Many homeowners undertake major renovations to remodel their homes before putting them up for sale. After all, sprucing up the place will always drive up the sale price, right?
“Fix it and return it” is a phrase often associated with real estate, but more often than not, upgrades don’t pay off. Read on to find out how to strategically renovate and which projects really add value to your property.
Key points to remember
- There are four types of renovation projects: basic projects, curb appeal, added value and personal preferences. Not all offer a high return on investment.
- The basics include a roof that doesn’t leak, working gutters and downspouts, a dry basement, a reliable furnace, solid floors, walls in good repair, and retaining walls that work.
- Attractive features include a manicured lawn, low cost landscaping, fresh paint inside and out, carpets cleaned and new appliances.
- Value-added amenities include new siding, kitchen renovations and new windows.
- Personal preference projects include swimming pools, tennis courts, hot tubs, wine cellars, basement game rooms and ponds.
The difference between investors and owners
Updating an investment property is generally a good strategy, if done the right way. Successful proponents of the fix-it-and-flip-it philosophy are investors, with the investor mantra “buy low, sell high”. So they buy dilapidated houses at bargain prices and save money on repairs by doing most of the work themselves. A little sweaty equity goes a long way in making a real estate investment profitable.
They also choose their renovation projects carefully, focusing on those that will result in the most value for the least effort and cost. Part of the process is to pay attention to other houses in the neighborhood to avoid upgrading the property too much. If none of the other homes in the area have crown molding and Corian countertops, adding these amenities is unlikely to result in a significant increase in the selling price.
Homeowners, on the other hand, often take a less strategic approach when sprucing up their homes. As a result, they may end up investing a lot more money in a project than they will get out of it when it sells. While it’s certainly a good idea to make a few improvements, no one should overdo it.
How do you know which upgrades are worth the hassle and expense, and which aren’t? To get the most out of your renovation, it pays to keep four types of projects in mind: basics, curb appeal, added value, and personal preferences.
1. The Basics
The basics are the things buyers expect when buying a home. This includes a roof that doesn’t leak, working gutters and downspouts, a dry basement, a reliable furnace, solid floors, walls in good repair, and retaining walls that work. Most potential buyers also expect your home to have working plumbing and HVAC systems. In higher-end properties, basics may also include a number of bedrooms, bathrooms, and multi-car garages, as well as other amenities common to the neighborhood.
That doesn’t mean you have to update everything. You can focus on regular maintenance and smaller, less expensive upgrades that keep everything in good working order. Adding these items to a home that lacks them does not add value; it simply brings the property up to standard with the rest of the houses in the neighborhood, ensuring that you can ask for a comparable price.
On the other hand, even if you want your home to stand out from the competition, you shouldn’t make unwarranted upgrades that vastly outshine other properties in the area. Not only will you end up losing money; you can also scare away potential buyers. In short, before investing tons of money in an elaborate full renovation project, think about what competing properties in your neighborhood have to offer. Find out how similarly priced homes in your neighborhood measure up and make improvements based on your specific market.
2. Curb appeal
Items that add curb appeal help the property look good when potential buyers arrive. Although these projects do not add significant monetary value, they will help your home sell faster. Attractive features include a manicured lawn, low cost landscaping, fresh paint inside and out (at least the front door), cleaned carpets and new light fixtures (even by redoing the address numbers). You can do these projects yourself to save money and time.
Sinking on the plain vanilla side, though. Now is not the time to incorporate bold design choices into the decor. Subtle accent walls and tasteful backsplashes are simple design features that will add curb appeal to your home.
Lighting is another element that can break the bank. While you want the home to be bright and inviting, you don’t want to overdo it or overload your home’s circuitry. Instead, consider installing recessed or LED lights for a modern upgrade. If you need help with these projects, you can consult an interior design professional. Just be sure to look for inexpensive choices.
Avoid bold design choices in your decor. Subtle accent walls and tasteful backsplashes will most effectively add to the curb appeal of your home.
3. Added value
Projects that add tremendous value are firm favorites with fix-it-and-flip-it proponents — and they should be high on the homeowners list, too. While most of these efforts will not recoup their costs, some will come close. The National Association of Realtors (NAR) cites new siding, kitchen renovations (new countertops and state-of-the-art appliances), and new windows as projects with one of the best returns on investment, recouping often 80% or more of their cost when reselling. Upgraded bathrooms, renovated terraces and energy-efficient upgrades also offer excellent value for money.
4. Personal preference
Personal preference projects are nifty items that you want but other people may not like or be willing to pay for. In most parts of the country, these include amenities such as swimming pools, tennis courts, hot tubs, wine cellars, basement game rooms, and ponds. Believe it or not, a swimming pool rarely adds value to a home. First of all, it usually costs a small fortune to have an in-ground pool installed. Second, many homebuyers view a swimming pool as a maintenance issue and a safety risk, especially since it’s something that’s only usable for a few months a year (unless you live in a tropical climate, of course).
There’s certainly no harm in adding these items to your home, but don’t expect potential buyers to be willing to pay a premium for them when you’re ready to sell. And beware if the renovation involves the replacement of a popular or mundane element. If every other house in your neighborhood has a two-car garage, you should probably think twice before converting yours into a game room. Do you really want to be the only house in the neighborhood without a protected parking space?
Other tricky conversions include:
- Turn a bedroom into a studio
- Removing walls to enlarge a space (unless it’s a really practical move, like creating a flow between the dining room and the kitchen)
- Deleting a room to enlarge a room
- Basement renovation (stick to small improvements, such as improved storage capacity)
No matter what project you are considering, remember that your principal residence is not just a house; it is your house. If you plan to live there for many years, add the amenities you want to have, regardless of their impact on resale. When it’s time to sell, do the groundwork to bring the property up to par with the neighborhood and add some curb appeal, but don’t bother undertaking a wide range of projects strictly for the purpose of raising the price of the property. purchase of the property.
Elaborate custom upgrades may interest you more than potential buyers. It’s best to keep renovations small, neutral in appearance, and focused on improving the functionality of your home. And remember, even with home renovations that are known to add value, there’s a good chance you’ll be spending more money than you’ll get back.