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.

Jason Cohen Pittsburgh's Jason Cohen Pumps $1.5 Million into Pittsburgh

Jason Cohen, Chief Consultant at Jason Cohen Pittsburgh, has completed the reinvestment of proceeds, obtained from a sale on March 28, 2013 in the South Oakland area of Pittsburgh, back into the Pittsburgh economy, with the closing of an 18-unit apartment building on Friday, August 30, 2013 in Regent Square.   At a time when the Pittsburgh real estate market is finally being noticed by the masses, having experienced its first population increase in over three years, this reinvestment only adds fuel to Pittsburgh’s fire.  By utilizing the services of a 1031 exchange qualified intermediary and by choosing to reinvest the proceeds from the sale back into like-kind property (selling multi-family property then buying multi-family property with those funds), Mr. Cohen was able to maximize the amount that he could reinvest back into the local economy.  

When asked about his experience with this process, Mr. Cohen said, “We made a promise to Pittsburgh several months ago, that selling the property in South Oakland was not a sign we were divesting, but rather just the opposite; that we would put that money right back into the Pittsburgh real estate market.” That he did. With today’s closing, Jason Cohen’s reinvestment into Pittsburgh ends up being more than double the amount of the proceeds from the original sale outlined in a press release on April 22, 2013, featured in the Wall Street Journal.

This reinvestment, totaling $1.5 million, afforded Jason Cohen Pittsburgh the opportunity to take part in the acquisition of five more local properties. The acquisitions occurred in some of the most premiere neighborhoods of Pittsburgh. One purchase was a 7-unit property in Shadyside and a 4-unit property in Squirrel Hill, another was a 3-unit property in the South Side, and the last was two properties totaling 18-units in Regent Square. While this is Jason Cohen Pittsburgh’s first delve into the Regent Square area, this purchase already positions Mr. Cohen as one of the largest multi-family owners in Regent Square.

Regent Square is an up and coming area of Pittsburgh and runs through four municipalities: the City of Pittsburgh, Edgewood, Swissvale, and Wilkinsburg. It has a unique shopping district and is comprised mostly of family and independently owned businesses.  While predominantly smaller multi-family properties exist in this neighborhood (6 units and below), Jason Cohen was able to combine two of the larger properties in the highly sought after Braddock Avenue section of Regent Square.

Shadyside and Squirrel Hill are also ideal locations for living. Shadyside is home to many upscale stores, boutiques and businesses located along three corridors: Walnut Street, Ellsworth Avenue and South Highland Avenue.  The majority of Squirrel Hill's business areas are located along Forbes and Murray Avenues. In addition to these, there are a number of longtime, non-profit organizations in the area and many annual events are hosted in Squirrel Hill by various community organizations.  The South Side of Pittsburgh is also a model place to reside offering plenty to explore along bustling East Carson Street, and plenty of green spaces to enjoy (South Side Park, South Side Riverfront Park, Armstrong Playground, Ormsby Recreation Center).

Jason Cohen Pittsburgh is one of the largest and most rapidly growing small to mid-size multifamily investors in specific Pittsburgh markets, with the first commercial property being acquired in 2004. The company is a consulting forum for Jason Cohen and others to unite and package together specific real estate strategies tailored to the unique financial situation and goals of each client. Jason Cohen Pittsburgh represents, and has provided, real estate consulting services to everyone from private citizens to seasoned investors and real estate professionals. Cohen’s group is set apart by the customized process designed exclusively for each client to succeed in their real estate activities.

Jason Cohen Pittsburgh's Jason Cohen and Team Give Back to Habitat for Humanity

On August 8, 2013, Jason Cohen Pittsburgh worked together, alongside Habitat for Humanity of Greater Pittsburgh, on rehabbing a home in the Sharpsburg area of town for a family of 7, from Burundi, who had been recently displaced by war.

The home, built in the early 1900s, was sold to Habitat for Humanity of Greater Pittsburgh at a very low cost from a Sharpsburg police officer. It was purchased specifically for this family in need and offers 5 bedrooms in order to accommodate everyone in the family. The majority of the renovations consisted of minor demolition, updating electricity and plumbing, and bringing things up to code.

This project is being funded by the Episcopal Diocese of Pittsburgh and various church groups within the Diocese have raised money for the renovations to this home. The Archbishop blessed the home as well. The Fox Chapel School District also holds fundraisers throughout the year, with proceeds benefitting Habitat for Humanity of Greater Pittsburgh, and for this particular home.

Habitat for Humanity of Greater Pittsburgh was established in Pittsburgh in 1986, and their belief is that “all God’s people deserve a simple, decent place to live.” It is through this belief that they have been able to help 73 low-income families with affordable housing. In order to qualify for housing through Habitat for Humanity of Greater Pittsburgh, a family must first meet certain income criteria, and fill out an application and necessary paperwork. Next, a committee must accept or deny the application.

If accepted, family members begin earning “Sweat Equity” by working 350 hours of labor at house construction sites. After 50 hours of working on another family’s house or at Habitat for Humanity of Greater Pittsburgh’s ReStore, which sells reusable donated house building and home improvement materials to the public, a site is chosen for their home. Next, an army of enthusiastic volunteers works side-by-side with the family to build the house, which will become their home. This construction experience helps families learn to maintain their new home and fosters a sense of pride, accomplishment, and responsibility to their community. The home is then purchased by the family through a no-profit, no-interest mortgage. This entire process typically takes about a year to complete, from start to finish.

Jason Cohen Pittsburgh has had a relationship with Habitat for Humanity of Greater Pittsburgh for approximately 3 years now, working on several projects a year. In fact, Habitat for Humanity of Greater Pittsburgh is the only charitable organization who can do roof repairs, and that is due to its relationship with Jason Cohen Pittsburgh.

Jason Cohen is the Chief Consultant of Jason Cohen Pittsburgh, one of the largest and most rapidly growing small to mid-size multifamily investors in specific Pittsburgh markets, with the first commercial property being acquired in 2004. Jason Cohen Pittsburgh is a consulting forum for Jason Cohen and others to unite and package together specific real estate strategies tailored to the unique financial situation and goals of each client. Jason Cohen Pittsburgh represents and has provided real estate consulting services for private citizens, from doctors, teachers, and single parents to the seasoned investor and real estate professional. Jason Cohen Pittsburgh also offers extensive services to small- and large-cap businesses. Cohen’s group is set apart by the customized process designed exclusively for each client to succeed in their real estate activities.