Home Improvements that Don’t Add a Lot of Value to Real Estate Investors

The housing market is slowly recovering. Real estate investors are having success again. But it’s still a buyer’s market. Homebuyers are more cautious now. They know better. They’re not going to spring for the luxuries that they may have before the Recession. They know what they can afford.

It’s time for real estate investors to make sensible improvements that add real value, not add luxurious unnecessary features to entice buyers who may be trying to live beyond their means. Banks have wised up and are stricter with their lending. So, just like the homebuyer, a real estate investor should be cautious with their renovations. When flipping property, the following “improvements” should probably be avoided:

Creating a Home Office.

Sure, telecommuting is getting to be a more viable option every day, but home offices tend to offer less than a 50% recoup on installation expenses. They’re not for everyone — some buyers may see more value in the space as an extra bedroom — so it doesn’t make too much sense to add it to an investment property.

Adding a sunroom.

Again, not for everyone. Some people may not think that a solarium is a necessity. Some may not know what a solarium is. Either way, it’s not the best investment.

Adding a bathroom.

Though it may seem like a huge selling point, it’s usually not. The amount of money you’d have to add to your selling price to recoup your investment in adding a bathroom may scare away buyers who see it as a luxury that they’re not willing to pay for.

Luxury bathroom remodel.

Jacuzzi tubs and enormous glass showers with massaging heads may seem enticing, but they’re practically never worth it.

A pool.

Granted, a real estate investor is generally not considering adding a pool to properties that will be flipped, but it should be mentioned as a money-guzzling undertaking that does not offer a return.

Adding a master suite.

It’s not Versailles. It’s an investment property. Most homes don’t have wings, so a master suite may seem a bit much in the average home.

A roof replacement.

Unless this is really necessary, like you’re buying a house that was the victim of the tornado in The Wizard of Oz, you probably don’t need to replace an entire roof.

As a real estate investor, a general rule that you can follow when it comes to property renovations is that luxury may be, well, too much of a luxury.

Bridge Loans for Real Estate Investors

For sellers/real estate investors that want to buy a new home before selling their homes, a bridge loan is a viable option.

The US real estate industry is making a slow recovery, but it’s still a buyer’s market. House prices are on the low side and homes tend to sit on the market. Homeowners looking to sell their existing home and purchase a new property may find themselves in a difficult situation. It’s easier to buy than sell a home.

In this situation, in which an investor wants to buy a home before selling an existing home, a bridge loan is a viable option. These loans provide a means to afford owning two properties for a short period of time. The stipulation is that the recipient is attempting to sell a home. They are an invaluable resource for real estate investors who are flipping property. Often, they use bridge loans when snatching up a great deal on a foreclosure property.

For homebuyers and property flippers, bridge loans enable investors to close on a purchase quickly before the selling process is complete. The borrower uses the funds to repay the bridge loan after the sale of the original property is complete.

There are two basic types of bridge loans. In one type, buyers use the loaned money to pay off the mortgage on the existing home and make a down payment on the new home. Borrowers in this scenario only need to worry about repaying their existing mortgage and will have funds to sink into the new property once the sale closes. In the second type, the homebuyer borrows against the equity of the existing home to use for the down payment. The second option is more complex than the first.

Bridge loans are short-term financing plans that are only used for transactions that involve multiple properties. They bridge the gap between the purchase of a new home and a sale of an existing one. Usually bridge loans must be paid back within six months. So, the state of the real estate market becomes quite important to honor the terms of the loan. If the existing property is slow to sell, borrowers may have to renegotiate the terms of the loan and have it extended.

There are risks, as with any real estate investment and home loan. However, if you’re a real estate investor with something to get rid of and an eye on a property that may be off the market soon, a bridge loan is a viable option.