mechanicals and electrical. Everything was painted. Flooring was added. Lastly, a new garage door, reinforced to handle high-impact winds, was added. Yet the company cleverly preserved a lot, too. For example, countertops and upper cabinets in the kitchen were cleaned and painted. The work, says Jordan, was completed in three weeks and cost about $20,000, labor included. “Everyone says it can’t be done, but we do it all the time,” says Jordan.

Jordan’s pride-of-ownership is genuine. He and his investors own this home among many others in the area. They buy ugly houses, upgrade them and hold them as rental properties. Rebuilding America, with 10 employees, is the opposite of “a flipper.” They might best be described as “a holder.” They rebuild old houses, betting on solid demand for workforce rental housing. And they are also betting that, over the long term, the local real estate market will sustain generally higher housing values.

With the paint still wet, newly acquired and remodeled homes are rented out and added to a portfolio of dozens of other nearby homes owned by Rebuilding America. As a group, the portfolio represents an ever-increasing, income-producing asset. As such, the somewhat rare practice of remodeling and holding homes might just be the best way that top-quality remodeling, renovation and repair companies can be a vehicle to build wealth. In this fashion, remodeling can drive a strategy to build a real estate portfolio that provides income and asset appreciation. And, if ever there was an American industry where a large number of its business owners have a hard time earning real profits — let alone accumulating wealth — remodeling is it.

According to the Census Bureau’s Census of Construction, between 1997 and 2002, tens of thousands of remodeling contractors entered the remodeling industry and almost as many didn’t make it. Experts theorize that with its low barriers to entry, the remodeling industry attracts many people who know how to design and build, but only a small percentage of those who enter the industry understand what it takes to run a business profitably. What’s more, even among those who operate in remodeling profitably, fewer manage to create wealth over the long haul.

Qualified Remodeler columnist and former Remodelors Council chairman Mike Weiss, CGR, CAPS, is well-known for calling the traditional remodeling business model “a get-rich slow” scheme. Jordan believes that his model of property ownership and management can turn remodeling into a more solid pathway to wealth and ultimately create a more respected profession.

Jordan, 65, relaunched Rebuilding America Inc. two years ago in Pensacola after moving it clear across the country, away from the overheated residential real estate market of San Diego, where the company got its start in the mid ’90s. The company sold all of its properties at the high end of a hot market there and feverishly re-invested the capital in Pensacola. Why Pensacola? That is a question a lot of people have asked, says Jordan, and the answer is straightforward.