What's the Number We Have to Hit?
It's really simple, and it looks like this: There is overhead to selling the future house (6% realtor commissions, 1.78% excise tax). There is a minimum profit needed on the construction funds: 7% per year, or I should put the construction funds into a better investment. (One could argue that the money spent buying the house should earn its keep, as well, but I have to live somewhere.)
This sets up a simple table:
| Construction Investment | | Min. Sale Price |
|---|---|
| $50,000 | $568,487 |
| $100,000 | $630,563 |
| $150,000 | $692,640 |
| $200,000 | $754,716 |
Clearly, I would like to do much better than 7%, so I hope these sales numbers are low. Break it down: Sell for $568,487, pay $34,109 in commissions, $10,119 in excise tax. Net: $524,259, or $7,259 profit over the ($467,000 + $50,000) I put in. Sell for $692,640, net $638,753, or $21,753 profit on $150,000 in construction investment.
The neighborhood might appreciate 8% per year (or it might not appreciate at all), so the sale price in Spring 2017 should be some 16% higher naturally. If we could spend $50,000 today and sell tomorrow for $568,487--I said "if"--then we might sell for $663,083 in 2017, adjusted for appreciation. That would be an additional $87,236 profit, turning our 7% into a 37.47% profit. If we could assume appreciation, we could contemplate selling for less to still make our 7%, but that would be very risky.
Forced Air vs. Hydronic
I chatted with Johnathan Jones again tonight and, as usual, left with more to think about. I have been using the ballpark $20,000 number that Northwest Mechanical gave me, and the $9,000 I have heard from various sources (including Master Works Construction) for a new gas furnace and ducting upgrade. So, I conclude that Hydronic is about an $11,000 upgrade on a basic heating system.
Johnathan pointed out that heating the big volume in a Trees Room with forced air is a bigger deal. It's really $9,000 plus the cost of forcing air into an almost 6,000 CF space (for comparison, the Master Bedroom is 1,500 CF). Heated air rises, so you have to overdo forced air to keep the temperature 3' off the ground warm.
But underfloor hydronic works perfectly in this situation. The radiant heat from the floor warms at people level with much greater efficiency. Net net: Hydronic is only a $6000 or $7000 extravagance.
I'm sold that heating the floor rather than blowing dust and allergens around makes perfect sense, but I wonder how the market takes it. 214 NW 140th St is a spec house with hydronic heating. At a recent open house, they felt the need to hand out one-page flyers explaining hydronic heating. I didn't yet know myself, and it sounded to me like they were justifying a cost-cutting move. Let me tell you about plastic kitchen sinks--the sink of the future.
I love this comp (214 NW 140th St): "New construction in Broadview! Contemporary architecture in a classic style. Three bedrooms, 2.25 baths. Two-car garage with spacious driveway for additional off-street parking. Huge yard on this 8,235 square foot corner lot. Tankless hot water heater. Hydronic heating system. Beautiful kitchen adjoining dining area and large living room with see-through gas fireplace." Our lot is 2,430 SF larger. They have 3/2.25, we have 3/2.5. They have 2,419 SF, but they're on a corner lot with busy 3rd Ave NW right there and they have no backyard at all. They are asking $799,000 and it's not moving, but that's a nice ballpark. And it's $330.30/SF.
City26, the Isola development at Meridian N and 140th St, brags about its "cutting-edge HVAC system. The combination of a heat recovery ventilator and ductless Mitsubishi heat pump creates an ideal environment of fresh air + efficient heating and cooling." One of the first contemporary mini subdivisions I saw, 1550 NW 60th St, says "Hot Water Recirc Pump, Radiant, Wall" instead of the typical "Forced Air" for Heating/Cooling.
The high-end Canopy at Maple Leaf development features "In Floor Radiant Heat & Mini Split AC." Sage Homes Northwest features "Mitsubishi FE12 Mini Split Ductless Heat Pump with Cooling."
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