Why Go to Open Houses in your Neighborhood?
A few years ago I staged a home that had a stunning newly renovated kitchen. It was complete with long sleek granite counter tops, new high end kitchen cabinets and of course the very best stainless steel appliances.
Around the same time I staged another home that had a gorgeous en-suite bathroom in the master bedroom. Beautiful tiles, nice new vanity, great shower including an expensive trendy rain shower head.
In both situations, the renovations were stunning! Potential buyers were wowed when they walked into these two rooms.
Do you always recoup renovation dollars?
Watching all the renovations shows on TV makes you believe that you will always recoup your renovation dollars. Especially with kitchen and bathroom renovations. They always increase the value of your home. Right?
The challenge in both situations was that both of the homeowners had created amazing spaces but they both OVER spent and OVER renovated for their neighborhood.
The townhouse with the newly renovated high end kitchen was absolutely stunning with all high-end finishes. It was very appropriate for a single family home in an upscale neighborhood. The challenge however, was the home was located in a mid-range neighborhood for town homes.
The townhouse with the gorgeous drop dead spa like master en-suite that would be perfect for a high-end single family home was located on a busy street in a starter home neighbourhood where the townhouses were purchased primarily by singles, single parent families, and/or newly married couples.
In both situations, the cost of the renovations were higher than what the norm was for their neighborhood. In both situations, they had overspent on their renovation for their repsective neighborhoods. The result? Both homeowners didn’t recoup all of their renovation costs which left them very frustrated & discouraged.
Know Your Neighborhood!!!
As a Designer|Stager|Real Estate Investor, I quite often get asked by friends, neighbors and anyone else who knows what I do for a living if they should put in hardwood flooring, do a bathroom renovation, and/or a kitchen renovation to sell their home. The first question I ask them is what is the norm in their neighborhood! Would they recoup the costs of those renovations for their neighborhood?
There are many factors to take into consideration when you are renovating or upgrading a feature in your home. Where do you live? What kind of neighborhood do you live in? Do you live in a trendy and up & coming area where there are a lot of renovations going on? Or do you live in an area where there are a lot of houses for sale? Or somewhere in-between.
Do you live in a neighbourhood which is considered a starter home neighborhood? A family neighborhood or a high-end luxurious neighborhood? What’s the average price going for homes in your neighbourhood? How long does it typically take for a home to sell in your area. Or in real estate terms, the average days on market.
Walk and drive around your neighbourhood. See what type of renovations people are doing AND more importantly, what renovations are they NOT doing in your area. For example, it’s risky being the first house to spend thousands of dollars changing the front of your house from faux stone to real stone when no one has done it yet. In some neighborhoods, you will start a trend and add value to your home and eventually increase the prices in your neighborhood. But in other neighbourhoods, you will not recoup those renovation dollars when you want to sell. And can you afford the risk of starting a trend in your neighborhod?
Go To LOTS of Open Houses In Your Area
Its surprising how many people are reluctant to go to open houses in their neighborhood. They’re afraid their neighbor will think they are nosy. But why would you not do important research for probably the most important asset you will own in your life – your home.
Going to open houses in your neighbourhood will give you a better idea of what renovations your neighbours are doing, and how much they are asking for their home. Once the home sells, be sure to find out how much they sold their home for. If you don’t want to ask your neighbor, the agent who sold the house would be happy to tell you.
Go to lots of open houses to get a clear picture of what’s going on in your area. Don’t just go to one or two because the one or two that you visit may have over renovated or under renovated their home. You may not get the full story.
Don’t “Under” Renovate For Your Area
One home I saw for sale was a beautiful 4 season home situated right on a lake. The property was in the $1- 2 million + price range. The home owner had completely renovated the kitchen which was gorgeous. However, for some reason, probably financial, the homeowner installed laminate counters instead of granite. Buyers in this price range, with the location and size of the home, want and expect higher end finishings.
If you don’t have the money to do the proper renovation that your neighbourhood commands, then don’t do it!
I walked through a home where the home owner had just installed laminate flooring in a hardwood floor neighbourhood. The floors were beautiful but they had definitely under renovated for their area. They would definitely be able to recoup the renovation costs plus more in their area if they had installed hardwood. In this case, the buyer will most likely take the dollars off their offer, rip up the newly installed laminate and install hardwood flooring when they move in.
Spend Less Dollars Than Your Profit Potential
What is profit potential?
The profit potential is what the new value of your home is after renovations. For example, one home renovation show on HGTV showed a family who spent $100,000 on their home renovation. They increased the value of their home by $120,000 by doing the renovation. So their profit potential in this case was $20,000. That’s alot of work for a small amount of return on your dollar. If you’re doing the renovation to live in and enjoy the home, that it would be worth it. BUT if you’re doing the renovation solely to increase the value of your home to sell, then its alot of work for very little profit. Most “house flippers” would consider that a lost for the effort put in to earn that $20,000. In my opinion, they either over renovated or they didn’t do the renovation that would have best benefited them.
Making sure you spend less dollars than your profit potential is key!
Breaking this rule will make you disappointed and frustrated like our two homeowners. Following this rule will make you excited with the new value of your home after your renovation.
I’m Debi Collinson, a Designer. In 2006, at the request of a realtor, I staged my first home. The sellers liked their newly redesigned home so much that they turned down an offer for full asking price. I never looked back. Since then, I have been helping clients make their homes look like they came out of a magazine. I have helped clients earn money for their home beyond their expectations.
I’m also a real estate investor. I buy “fixer uppers” and either flip them for a healthy profit, or turn them into profitable rental properties. I’m currently living in my 8th “fixer upper.” Come join me as I share my tips & secrets along the way.