Improvements are one of the great ways to make money in real estate. You buy a home that needs work, add in updated features and fixtures and eventually sell the home for more than you bought it for. In theory, that all works extremely well but there is a limit to how much value can be added to a home with improvements. In this article I am going to detail what improvements will add value, what improvements have limited value and how to make improvements properly.
Improvements that add value
I will start by saying unless you are an investor, try to make improvements that you will get good use out of while you live in the home. One of the most common ways to make money in real estate is by improving the physical components that are in the house or condo. The four best places to improve are the kitchen, the bathrooms, the floors and the closets. Updating your kitchen will include new cabinets, countertops, backsplash and appliances (if they are very old). Places to improve in the bathroom are the walls, the vanity and fixtures. Updating the floors to a nice hardwood if you don't have hardwood can greatly add value. Finally, adding custom closet fixtures such as The Elfa System or California Closets can help make your home stand out.
What improvements add no value
There are improvements that can be done for personal use but should not be done solely to increase your home value. Examples of these are things that are extremely custom. Making your kitchen cabinets pink may be something that you love but it doesn't appeal to the general buyer who will look at that as an expense they have to change when they move in. Personal movie theaters are also part of this. It may add a small amount of value to the property but nothing compared to what it will cost to install the theater. The final improvement on the list is high end appliances. While high end appliances are great for personal use the value doesn't transfer to an appraisal so the money spent won't be regained.
How to make improvements properly
The way in which you decide to upgrade a home is largely dependent on your financial situation and the home you are improving. If you are planning on buying a home, improving it and then selling it on it is advisable to make sure you either have the cash to do the repairs or you get a home improvement loan to provide you the money to pay the contractors. If you purchase a home that needs fixing up with the plan to sell and you have no money you are surely going to take a big loss on the transaction. If you live in the home you would like to improve it is generally advisable to save up the cash and improve your home over time. If you are planning on living in a home for 5-10 years there is no rush to make the fixes and you can take your time before you sell. This way you will have the cash to pay and you won't completely uplift your life to change the home all at once.
Improving the home you own can be a great way to make money. As always be sure to plan your project and make sure that you are prepared for the costs. Don't over improve and don't make your home too custom.