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Reply by Sarit

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Posted on Home appraisals and additions/remodels values

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Sarit

487 posts in 1798 days


#1 posted 09-01-2011 06:06 AM

A remodel that gets you the most ROI is usually not a remodel that you want to live with. It is usually “lipstick and mascara”. Its basically filling your house with the cheapest things that look expensive, not upgrading any wiring/plumbing/insulation/venting/structural support and hoping nobody notices.
On top of this, let’s say you want to do the reno now, but don’t expect to sell for 10yrs, then whatever you install today is gonna be a bit worn and feel dated by then and you won’t get top dollar anymore.

Don’t get too excited over the DIY shows out there. They usually start with properties that really need that renovation so of course when the reno is done and the appraisal is done they can realize the full value of the updates. When you reno an already “nice” property you have to remember that you’ve already paid for the previous owners/builder’s updates so you will only be able to realize the difference between their apparent values (regardless of how much you replace). For instance if you have what looks like a $15k kitchen, then you completely gut it and install what looks like a $25k kitchen, then your valuation only increases $10k. If you managed to spend only $10k to get the $25k look then you still only break even.

Like Lissajous said, treat your home as an expense. Do the renos that will make you happy while avoiding resale faux pas’. Don’t overextend yourself to get that dream kitchen because you think you’ll make that money back. If however you assume it to be a complete loss, then you could take the cost of the reno and divide it by how many months you plan to stay there and that would be how much “rent” you’re paying to have a nice kitchen. If you’re happy with that number, then whatever happens you won’t regret your kitchen (unless you sell earlier than expected).
As an expense, the projects I do on my house tend to be for minimizing expenses and maintenance rather than for value creation. For instance, I’ll be installing those gutter liners that keep leaves out. I probably won’t see a dime added to my appraisal but eliminating the need to clean gutters and minimizing water damage caused by malfunctioning gutters will pay for itself.

When you decide that you want to sell, that’s when you switch from ‘expense’ mode to ‘flip’ mode. Here is where you pull out all the lipstick and mascara to pretty up your place without actually spending much money. New paint, resurfacing cabinets, regrout the tiles, etc. If you can’t see it don’t pay for it and don’t replace anything (unless contractually obligated to). In a true flip you might have to replace a lot, but if you’ve been treating your home as an expense up to this point, nothing should need replacing now.


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