When doing renovations, people rarely think about long-term resale value. Most families just want a really nice place to live and they work to create their forever home. However, life can be unpredictable. So while it is joyful to make a dream home, those dreams need to be balanced with an understanding of whether or not those granite countertops or that second story are good investments in the long run.
What is resale value?
We hear the idea of resale value quite often pertaining to real estate. The ideal is to buy a property that is a good investment and to have its value appreciate. Good maintenance and appropriate renovations help ensure that when it comes time to sell again, the property has gained equity and you’ll make money.
However, the amount of money you’ll make depends on market appreciation. Which is why it’s important to make improvements that fit the property and the neighborhood.
Location the key factor to consider
If you’ve bought a property by a highway or another not-so-great location, you probably got it for a good price. If that location’s value doesn’t increase during the time you own it, you’ll probably have to sell it for a similarly good price, even if you’ve done a lot of work on it.
Many property owners invest in renovations that aren’t in keeping with the neighbourhood. As a result, they end up selling for less than they invested, which can be heartbreaking.
Before you renovate, look at what has been selling around you – at what cost for what quality? If the most expensive home in your neighborhood sold for $400,000 after being completely renovated, it doesn’t make sense to style your house to a value any higher.
And really, how special are those $10-per-square-foot tiles anyway? Go with the $5 tiles instead.
Focus your investment to one or two elements per room. Make pricey items such as granite countertops, a fancy backsplash, or a higher end faucet; work like show pieces, similar to a piece of art.
Smallest may be best when it comes to resale
As for adding a second story to create more space for an expanding family, it may be worth it in the long run to hunt for a bigger home.
If you invest an extra $100,000 on a two-bedroom bungalow in a neighborhood full of two-bedroom bungalows, you may never recover that full investment. It may be a much better idea to take your equity and find a larger home in a neighborhood where your investment will hold and even grow in time.
When it comes to resale value, it’s always better to have the smallest house in an area with mansions rather than a $600K house surrounded by $300K houses.
Of course, creating a joyful home should always be the first priority. Just make wise decisions that will bring you prosperity and happiness for years to come.