Investing in real estate means you’re often making repairs and renovations. Whether it’s just a layer of paint or a complete gut job, renovations can quickly run through a repair budget if you’re not focused on costs and which renovation choices will be a good return on your investment.
Don’t let the glare from shiny new granite countertops fool you. There are some upgrades that are not worth the cost, especially if you’re planning to use the property for rental income. If you’re not creating your own dream home, skip these five property renovations.
One of the biggest property investment mistakes in terms of a return on your money is adding a pool. A swimming pool addition rarely increases the value of a home beyond the cost of installation and can actually be a deterrent to some buyers as the amenity will increase home insurance premiums in some parts of the country.
Home Additions or Conversions
While it may be easier to market a three bedroom home over a two bedroom, the cost associated with creating or adding an extra bedroom likely isn’t worth the cost. Trying to recoup the cost of converting the garage into a bedroom or properly constructing a home addition will prove futile in the housing market.
Nicest House on The Block
Before you begin any renovation work to a particular property, pull the comps to compare your home to others recently sold in the neighborhood. Estimate your asking price after making the desired renovations. If your plans create the nicest (and most costly) house on the block, pull back on the reno. Pricing the home out of the neighborhood means you won’t get enough back to compensate for the upgrades.
There is definite value in renovating the kitchen of a home, but upgrading the basics into a chef’s kitchen will leave you with too little cash to fill the fridge. Minor kitchen upgrades offer a return of more than 80 percent, while major renovations give you 64 cents back on the dollar. If you’re planning work in the kitchen, go with a neutral backsplash and granite or granite-like countertops.
Hard To Repair
Creating a home renovation that would be difficult to repair or change should be avoided. Framing the fireplace in rare stone tiles or building custom built-in shelving may be something the buyer doesn’t like. You’ll be forced to change the unique upgrade or wait for the exact buyer who likes your interior design taste.
Repairing a property to its original beauty can be rewarding, but knowing when to stop with over-the-top renovations is key to real estate investment success. The basics that build a good home – energy-saving windows, a newer HVAC system or a freshly painted front door – will be money well-spent.