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Open House

Interviews with Lou Manfredini, Tom Kritler

Aired February 05, 2005 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


GERRI WILLIS, HOST: Today on OPEN HOUSE, it seems everybody is making money in real estate. Is your turn next? We have the outlook for 2005.
Then, remodeling may add value to your home, but you can't overdo it. We'll show you which renovations pay off.

And our weekend project, laminate flooring. Learn how to transform a room from boring to beautiful.

Next, on OPEN HOUSE.

Hello, and welcome to our first CNN OPEN HOUSE. I'm Gerri Willis.

From buying and selling to renovation and design, we'll show you how to get the most value out of your biggest investment, your home.

No doubt you've watched its value rise recently. But can this red-hot market last? We'll start in Las Vegas, where housing prices jumped more than 50 percent last year alone.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Las Vegas has always been about the money. And these days, the sure bet is real estate, say investors like Debbie Smith, who started her own club to spread the word about the new Vegas gold mine.

DEBBIE SMITH, "INVESTOR INTELLIGENCE REPORT": You could buy a house for 130, and by the time you close, it could have been worth 200 or more. Some people have made 50 to 100, even 150,000, off a single- family home.

WILLIS: In fact, last summer, the National Association of Realtors reported Las Vegas as the fastest-growing market for home prices.

MAYOR OSCAR GOODMAN, LAS VEGAS: It's just unbelievable. We have 6,000 people on a net basis move in here a month. We build a new home every 20 minutes, if you can imagine that.

WILLIS: Demand is so intense here that development has pushed out to the surrounding Sierra foothills, where the government holds title. The only direction to go now, up, says developer Marty Burger. MARTY BURGER, RELATED COMPANIES: That's right, we're here, and we're building this World Market Center, which is a 7 million-square- foot furniture showroom complex. And we're also here building mixed- use developments that are nongaming, and residential highrises. This is a very, very strong market.

WILLIS: But Las Vegas's successes have not come without costs.

In Joanne Cappalletti's 55-plus community, prices on new homes were cut after a glut of investment properties hit the market. Residents here now worry that they overpaid for their homes.

JOANNE CAPPALLETTI, LAS VEGAS RESIDENT: We've saved our pennies, and now we've bought our dream, and then to find out that, you know, if something should happen, and maybe one of us becomes ill or something, we have to sell the house, where is our money?

WILLIS (on camera): Is the bloom off the boom for Las Vegas real estate? Clearly, it depends on who you talk to. One thing is for certain, though, the extraordinary run-up in prices is causing concerns beyond Las Vegas.

(voice-over): And they come from every part of the United States, like Washington, D.C., buoyed by strong government spending. Once a bedroom community for Los Angeles, Orange County, California, has emerged as a market in its own right. Florida coastal areas like Sarasota and West Palm Beach have attracted investors and retirees alike. Providence, Rhode Island, with its close proximity to Boston, is luring professionals and families who have the means to buy second homes.

With all this expensive housing, could a bust be in store for 2005? One economist says yes.

KARL CASE, FISERV CASE SHILLER WEISS: Prices will stop rising and flatline in many of these hot markets, and then downward pressure will depend on whether the economy continues to grow as it is, or whether it slows down.

WILLIS: Not everyone is as worried. National Association of Realtors economist David Lereah.

DAVID LEREAH, NATIONAL ASSOCIATION OF REALTORS: I think price appreciation will begin to slow, which is actually good news for the housing markets, because supply and demand have been in out of balance for the past several years. I'm looking for about 5, 6 percent price appreciation in 2005, which is still very good, very healthy.

(END VIDEOTAPE)

WILLIS: Experts may disagree, though most see sales slowing this year, and some prices flattening. Either way, there are real estate investors who always seem to make money, like Chicago billionaire Sam Zell. He made his fortune starting with just a $1,500 investment 40 years ago. He's known as the bad boy of real estate. When his competitors were buying, he was selling, and when they sold, he bought. These days, he's harvesting the rewards of being a contrarian.

(BEGIN VIDEOTAPE)

SAM ZELL, EQUITY OFFICE PROPERTIES: This is the Mercantile. And this is...

WILLIS: (UNINTELLIGIBLE) I didn't realize...

ZELL: This is (UNINTELLIGIBLE).

WILLIS: ... that you owned the Mercantile...

ZELL: Yes.

WILLIS: ... until they told me.

ZELL: Yes, this is owned -- this is part of the Equity Office. This is the Civic Opera Building.

WILLIS: And you own the Lyric. I didn't understand that.

ZELL: Yes, this is part of Equity Office. And I think we have 12 million feet in the Chicago Metropolitan Market.

WILLIS: Twelve million feet.

ZELL: Twelve million feet.

WILLIS (voice-over): And that is just a fraction of what he owns nationwide. Billionaire Sam Zell controls hundreds of thousands of apartments and close to 130 million square feet of office space. He's considered the nation's biggest landlord and arguably one of the most successful real estate developers of all time.

And, despite rumblings of interest rate hikes and fears of housing bubbles, he remains bullish on real estate.

ZELL: In the 40 or 50 years I've been in the business, I've heard about all kinds of housing bubbles, and I ain't seen one yet. Now, there maybe been a couple of examples in very short periods of time, where we have seen single-family housing decrease in price.

WILLIS: I want to play devil's advocate for just a minute. There's some very well-known economists right now who are saying, in fact, it is a bubble that will burst. Real estate prices up about 47 percent on average across the country. And again, I'm talking about residential real estate prices.

In some markets, like Vegas, prices have gone up 50 percent in a year. How can this not be a bubble, just given the experiences of prices themselves?

ZELL: Well, (UNINTELLIGIBLE) college, and I took a course in economics called Econ 101. And when I walked into the classroom, on the wall was supply and demand. And the prices of homes in the United States have gone up because the demand has been much greater than the supply. And if you look at the fact that over the next 10 years, in each of the next 10 years we're going to add 1 million new households in the United States, what you see is more demand on the horizon.

WILLIS: Is there anything on your horizon that you worry about?

ZELL: I think the answer is that, yes, we're likely to see the growth of housing prices slower in the next five years than they were in the last five years.

WILLIS: Do you, are you at all concerned about inflation?

ZELL: I have (UNINTELLIGIBLE) kind of been one, kind of somebody talking -- you know, walking kind of a lonely path, in that I have been very concerned about inflation. I continue to be concerned about inflation.

WILLIS: Any concern about interest rates? Lots of the pundits are saying rates will be higher this year. Could be a problem for the housing market. What do you think?

ZELL: I think there's no question that interest rates are going to be higher. I think that interest rates have been -- particularly at the short end have been unusually low.

WILLIS: And what do we see for that 30-year fixed-rate mortgage, do you think?

ZELL: I think a year from now, we're going to be looking at a 7 percent mortgage rate, or a 7.5 percent mortgage rate.

WILLIS: What kinds of things have you learned over your career that would help people understand how this market functions and what they can expect of it?

ZELL: I think, at least in my perspective as an investor, my focus has always been on making sure that I'm not caught up in some, you know, trend or fad or scenario.

WILLIS: You know, you talk about not getting caught in a mania or fad. A lot of homeowners think they might be caught in a mania or fad, if they live it in one of these cities where the prices have gone up dramatically. Should those people be worried? Should be, be diversifying their portfolio?

ZELL: I don't think they should be particularly worried. At the same time, I'm not sure that I'm a great believer that everybody should have all of their assets in real estate.

(END VIDEOTAPE)

WILLIS: That was billionaire real estate investor Sam Zell.

Ahead on OPEN HOUSE, remodeling boosts the value of your home. But not every project pays off. We take a look at which renovations are worth the investment.

And our weekend project, laminate flooring. We'll show you how install it yourself step by step.

But first, your tip of the day.

Planning a remodeling project? When working out your budget, set aside 10 to 20 percent of the total cost for any unexpected expenses. Know the retail prices of items like lighting fixtures, faucets, and knobs. And if you can buy them on your own for less, the contractor will often agree to do just the installation. And no last-minute changes or additions. That will add to the total cost and put your project behind schedule. Plan wisely, educate yourself, and stick to the original plan.

And that's your tip of the day.

(COMMERCIAL BREAK)

WILLIS: It's easy to assume that any renovations you make will likely pay off. But that's not always the case. You can, in fact, overremodel your home.

That's the situation for one Michigan couple.

David Haffenreffer has the story.

(BEGIN VIDEOTAPE)

DAVID HAFFENREFFER, CNN CORRESPONDENT (voice-over): Shortly after getting married two and a half years ago, Todd and Jennifer Krieger grabbed their piece of the American dream, buying this home in West Bloomfield, Michigan, just outside Detroit. It cost them $170,000. They put in another $10,000 to fix the place up.

Wanting a bigger house, they put it on the market to turn a quick profit.

TODD KRIEGER, HOMEOWNER: We painted this room, we painted most of the house. We put in all -- these are Pergo (ph) floors, we put these in throughout the house. We gutted one of the bathrooms.

This is new. We painted in here. The toilet's new. The shower's new. This was a really a big job.

HAFFENREFFER: And you reinsulated the entire, entire house. How did you know to do that? And how much of an investment was that?

TODD KRIEGER: It was something that would improve the value. We could talk about it people when they came through and say, you know, And we just, we added another layer of insulation.

HAFFENREFFER (voice-over): They also made extensive repairs to the exterior of the house, installing vents and fixing a cracked chimney.

(on camera): Once the renovations were completed, Todd and Jennifer listed their house for just under $200,000. It didn't sell, so they pulled it off the market. When they relist it, they'll reduce the price by $20,000. It's a problem that most real estate agents say could be solved by simply living in your house longer.

SHARON JAFFE, CENTURY 21 TODAY: If they wait five years, maybe they'll come out with a $10,000 or $20,000 profit, you know, in the house, and then be able to use that as a down payment for their next house.

HAFFENREFFER: But when homeowners don't want to wait, they'll want to keep renovation costs down.

UNIDENTIFIED MALE: The smaller stuff makes sense (UNINTELLIGIBLE) resale. The larger projects, you just want to be careful to not price yourself out of your neighborhood.

HAFFENREFFER (on camera): So the solution here for you two is to simply extend your stay here.

JENNIFER KRIEGER: Right. Maybe.

TODD KRIEGER: We've done things to make the house enjoyable for us, while we're here too, so that if we do have to stay a little bit longer, you know, the things we can enjoy.

HAFFENREFFER: For OPEN HOUSE, David Haffenreffer, CNN, West Bloomfield, Michigan.

(END VIDEOTAPE)

WILLIS: Americans spent a record-breaking amount of money last year fixing up their homes, more than $180 billion. But not all of that money is easily recouped at resale.

Lou Manfredini is a Chicago-based real estate developer who knows firsthand which projects pay and which ones don't. Lou is also spokesman for Ace Hardware.

Lou, welcome.

LOU MANFREDINI, REAL ESTATE DEVELOPER: Thank you.

WILLIS: Good to have you here. You know, let's get down to brass tacks here. What gives you the biggest bang for your buck if you're remodeling?

MANFREDINI: I think it's a combination of a lot of different things. I mean, first of all, you have to be smart about what you're going after. Certainly, the kitchens and bathrooms are traditionally the things that we read about, that we see in the newspapers, that the real estate companies will talk about.

But how far you go really depends on the length of time you're going to stay in the house, and really, what your ultimate goal is, whether it's to stay in the house for a long time, or to try and improve the property to then make a profit and move on to the next one.

WILLIS: Absolutely, you have to do some analysis. But which of these remodels typically do not pay?

MANFREDINI: Well, you have to be careful about how you remodel. It's the type of thing -- I've seen people spend $80,000 on a kitchen that, lo and behold, five years later, the word "dated" comes up when they go to sell. And all of a sudden, that $80,000 isn't worth it.

So you really have to pay attention to style, to what kinds of finishes you choose. And that's not to say that a house has to be the house of beige, you know, that you want everything to be earth tones. But you have to be complementary when it comes to how you do the bathroom, how you finish it.

And, you know, people talk about keeping up with the Joneses. You really do have to pay attention to your surrounding neighborhood, to take a look and say, Are all the homes the same style? Do we all have the same amount of bedrooms? Do we all have the same amount of bathrooms? Sometimes a more expensive remodel will actually bring you more of a return by, say, adding an extra bedroom or adding an extra bathroom to your home.

WILLIS: The amount of money you put in your house, according to the experts out there, you only get about 80 percent back, on average, for the money that you invest when you sell your house, right?

MANFREDINI: Yes, it's not a dollar for dollar. I think that a lot of confusion comes in saying, Well, jeez, you know, I just spent $20,000 on my bathroom, so I bought the house for 150, now I should be able to add $20,000 to the price.

It just doesn't work that way, because there's a lot of other factors. Remember that in real estate, the old adage of location, location, location is still king. But you got to have a nice house in that location as well.

WILLIS: All right. Let's talk about some of the improvements that people don't think of first. It's fun and exciting, kind of sexy, to thinking about redoing your kitchen, putting in that fabulous center island, getting all the gizmos, the fabulous appliances. But, you know, who really wants to do the roof at the end of the day?

MANFREDINI: Right.

WILLIS: I mean, is that a good investment?

MANFREDINI: Yes, the mechanical side, or the nuts and bolts of a house that I talk about is the fact that that's really very important. I mean, one thing we saw in that Michigan house is, they reinsulated the home. That is something that people are concerned with.

So anytime you can do things like reinsulate the attic, update your furnace or air conditioner to a more efficient unit, maybe the water heater is 10 years old, that's something that you want to improve as well, because ultimately, you know, I'd love to say that there's a lot of handy people out there. But they're not. They're going to hire a home inspector, which is a good idea. And those are the type of things that make an inspection list. They'll say, Hey, it's a great home, but the furnace is 20 years old. Not that there's anything wrong with a 20-year-old furnace, but its efficiency is way down there. And it's one checkoff, one mark that goes against your house versus someone else's house that's on the marketplace.

WILLIS: But Lou, just playing devil's advocate here for a minute, do you really get credit for those basic things that you do? Don't people assume that the insulation's going to be there, there's going to be no crack in the chimney, the foundation's going to be in good shape?

MANFREDINI: I think people, when they walk into a house, assume all those things. And they, you know, when they walk in, they say, Wow, look at this kitchen. Wow, look at this bathroom. But then all of a sudden, if it's a home with a basement, they walk downstairs and they say, Jeez, there's cracks in the basement. Or, Wow, that water heater's 20 years old.

All of a sudden, that starts to mount. And then that goes against the ultimate price.

And so, just like when you build a house, you know, as a builder, you start with the shell before you put the kitchen and bathroom in. You need a strong shell. You need strong mechanical systems. And though it's not sexy, it's the way to really identify your property to gain more than your competition.

WILLIS: Wow. Lou Manfredini, thank you so much for being with us today.

MANFREDINI: My pleasure.

WILLIS: Coming up on OPEN HOUSE, weekend project. Now that we know small changes can make a big difference to the value of your home, we show you step by step how to make over a room with laminate flooring. Make it your weekend project.

(COMMERCIAL BREAK)

WILLIS: welcome back to OPEN HOUSE and weekend projects, when we take on a do-it-yourself task that you can do in just two days.

Today, we're at the house of Christine and Ralph Comulata (ph). We're in Scarsdale, New York. We're taking a look at a bathroom floor that we're going to replace with laminate.

To help, we're bringing in Tom Kritler. He's here from "The Money Pit" radio show.

Tom, what are the steps?

TOM KRITLER, "THE MONEY PIT": Well, we're going to start by measuring this laminate floor to fit where we need it to go. This is really an easy job. This laminate flooring locks together. This is made by Armstrong. It's called American Duet, Hartford Maple. And we chose this...

WILLIS: It's really beautiful.

KRITLER: ... yes, because it has a antique look. Now, this is a 1930s bathroom. And we want this to look it's been in the floor for 60 years. But it's going to hold up a lot better, because real wood, we couldn't putting in there. But this we can.

WILLIS: Excellent. Now, tell me, do I need any other materials? Or is this stuff just enough?

KRITLER: This is actually the surface flooring. We're going to put an underlayment on it. That's going to give us a little bit of cushion, make it a little bit easier to put this down, gives a little bit of soundproofing and moisture protection. And a little bit of glue for the joints, and that's all we need.

WILLIS: Excellent. Let's get started.

KRITLER: All right.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Before you buy the materials, measure your floor from the starting wall to the finish wall, and divide that by the laminate board width to determine how much flooring you will need. And remember, before the new floor goes in, the old fixtures need to be taken out. For the Comulatas, a floating floor made the most sense.

(on camera): You guys, you're a young couple. You have one child, another one on the way. I know you want to keep the costs down. How are you doing that?

RALPH COMULATA, HOMEOWNER: We found some laminate floor that we can actually put on top of the existing tile. So we don't have to do any major demolition.

WILLIS (voice-over): First, the foam underlayment is rolled out, and then the laminate boards can be placed over it with a tongue-in- groove technique.

(on camera): So Tom, I notice that Ralph is using glue in this project. Do have you to use glue?

KRITLER: You don't always have to. When you put a laminate floor in the bathroom, use a little bit of glue on the tongue and on the groove just to make sure we have a really tight, moisture-proof seal. Now, if you were putting this in your living room or your family room, you wouldn't have to glue it.

WILLIS: Now, tell me, too, about the pattern, because I notice that it sort of varies. How do I make that happen?

KRITLER: Right, that's very important, whenever you're putting down a flooring product, that you pay attention to the pattern. You want to use boards usually as they come out of the box, because the manufacturer does not put the same board right on top of each other. And you're going to have a very nice look to this floor, much like it would be if it was a real wood floor.

WILLIS (voice-over): You can get the look of wood, ceramic tile, or stone using laminate flooring. It makes sense in bathrooms, because it's waterproof and doesn't require much maintenance. But there are still some traps to watch out for.

RALPH COMULATA: I want to get this a little closer.

KRITLER: OK, well, hold it, and let me show you a little trick of the trade. You never want to strike this because you're going to hurt your hand, but not even with a hammer. (UNINTELLIGIBLE) piece of scrap flooring in now. Sort of really lock it in. Now, take the hammer and tap it right here.

Perfect. See, you just locked that in. It popped in. We didn't damage the joint at all. And it's ready for the next piece.

WILLIS: A brand-new floor might even inspire you to spruce up the rest of your bathroom.

Ralph and Christina completed their bathroom makeover with a splash of color and beautiful new fixtures, all projects we'll be showing you at a later date.

(on camera): The floor is finished. Tom, it looks great.

RALPH COMULATA: Thanks. It looks terrific. I'm really happy with the way it came out.

WILLIS: Here's what I want to know, though. Did you come in under budget, or did it cost more than you expected?

KRITLER: Absolutely not. No surprises here. That Armstrong floor was just $3.50 a square foot, a little bit more for the underlayment. Total cost, under 200 bucks.

WILLIS: What about time, though? You know, homeowners worry about spending too much time on these projects.

KRITLER: This stuff is so easy to install. Definitely could do it in under two days.

WILLIS: Any surprises?

KRITLER: No, and I think the reason we didn't have surprises is because we made that critical decision not to pull out the original tile floor. There was probably a reason that floor was put down. I didn't want to find out what that reason was in the middle of the project.

WILLIS: Great idea. OK, Tom, thanks so much.

KRITLER: My pleasure. WILLIS (voice-over): And how do the Comulatas feel about the upgrade?

RALPH COMULATA: What do you think?

CHRISTINE COMULATA: Oh, wow, it looks great.

RALPH COMULATA: Do you like it?

Can I have a high five?

UNIDENTIFIED MALE: High five.

RALPH COMULATA: All right!

(END VIDEOTAPE)

WILLIS: A weekend of hard work can really pay off. In fact, "Remodeling" magazine says you can recoup up to 90 percent of the cost of remodeling an average bathroom.

Coming up, a look at next week's show. We'll be right back.

(COMMERCIAL BREAK)

WILLIS: Coming up next week on OPEN HOUSE, even the most savvy home buyers can fall victim to mortgage fraud. We take a look at the latest scams and show you how to protect yourself.

Then, it's considered the slow season for home buying. We'll have tips on finding good deals during the winter months.

And our weekend project, going beyond your basic TV. We'll show you how to install your own mini-home theater.

Plus, we want to hear from you. Send us your comments, your questions, to openhouse@cnn.com.

Thanks for watching OPEN HOUSE. We'll see you here next Saturday.

Coming up, "DOLAN'S UNSCRIPTED."

But first, a look at the day's headlines. Have a great weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired February 5, 2005 - 09:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, HOST: Today on OPEN HOUSE, it seems everybody is making money in real estate. Is your turn next? We have the outlook for 2005.
Then, remodeling may add value to your home, but you can't overdo it. We'll show you which renovations pay off.

And our weekend project, laminate flooring. Learn how to transform a room from boring to beautiful.

Next, on OPEN HOUSE.

Hello, and welcome to our first CNN OPEN HOUSE. I'm Gerri Willis.

From buying and selling to renovation and design, we'll show you how to get the most value out of your biggest investment, your home.

No doubt you've watched its value rise recently. But can this red-hot market last? We'll start in Las Vegas, where housing prices jumped more than 50 percent last year alone.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Las Vegas has always been about the money. And these days, the sure bet is real estate, say investors like Debbie Smith, who started her own club to spread the word about the new Vegas gold mine.

DEBBIE SMITH, "INVESTOR INTELLIGENCE REPORT": You could buy a house for 130, and by the time you close, it could have been worth 200 or more. Some people have made 50 to 100, even 150,000, off a single- family home.

WILLIS: In fact, last summer, the National Association of Realtors reported Las Vegas as the fastest-growing market for home prices.

MAYOR OSCAR GOODMAN, LAS VEGAS: It's just unbelievable. We have 6,000 people on a net basis move in here a month. We build a new home every 20 minutes, if you can imagine that.

WILLIS: Demand is so intense here that development has pushed out to the surrounding Sierra foothills, where the government holds title. The only direction to go now, up, says developer Marty Burger. MARTY BURGER, RELATED COMPANIES: That's right, we're here, and we're building this World Market Center, which is a 7 million-square- foot furniture showroom complex. And we're also here building mixed- use developments that are nongaming, and residential highrises. This is a very, very strong market.

WILLIS: But Las Vegas's successes have not come without costs.

In Joanne Cappalletti's 55-plus community, prices on new homes were cut after a glut of investment properties hit the market. Residents here now worry that they overpaid for their homes.

JOANNE CAPPALLETTI, LAS VEGAS RESIDENT: We've saved our pennies, and now we've bought our dream, and then to find out that, you know, if something should happen, and maybe one of us becomes ill or something, we have to sell the house, where is our money?

WILLIS (on camera): Is the bloom off the boom for Las Vegas real estate? Clearly, it depends on who you talk to. One thing is for certain, though, the extraordinary run-up in prices is causing concerns beyond Las Vegas.

(voice-over): And they come from every part of the United States, like Washington, D.C., buoyed by strong government spending. Once a bedroom community for Los Angeles, Orange County, California, has emerged as a market in its own right. Florida coastal areas like Sarasota and West Palm Beach have attracted investors and retirees alike. Providence, Rhode Island, with its close proximity to Boston, is luring professionals and families who have the means to buy second homes.

With all this expensive housing, could a bust be in store for 2005? One economist says yes.

KARL CASE, FISERV CASE SHILLER WEISS: Prices will stop rising and flatline in many of these hot markets, and then downward pressure will depend on whether the economy continues to grow as it is, or whether it slows down.

WILLIS: Not everyone is as worried. National Association of Realtors economist David Lereah.

DAVID LEREAH, NATIONAL ASSOCIATION OF REALTORS: I think price appreciation will begin to slow, which is actually good news for the housing markets, because supply and demand have been in out of balance for the past several years. I'm looking for about 5, 6 percent price appreciation in 2005, which is still very good, very healthy.

(END VIDEOTAPE)

WILLIS: Experts may disagree, though most see sales slowing this year, and some prices flattening. Either way, there are real estate investors who always seem to make money, like Chicago billionaire Sam Zell. He made his fortune starting with just a $1,500 investment 40 years ago. He's known as the bad boy of real estate. When his competitors were buying, he was selling, and when they sold, he bought. These days, he's harvesting the rewards of being a contrarian.

(BEGIN VIDEOTAPE)

SAM ZELL, EQUITY OFFICE PROPERTIES: This is the Mercantile. And this is...

WILLIS: (UNINTELLIGIBLE) I didn't realize...

ZELL: This is (UNINTELLIGIBLE).

WILLIS: ... that you owned the Mercantile...

ZELL: Yes.

WILLIS: ... until they told me.

ZELL: Yes, this is owned -- this is part of the Equity Office. This is the Civic Opera Building.

WILLIS: And you own the Lyric. I didn't understand that.

ZELL: Yes, this is part of Equity Office. And I think we have 12 million feet in the Chicago Metropolitan Market.

WILLIS: Twelve million feet.

ZELL: Twelve million feet.

WILLIS (voice-over): And that is just a fraction of what he owns nationwide. Billionaire Sam Zell controls hundreds of thousands of apartments and close to 130 million square feet of office space. He's considered the nation's biggest landlord and arguably one of the most successful real estate developers of all time.

And, despite rumblings of interest rate hikes and fears of housing bubbles, he remains bullish on real estate.

ZELL: In the 40 or 50 years I've been in the business, I've heard about all kinds of housing bubbles, and I ain't seen one yet. Now, there maybe been a couple of examples in very short periods of time, where we have seen single-family housing decrease in price.

WILLIS: I want to play devil's advocate for just a minute. There's some very well-known economists right now who are saying, in fact, it is a bubble that will burst. Real estate prices up about 47 percent on average across the country. And again, I'm talking about residential real estate prices.

In some markets, like Vegas, prices have gone up 50 percent in a year. How can this not be a bubble, just given the experiences of prices themselves?

ZELL: Well, (UNINTELLIGIBLE) college, and I took a course in economics called Econ 101. And when I walked into the classroom, on the wall was supply and demand. And the prices of homes in the United States have gone up because the demand has been much greater than the supply. And if you look at the fact that over the next 10 years, in each of the next 10 years we're going to add 1 million new households in the United States, what you see is more demand on the horizon.

WILLIS: Is there anything on your horizon that you worry about?

ZELL: I think the answer is that, yes, we're likely to see the growth of housing prices slower in the next five years than they were in the last five years.

WILLIS: Do you, are you at all concerned about inflation?

ZELL: I have (UNINTELLIGIBLE) kind of been one, kind of somebody talking -- you know, walking kind of a lonely path, in that I have been very concerned about inflation. I continue to be concerned about inflation.

WILLIS: Any concern about interest rates? Lots of the pundits are saying rates will be higher this year. Could be a problem for the housing market. What do you think?

ZELL: I think there's no question that interest rates are going to be higher. I think that interest rates have been -- particularly at the short end have been unusually low.

WILLIS: And what do we see for that 30-year fixed-rate mortgage, do you think?

ZELL: I think a year from now, we're going to be looking at a 7 percent mortgage rate, or a 7.5 percent mortgage rate.

WILLIS: What kinds of things have you learned over your career that would help people understand how this market functions and what they can expect of it?

ZELL: I think, at least in my perspective as an investor, my focus has always been on making sure that I'm not caught up in some, you know, trend or fad or scenario.

WILLIS: You know, you talk about not getting caught in a mania or fad. A lot of homeowners think they might be caught in a mania or fad, if they live it in one of these cities where the prices have gone up dramatically. Should those people be worried? Should be, be diversifying their portfolio?

ZELL: I don't think they should be particularly worried. At the same time, I'm not sure that I'm a great believer that everybody should have all of their assets in real estate.

(END VIDEOTAPE)

WILLIS: That was billionaire real estate investor Sam Zell.

Ahead on OPEN HOUSE, remodeling boosts the value of your home. But not every project pays off. We take a look at which renovations are worth the investment.

And our weekend project, laminate flooring. We'll show you how install it yourself step by step.

But first, your tip of the day.

Planning a remodeling project? When working out your budget, set aside 10 to 20 percent of the total cost for any unexpected expenses. Know the retail prices of items like lighting fixtures, faucets, and knobs. And if you can buy them on your own for less, the contractor will often agree to do just the installation. And no last-minute changes or additions. That will add to the total cost and put your project behind schedule. Plan wisely, educate yourself, and stick to the original plan.

And that's your tip of the day.

(COMMERCIAL BREAK)

WILLIS: It's easy to assume that any renovations you make will likely pay off. But that's not always the case. You can, in fact, overremodel your home.

That's the situation for one Michigan couple.

David Haffenreffer has the story.

(BEGIN VIDEOTAPE)

DAVID HAFFENREFFER, CNN CORRESPONDENT (voice-over): Shortly after getting married two and a half years ago, Todd and Jennifer Krieger grabbed their piece of the American dream, buying this home in West Bloomfield, Michigan, just outside Detroit. It cost them $170,000. They put in another $10,000 to fix the place up.

Wanting a bigger house, they put it on the market to turn a quick profit.

TODD KRIEGER, HOMEOWNER: We painted this room, we painted most of the house. We put in all -- these are Pergo (ph) floors, we put these in throughout the house. We gutted one of the bathrooms.

This is new. We painted in here. The toilet's new. The shower's new. This was a really a big job.

HAFFENREFFER: And you reinsulated the entire, entire house. How did you know to do that? And how much of an investment was that?

TODD KRIEGER: It was something that would improve the value. We could talk about it people when they came through and say, you know, And we just, we added another layer of insulation.

HAFFENREFFER (voice-over): They also made extensive repairs to the exterior of the house, installing vents and fixing a cracked chimney.

(on camera): Once the renovations were completed, Todd and Jennifer listed their house for just under $200,000. It didn't sell, so they pulled it off the market. When they relist it, they'll reduce the price by $20,000. It's a problem that most real estate agents say could be solved by simply living in your house longer.

SHARON JAFFE, CENTURY 21 TODAY: If they wait five years, maybe they'll come out with a $10,000 or $20,000 profit, you know, in the house, and then be able to use that as a down payment for their next house.

HAFFENREFFER: But when homeowners don't want to wait, they'll want to keep renovation costs down.

UNIDENTIFIED MALE: The smaller stuff makes sense (UNINTELLIGIBLE) resale. The larger projects, you just want to be careful to not price yourself out of your neighborhood.

HAFFENREFFER (on camera): So the solution here for you two is to simply extend your stay here.

JENNIFER KRIEGER: Right. Maybe.

TODD KRIEGER: We've done things to make the house enjoyable for us, while we're here too, so that if we do have to stay a little bit longer, you know, the things we can enjoy.

HAFFENREFFER: For OPEN HOUSE, David Haffenreffer, CNN, West Bloomfield, Michigan.

(END VIDEOTAPE)

WILLIS: Americans spent a record-breaking amount of money last year fixing up their homes, more than $180 billion. But not all of that money is easily recouped at resale.

Lou Manfredini is a Chicago-based real estate developer who knows firsthand which projects pay and which ones don't. Lou is also spokesman for Ace Hardware.

Lou, welcome.

LOU MANFREDINI, REAL ESTATE DEVELOPER: Thank you.

WILLIS: Good to have you here. You know, let's get down to brass tacks here. What gives you the biggest bang for your buck if you're remodeling?

MANFREDINI: I think it's a combination of a lot of different things. I mean, first of all, you have to be smart about what you're going after. Certainly, the kitchens and bathrooms are traditionally the things that we read about, that we see in the newspapers, that the real estate companies will talk about.

But how far you go really depends on the length of time you're going to stay in the house, and really, what your ultimate goal is, whether it's to stay in the house for a long time, or to try and improve the property to then make a profit and move on to the next one.

WILLIS: Absolutely, you have to do some analysis. But which of these remodels typically do not pay?

MANFREDINI: Well, you have to be careful about how you remodel. It's the type of thing -- I've seen people spend $80,000 on a kitchen that, lo and behold, five years later, the word "dated" comes up when they go to sell. And all of a sudden, that $80,000 isn't worth it.

So you really have to pay attention to style, to what kinds of finishes you choose. And that's not to say that a house has to be the house of beige, you know, that you want everything to be earth tones. But you have to be complementary when it comes to how you do the bathroom, how you finish it.

And, you know, people talk about keeping up with the Joneses. You really do have to pay attention to your surrounding neighborhood, to take a look and say, Are all the homes the same style? Do we all have the same amount of bedrooms? Do we all have the same amount of bathrooms? Sometimes a more expensive remodel will actually bring you more of a return by, say, adding an extra bedroom or adding an extra bathroom to your home.

WILLIS: The amount of money you put in your house, according to the experts out there, you only get about 80 percent back, on average, for the money that you invest when you sell your house, right?

MANFREDINI: Yes, it's not a dollar for dollar. I think that a lot of confusion comes in saying, Well, jeez, you know, I just spent $20,000 on my bathroom, so I bought the house for 150, now I should be able to add $20,000 to the price.

It just doesn't work that way, because there's a lot of other factors. Remember that in real estate, the old adage of location, location, location is still king. But you got to have a nice house in that location as well.

WILLIS: All right. Let's talk about some of the improvements that people don't think of first. It's fun and exciting, kind of sexy, to thinking about redoing your kitchen, putting in that fabulous center island, getting all the gizmos, the fabulous appliances. But, you know, who really wants to do the roof at the end of the day?

MANFREDINI: Right.

WILLIS: I mean, is that a good investment?

MANFREDINI: Yes, the mechanical side, or the nuts and bolts of a house that I talk about is the fact that that's really very important. I mean, one thing we saw in that Michigan house is, they reinsulated the home. That is something that people are concerned with.

So anytime you can do things like reinsulate the attic, update your furnace or air conditioner to a more efficient unit, maybe the water heater is 10 years old, that's something that you want to improve as well, because ultimately, you know, I'd love to say that there's a lot of handy people out there. But they're not. They're going to hire a home inspector, which is a good idea. And those are the type of things that make an inspection list. They'll say, Hey, it's a great home, but the furnace is 20 years old. Not that there's anything wrong with a 20-year-old furnace, but its efficiency is way down there. And it's one checkoff, one mark that goes against your house versus someone else's house that's on the marketplace.

WILLIS: But Lou, just playing devil's advocate here for a minute, do you really get credit for those basic things that you do? Don't people assume that the insulation's going to be there, there's going to be no crack in the chimney, the foundation's going to be in good shape?

MANFREDINI: I think people, when they walk into a house, assume all those things. And they, you know, when they walk in, they say, Wow, look at this kitchen. Wow, look at this bathroom. But then all of a sudden, if it's a home with a basement, they walk downstairs and they say, Jeez, there's cracks in the basement. Or, Wow, that water heater's 20 years old.

All of a sudden, that starts to mount. And then that goes against the ultimate price.

And so, just like when you build a house, you know, as a builder, you start with the shell before you put the kitchen and bathroom in. You need a strong shell. You need strong mechanical systems. And though it's not sexy, it's the way to really identify your property to gain more than your competition.

WILLIS: Wow. Lou Manfredini, thank you so much for being with us today.

MANFREDINI: My pleasure.

WILLIS: Coming up on OPEN HOUSE, weekend project. Now that we know small changes can make a big difference to the value of your home, we show you step by step how to make over a room with laminate flooring. Make it your weekend project.

(COMMERCIAL BREAK)

WILLIS: welcome back to OPEN HOUSE and weekend projects, when we take on a do-it-yourself task that you can do in just two days.

Today, we're at the house of Christine and Ralph Comulata (ph). We're in Scarsdale, New York. We're taking a look at a bathroom floor that we're going to replace with laminate.

To help, we're bringing in Tom Kritler. He's here from "The Money Pit" radio show.

Tom, what are the steps?

TOM KRITLER, "THE MONEY PIT": Well, we're going to start by measuring this laminate floor to fit where we need it to go. This is really an easy job. This laminate flooring locks together. This is made by Armstrong. It's called American Duet, Hartford Maple. And we chose this...

WILLIS: It's really beautiful.

KRITLER: ... yes, because it has a antique look. Now, this is a 1930s bathroom. And we want this to look it's been in the floor for 60 years. But it's going to hold up a lot better, because real wood, we couldn't putting in there. But this we can.

WILLIS: Excellent. Now, tell me, do I need any other materials? Or is this stuff just enough?

KRITLER: This is actually the surface flooring. We're going to put an underlayment on it. That's going to give us a little bit of cushion, make it a little bit easier to put this down, gives a little bit of soundproofing and moisture protection. And a little bit of glue for the joints, and that's all we need.

WILLIS: Excellent. Let's get started.

KRITLER: All right.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Before you buy the materials, measure your floor from the starting wall to the finish wall, and divide that by the laminate board width to determine how much flooring you will need. And remember, before the new floor goes in, the old fixtures need to be taken out. For the Comulatas, a floating floor made the most sense.

(on camera): You guys, you're a young couple. You have one child, another one on the way. I know you want to keep the costs down. How are you doing that?

RALPH COMULATA, HOMEOWNER: We found some laminate floor that we can actually put on top of the existing tile. So we don't have to do any major demolition.

WILLIS (voice-over): First, the foam underlayment is rolled out, and then the laminate boards can be placed over it with a tongue-in- groove technique.

(on camera): So Tom, I notice that Ralph is using glue in this project. Do have you to use glue?

KRITLER: You don't always have to. When you put a laminate floor in the bathroom, use a little bit of glue on the tongue and on the groove just to make sure we have a really tight, moisture-proof seal. Now, if you were putting this in your living room or your family room, you wouldn't have to glue it.

WILLIS: Now, tell me, too, about the pattern, because I notice that it sort of varies. How do I make that happen?

KRITLER: Right, that's very important, whenever you're putting down a flooring product, that you pay attention to the pattern. You want to use boards usually as they come out of the box, because the manufacturer does not put the same board right on top of each other. And you're going to have a very nice look to this floor, much like it would be if it was a real wood floor.

WILLIS (voice-over): You can get the look of wood, ceramic tile, or stone using laminate flooring. It makes sense in bathrooms, because it's waterproof and doesn't require much maintenance. But there are still some traps to watch out for.

RALPH COMULATA: I want to get this a little closer.

KRITLER: OK, well, hold it, and let me show you a little trick of the trade. You never want to strike this because you're going to hurt your hand, but not even with a hammer. (UNINTELLIGIBLE) piece of scrap flooring in now. Sort of really lock it in. Now, take the hammer and tap it right here.

Perfect. See, you just locked that in. It popped in. We didn't damage the joint at all. And it's ready for the next piece.

WILLIS: A brand-new floor might even inspire you to spruce up the rest of your bathroom.

Ralph and Christina completed their bathroom makeover with a splash of color and beautiful new fixtures, all projects we'll be showing you at a later date.

(on camera): The floor is finished. Tom, it looks great.

RALPH COMULATA: Thanks. It looks terrific. I'm really happy with the way it came out.

WILLIS: Here's what I want to know, though. Did you come in under budget, or did it cost more than you expected?

KRITLER: Absolutely not. No surprises here. That Armstrong floor was just $3.50 a square foot, a little bit more for the underlayment. Total cost, under 200 bucks.

WILLIS: What about time, though? You know, homeowners worry about spending too much time on these projects.

KRITLER: This stuff is so easy to install. Definitely could do it in under two days.

WILLIS: Any surprises?

KRITLER: No, and I think the reason we didn't have surprises is because we made that critical decision not to pull out the original tile floor. There was probably a reason that floor was put down. I didn't want to find out what that reason was in the middle of the project.

WILLIS: Great idea. OK, Tom, thanks so much.

KRITLER: My pleasure. WILLIS (voice-over): And how do the Comulatas feel about the upgrade?

RALPH COMULATA: What do you think?

CHRISTINE COMULATA: Oh, wow, it looks great.

RALPH COMULATA: Do you like it?

Can I have a high five?

UNIDENTIFIED MALE: High five.

RALPH COMULATA: All right!

(END VIDEOTAPE)

WILLIS: A weekend of hard work can really pay off. In fact, "Remodeling" magazine says you can recoup up to 90 percent of the cost of remodeling an average bathroom.

Coming up, a look at next week's show. We'll be right back.

(COMMERCIAL BREAK)

WILLIS: Coming up next week on OPEN HOUSE, even the most savvy home buyers can fall victim to mortgage fraud. We take a look at the latest scams and show you how to protect yourself.

Then, it's considered the slow season for home buying. We'll have tips on finding good deals during the winter months.

And our weekend project, going beyond your basic TV. We'll show you how to install your own mini-home theater.

Plus, we want to hear from you. Send us your comments, your questions, to openhouse@cnn.com.

Thanks for watching OPEN HOUSE. We'll see you here next Saturday.

Coming up, "DOLAN'S UNSCRIPTED."

But first, a look at the day's headlines. Have a great weekend.

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