Not long after the housing bubble burst in 2007, a wave of foreclosed homes flooded the Atlanta real estate market. Jim LaVallee and his old business partner, Rick Bennett, heard of banks accepting bids as low as $30,000 for a house and resurrected a strategy they had successfully employed earlier in the decade: buy distressed properties at discounted rates, inject some much-needed equity, and then flip the homes for profit. This approach carried additional risk in a reeling housing market, but the two partners parlayed their investments into high returns and established the design-build firm Epic Development in the process.
COMPANY SNAPSHOT
Company: Epic Development Atlanta, LLC
Owner: Jim LaVallee
Location: Atlanta, Ga.
2013 sales volume: $12 million
Projected 2014 sales volume: $16 million
Website: www.epicdevelopment.com
The company began acquiring homes so quickly that sometimes the firm purchased foreclosures and short sales without anyone seeing them in person first, Bennett says. But after LaVallee discovered a property in a wooded area of Buckhead, an upscale neighborhood of Atlanta, he and Bennett visited the vacant house to determine whether they should submit an offer. The home, which LaVallee found through a multiple listing service, had been under contract numerous times only for the buyer to pull back each time before closing the deal.
Nestled into the side of a small cliff and flanked by a creek and waterfall, the site certainly maintained an aesthetic appeal; however, the dilapidated house, which Bennett estimates was built in the late 1960s, sported an unorthodox roofline and wood-panel exterior that had seen better days. LaVallee feared the existing structure would have to be demolished and concluded any new construction on the steep, rocky site would destroy the company’s margins. Bennett reassured him the home could be renovated and began sketching out an idea for the property.
“The house had a good, open floor plan and it was big, but it had a very outdated roofline,” says Bennett, who influences the final designs of many Epic Development projects. “The home already had modern design principles, but it was just so ugly people didn’t realize it.”
Once LaVallee factored Bennett’s vision of a remodel into the equation, the numbers pointed to a profitable project. Epic Development submitted a bid for the house and acquired the property despite interest from many other buyers.
Finding value
Bennett especially admired the lines created at the base of the home; instead of embracing a typical rectangular pattern, the original builder redirected exterior walls toward and away from the center of the house before closing off a room. This method increases the perimeter and becomes an expensive way to build, but it also generates visual interest. In fact, the home’s close proximity to the creek would prohibit anyone from erecting this particular house at this exact location today.
PRODUCT LIST
CARPET: Mohawk
HVAC: Carrier
CERAMIC TILE: Daltile
DOORS: Pro Build
GARAGE DOOR: Clopay
GARAGE DOOR OPENER: LiftMaster
FAUCETS: Delta; Grohe; Kohler
FIREPLACE: Heat n’ Glo
BATHROOM FIXTURES: Eljer
HOME SYSTEM CONTROL: Honeywell
LIGHTING: Halo; Kichler; Sea Gull
HOUSEWRAP: Owens Corning
INSULATION: Owens Corning
KITCHEN APPLIANCES: Jenn-Air
LOCKSETS: Schlage
PAINTS & STAINS: Sherwin-Williams
MILLWORK & MOULDING: Georgia-Pacific
ROOFING: GAF
SINKS: American Standard; Eljer
WATER HEATERS: Rinnai
WINDOWS: Andersen
Because Epic Development sought to stay within the existing footprint and refrain from any new construction, the company received a renovation permit from the city without any trouble. “The key was that we weren’t changing the footprint,” says LaVallee, whose background in real estate valuation aided the company’s assessment of the property. “We had to make the floor plan functional and work by today’s standards, but fit it in the existing footprint.”
Bennett partitioned the full bathroom off the first-floor bedroom to create an adjacent half bath and a laundry room accessible from the main living area. The reconfiguration also allowed for a larger closet in the hall between the bedroom and full bathroom. Bennett further improved the flow of the first level by extending the floor to the front of the house, eliminating walls that bordered the main staircase and enabled someone to look over railings from the main level down into the basement.
The company elected to keep similar openings between the first and second floors and eliminated an office in the stair landing between the two levels. Bennett reworked the master bathroom on the second floor in the same vein as the one on the lower level in order to carve out a sizable walk-in closet. The existing house had emphasized clean, modern lines, a style that remains relatively uncommon in Atlanta, Bennett says.
Executing plans
The living room featured a cathedral ceiling, which added to the openness of the first floor, but Bennett decided to remove the pitch and drop the ceiling to 12 feet. This modification granted Epic Development the ability to establish an outdoor living area above the room now that the roof was flat. “The cathedral ceiling isn’t really right for the style anyway, so we didn’t want to keep that dated treatment,” Bennett says.
Budget History
Acquisition cost: $330,000
Hard cost: $380,000
Total direct cost: $710,000
Sale price: $920,000
Gross profit: $210,000
Soft cost: $107,000
Net profit: $103,000
The company reinforced the new ceiling so people could walk out onto the spacious upper-level patio and would not worry about the support below. Epic Development also installed a fireplace and wet bar to enhance the ambiance of the covered space. “It feels like you’re sitting up in the trees,” LaVallee says. The hilly, wooded site precluded the firm from integrating traditional outdoor living areas around the perimeter of the house, so the inclusion of spaces like the one above the living room became a directive of the project.
Decks off the breakfast and dining rooms on the first floor, and one off a guest bedroom on the lower level, also aim to address the lack of opportunities for outdoor living. Epic Development even removed a tree behind the garage to level out a small area for a backyard. “It was such a steep lot there wasn’t really a good spot for a yard, so we were trying to give them space where they could be outdoors,” Bennett says.
The firm converted the carport connected to the existing house into a large, two-car garage. Because the header above the opening of the carport proved high enough—and the whole structure wide enough—the transformation went off without a hitch, Bennett says. Epic Development next sought to widen the driveway by a couple of feet so that cars could turn around as opposed to backing out all the way to the street. The company encountered rock alongside the driveway and had to jackhammer in order to level it and pour concrete. “It was like the house was originally built on a big rock,” Bennett says. “Situations like this supported our decision to renovate because the costs of new construction would have been too high.”
Embracing nature
The mountainous terrain of the site presented the biggest challenge throughout the duration of the project. After successfully removing and reframing the roof, Epic Development experienced some difficulty when installing new windows. The existing home already featured many oversized windows, which had helped establish a modern style, so the company replaced and upgraded those units and installed a few more windows to complete the whole aesthetic. But reaching the house as the ground sloped down toward the creek required additional scaffolding and longer ladders, and workers took more time than usual to make sure the supports were put together securely and safely.
Epic Development faced a similar struggle when applying the exterior treatments, which included paint, soffits, and fascia, among others. The firm opted for hard-coat stucco as the main material and used natural rock as a complement. Although hard-coat stucco appears sparingly in Atlanta, this treatment paired with stone evokes a Modern Prairie style with Mediterranean accents, which attracted many international buyers. In fact, about 70 percent of the people interested in purchasing the house lived in Atlanta but were born outside the U.S., LaVallee says.
He and Bennett put the property on the market around Christmas in 2011, and the home sold in less than three months. The excellent schools in the area and the site’s proximity to midtown, downtown, and Buckhead—home to some of the top shopping malls in the country—further appealed to potential buyers. “It’s just a prestigious area to live in,” LaValle says.
Despite having to wrestle with the lot’s unusual characteristics, LaVallee and Bennett understood the home’s orientation on the side of a cliff in the woods of a prominent community continued to drive its resale value. Many companies and contractors had previously shied away from closing on the property, but Epic Development saw a unique opportunity to recreate something special.
“Luckily for us a lot people don’t see any value in houses like that, they just want to tear them down,” Bennett says. “That one definitely worked out for us.” PR