Val Puddington, Coldwell BankerHappy Homebuyers

Renovate Your Way to Riches

February 5th, 2009 | Business, Maintenance | permalink

The proposition sounds fool-proof: buy a disheveled, undervalued home, invest some sweat equity, and sell later at a big profit.

Of course, nearly all of us have run into the opposite case: one of our handyman friends buys a “fixer-upper”, but it never quite seems to get up!  A project that looked an entrepreneurial sure-thing becomes something like a second job, but without the paycheck.

When you are a first-time buyer, how much renovation is too much is a complex question.

The factors involved include your skill set and your tolerance for living in a “work in progress”.

Renovations are important to consider when buying a house, and also when putting a home on the market.

A little-known fact about home renovation is that renovation projects very rarely add 100% of their cost to the value of a home.

The National Association of Realtors recently released their annual Cost vs. Value Report. It breaks down the complete range of home repairs and renovation projects, with an average cost and the associated value benefit.

There are plenty of geographic and price bracket variations across the country, but for almost every market and every price point, renovations such as a new kitchen, vinyl siding, or a bathroom upgrade return no more than 50-80% of their investment.

So why renovate at all? From a cold cash analysis, it doesn’t seem to make good money sense.  But cold cash is not the whole story when it comes to our homes.

When home owners renovate before they sell, they get to enjoy the new space themselves, not just make things more attractive to buyers. You could even say that the enjoyment factor is the primary return on investment for the home owner.

Recent renovations also make buyers’ lives easier. The opportunity cost of a higher quality of home life is hard to measure, but it’s real.

Making home improvements can also reduce seller stress by short-circuiting a buyer’s tactic of picking at defects to drive down the price.

Consider the market you’re in carefully, as in all decisions concerning your home.  You can overbuild for the neighborhood you are in, and never recover your costs.

Another study that indicates now may be a good time to renovate is the Leading Indicator of Remodeling Activity released by the Joint Center for Housing Studies.  It indicates that the demand for home renovation services will continue to be soft, even as the housing market improves.

Your local contractor is looking for work, and now may be a great time to negotiate your way to the new bathroom or home office that makes your house your dream home.

I can help you with home selection, finding the right contractor, and all the aspects of choosing, buying, and moving you into the home that’s right for you.