How to Add More Value into Your Properties
Many people like to invest in real estate because it can often be a relatively passive strategy. Investors will buy a property and sit on it, waiting for it to appreciate over time slowly.
This isn't always a terrible strategy. Most homeowners are implicitly executing this strategy concerning primary residence without even realizing it.
Furthermore, home prices increased by almost 11% in 2020 alone and are expected to continue to grow as inventory and mortgage rates remain low 1.
But the "wait and see" tactic often puts you at the mercy of movement in the housing market. If the market experiences a downturn, you could lose out on potential gains.
Alternatively, investors with a growth mindset understand that certain things can add more value to your property investment that will inevitably increase your bottom line.
If you want to add more value to your properties, consider these pivotal steps that are sure to boost your property value.
Your first go-to step in adding value to your property is to figure out any deferred maintenance that you can remedy. If you ask a licensed appraiser, they will tell you that they calculated any deferred maintenance into their opinion of your property's market value.
Simple things like replacing worn-out or stained carpeting, fixing a cracked window, or caulking joints and cracks will make your property last longer while also boosting its resale value. Fixing appliances or major mechanical systems is another easy repair you can complete with a significant upside.
When you consider which repairs to tackle, you should prioritize repairs with a low upfront cost with higher after repair value.
Some properties might have initially been built with a particular design or floor plan in mind. However, aesthetics, taste, and trends change over time. One of the easiest ways to increase the value of older properties is by converting certain aspects to meet modern expectations and preferences.
For example, a recent survey found that nearly 53% of respondents preferred buying a house with a home office space compared to those with an extra bedroom2. Converting a bedroom to a dedicated work area is an easy change that could benefit you at the time of sale.
Conversion can also be beneficial when finding a new use for an unused area in the property. One idea might be to convert an unused loft area into an extra bed or bathroom. This type of conversion has shown to increase up to 15% to your property value 3.
Another option is to transform your space to follow a more open floor plan or concept by removing walls that separate rooms. Projects like this can potentially add anywhere from 3-5% to your property value 3.
Adding new improvements to a property can certainly help increase its overall value. These features can not only make a property more marketable but also make it more enjoyable.
However, improving a property can be a bit capital intensive, so you may need to set some money aside or borrow additional funds to complete specific projects.
Adding an extension or new addition is an example of an improvement that could increase your property's value by approximately 10% 3.
Suppose you want to add something a little more niche, such as a conservatory or garden room. In that case, you can still add about 3-5% to the property's value, but you should be careful about inhibiting your property's marketability to a broader audience 3.
Renovate and Remodel
If you are looking to boost your return on investment (ROI), remodeling is one of the best ways to add value to your property. According to the Joint Center for Housing Studies, spending on remodeling projects will be near $337 billion for the later part of 20214.
Similarly, the average return on popular remodeling projects in 2020 was roughly 66.5%5. Meaning, tackling multiple remodeling projects can further increase your returns.
A significant renovation project with great ROI is replacing that old or banged-up garage door. It can significantly improve the property's outer appearance, and you can expect to recover almost the entire project's cost with the expected sale price5 by reusing the existing opener.
Finishing a basement is an excellent example of a top-tier renovation that can help your house stand out in the market. While the project can require a lot of work (if you feel like flexing your DIY muscles) and the upfront costs can be a bit high comparatively, most property owners can recoup roughly 70% of the total cost 5.
1 Yale, A. (2021, June 28). 2021 Real Estate Trends: What Investors Need to Know. Retrieved July 20, 2021, from https://www.millionacres.com/real-estate-market/real-estate-trends/real-estate-trends-guide/
2 Holmes, T. E. (2020, December 11). 53% of Homebuyers Would Choose Home Office Over Extra Bedroom. Retrieved July 20, 2021, from https://www.valuepenguin.com/news/covid-19-homebuyers-wish-list-office-space-wifi
3 24 Ways to Add Value to Your Property. (2018, March 20). Realtor Magazine. Retrieved July 20, 2021, from https://magazine.realtor/daily-news/2018/03/20/24-ways-to-add-value-to-your-property
4 Joint Center for Housing Studies of Harvard University. (2021, October 15). Residential Remodeling to Continue a Steady Expansion [Press release]. Retrieved July 20, 2021, from https://www.jchs.harvard.edu/press-releases/residential-remodeling-continue-steady-expansion
5 Kalfrin, V. (2020, December 07). What Upgrades Increase Home Value? 19 High-ROI Improvements. Retrieved July 20, 2021, from https://www.homelight.com/blog/what-upgrades-increase-home-value/