Thursday, December 26, 2013
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.
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.