Ever watch that show on HGTV called Bang for Your Buck? Let me let you in on a secret…..the winning house is ALWAYS going to be in a neighborhood that will best absorb the amount of money invested on whatever the improvement was.
I recently had a chance to play “Bang for Your Buck” with a client, only they were wanting to pick the house that had the best change to have been the winner. They narrowed down their short list to about 8 houses. I ran the comps, took what I knew about the neighborhoods and the market, and told them which ones would be the best bet to get back the $20-30k they want to spend on improvements. Of the eight houses, most were at or near the top of the range for their neighborhood. That never works for getting anything back on your improvement dollars. If the range for the neighborhood is $150-200k, you can spend a million bucks on a house, but you aren’t going to get much more than $200k for it. See, once you over-improve a house, you end up making buyers pick between the best house in an inferior neighborhood or an average house in a superior neighborhood…….and sometimes those people have a realtor like me who will tell them they can improve any house, but they can’t do a ding dang thing to change the whole neighborhood!
So, my folks picked a house in the lower end of a neighborhood that ranges from $200k up to well over $500k. That should give them the room they need in the value range to get back most or all of the money they spend. It is also in an area where it is the preferred neighborhood due to character and school district. You’ve got to consider what other neighborhoods any future buyers may also consider. We ruled out several good houses just because there were so many similar neighborhoods all in the same part of town. In fact, we saw about 10 houses that were all pretty much the same floor plan within a quarter of a mile from each other. You don’t want a future buyer to be playing “Where’s Waldo” with your house when it is time to sell!
I also gave them some ideas for what would be the best things to do to the house. Pretty much, what you want to do is offer a buyer just a little more than what they expect to see in your neighborhood. Some people (and amateur Flippers) go over board. I think I blogged about a Flipper who put granite and travertine all over a house in a neighborhood where 30-year-old laminate was typical. That dude could have done just as well with a nice new laminate counter top and 89 cent tile. Sure, who doesn’t like granite and travertine, but it was wasted money from an investment standpoint……especially since his higher material cost drove up his asking price and he couldn’t sell it.
Here are some things that never go out of style:
-Adding a fireplace
-Adding a deck or patio or making the one you got larger
-Fencing a yard
For things that a buyer will want to rip out in 10-20 years, (tile, counter tops, backspashes, carpet, light fixtures, cabinets, etc) you are only going to get a return on your investment as long as what you bought is not only still stylish, but in good condition. For example, when your maple glazed kitchen cabinets are beat to heck a few years down the road, don’t expect a buyer to pay you back for them. And in 15 years, they don’t add any value.
If you can’t tell, I really want my own reality show.