Ranch, Two Story, Three Story, Bi-Level, Tri-Level. Does it make a difference? [Due Diligence, Phase I]

--- by Osman Parvez

Ranch, Two Story, Three Story, Bi-Level, Tri-Level. Does it make a difference? 

The better question to ask is whether you’re so focused on your current needs that you’ve ignored your future ones. What about liquidity? If your job changes, or there is some other life event, will you be able to sell in a hurry? Should you be worried about capital preservation at this phase of the real estate cycle? 

Yes. You should be. 

What if you might need to expand in the future? Will the design, orientation, setbacks, and lot size support it? The rule book in Boulder is thick. Don’t expect your Realtor to be an expert, but they should be familiar with the basics. 

These are the sorts of conversations I regularly have with my clients when we start to look at houses. On one hand, it’s a matter of taste. On the other, this large asset will likely comprise a substantial component of their portfolio. If they’re young, it might be their only significant asset after the down payment. 

Always consider the pros and cons of various styles of homes, before you write your offer. It’s essential phase I due diligence.

Don’t forget that when it comes to future appreciation and liquidity, emotions count almost as much as functional needs. For example, some buyers experience a negative emotional reaction when they open the front door and are confronted by a flight of stairs. Others prefer the better views and elevated feeling that comes from a multi-level house. 

In my experience, more buyers prefer a multi-story house to most other styles. When they walk in, they love to see an open floor plan that seamlessly blends living, dining, and kitchen spaces with a wall of glass in the back to let in the outdoors. Bedrooms are traditionally on the upper. Sometimes, a guest room and a recreation space are in the basement. Remember, more buyer demand also means more protection from capital loss during a down turn. 

What’s that? Your agent told you Boulder real estate never loses value? Sorry, they’re wrong. I’ve tracked this market obsessively since 2005. There have absolutely been downturns, and owners that timed it wrong and were forced to sell at the bottom incurred losses as high as 40%. Yes, you read that correctly. Next time, choose a better agent. 

Back to those future needs.  

If your investment thesis includes a future expansion, the box shape of a basic ranch is a great place to start. There are hundreds of examples of additions and remodels that started as a basic ranch, scattered throughout Boulder. Just keep in mind that most will likely need to be taken down to the studs and then rebuilt to meet modern energy efficiency and other requirements. Don’t pay a premium for someone else’s remodel. And strongly consider keeping the master on the main level. You’ll thank me when it comes time for resale. 

Remember: Just because one style of house is more popular than another, doesn’t mean that it’s the wrong choice for you. With every design, there’s a trade-off. To make an intelligent choice, it's important to understand the compromises and go into the purchase with eyes wide open.

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate.  image credits: Christopher Harris, Luke Stackpoole, Annie Spratt 

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