Recently listened to a podcast where a woman selling her place was a little upset that her $50k in renovations did not translate to her house selling for an additional $50k more. Honestly, I sympathize with her mindset but understand after a decade in the industry that most of the time, money spent in renovations is not a direct correlation with the price of the home itself (Salability vs. Sales Price). That does happen, don’t get me wrong, but those deals are few and far between and usually happen with REALLY run down homes being renovated up to standard.
Salability
About 2 weeks ago, we had a brand new roof put onto our house. The general contractor that installed it said we are getting a $25,000 roof for only $1,200 (insurance paid for it). Assuming that is in fact true, I’m going to go ahead and tell you that my house would not sell for $25,000 more because I have a roof that’s only 2 weeks old. Personally, I think I may get $5,000 more compared to an identical house that has a 10 year old roof.
What would increase though is the appeal or desire to buy my house. I have a new roof (literally) and the comps in my same neighborhood most likely do not. The salability part of this is really just a home being more desirable than another based on how well it is maintained/updated.
Sales Price
Looking at a home from an investor standpoint, I believe the best way to get your best bang for buck on the sales price vs. dollars spent is by adding to the home, not just simply upgrading what’s already there.
Personal Example: We bought a rental property up in Akron, Ohio that was originally a 2 bed / 1 bath single family home. It needed a lot of TLC, but the home was also designed in such a way that a whole other bedroom and bathroom could be added, converting it to a 3 bed / 2 bath with the same square footage. Now, that home went from being compared to 2/1 homes to 3/2 homes, increases the value of the home by almost 100% of the purchase price. Only around 50% of the original purchase price was spent getting it up to this condition. This property is a rental and literally doubled the rent rate for this house due to this renovations.
Final Thoughts
What I’m really trying to relay is that most of the time, replacing builder grade trim at $2.00 a foot (made up number) with your new fancy trim at $5.00 a foot will most likely not increase the value of your home by $3.00 a foot of trim that you replace in the house. It will make your house more desirable though.
Maintaining your home is definitely a key factor in salability of a home, but it’s not usually a 1 to 1 ratio to increasing sales price.