Oh, home improvements can be so much fun. Is there anything more satisfying than a dramatic before and after? Fixing up your home can get to become a way of life. There’s always another project just waiting for your magic touch. But for those of us with a fixer-upper habit, there’s a peril lurking on the other side of all those re-dos – it’s the dreaded Over Improved house.
You know the one. The house on the block with the owners that just went way overboard, with Carrara where everyone else has a nice mid-range tile, with the Wolf range when the neighbors have a perfectly decent GE stove. But when you are in the throes of full-on home improvement fever it can be really hard to step back and objectively evaluate what you’re doing.
I find myself in that position now. With my neighborhood of century-plus old houses lately seeing an uptick in values, my home improvement mania is in full throttle. Every room painted. Third floor totally redone. Mudroom converted to giant pantry. And I’m still thinking…. now what?
Now that Airbnb income can be counted when you refinance your mortgage, my husband and I are in serious talks about investing in a dream bath – not just because our bathroom situation is pretty dreadful, but because we’ll sell this house one day and I know people make buying decisions based on emotion – and a lustworthy bath may make buyers overlook the house’s other drawbacks. But that’s a scary-big investment. Is it the right move just because of some eye-popping prices on our street lately?
To find out how homeowners like me can keep their fixer upper fixation in check, I turned to an expert – my own realtor, a guy who’s seen many of the mistakes owners can make. Garrett Ackles has guided us through two home purchases and a sale, and I trust his guidance completely. Here’s what I learned.
Keeping Up with the Joneses
One of Garret’s favorite words is situational. Keeping your eye on your future buyer’s wants and needs, “it’s really important to look at your neighborhood,” Garrett says. “And know where you are compared to the neighborhood standard in whatever it is you’re thinking about upgrading.”
Take countertops. “If the standard is granite and you’re sitting there without granite or solid surface of some sort … then certainly bringing that up [to the neighborhood] standard will return that investment as close to 100 percent as you’re going to get,” he says. “In that situation it’s definitely worth it.”
If nobody else on the block, on the other hand, has a solid surface counter, upgrading may only get you a 50 to 60 percent return, he says.
“If you’re thinking about things like bathrooms, kitchens, adding on,” Garrett says, “the higher that budget goes, the more you really need to look at the neighborhood and where it’s going to position you.”
The jargon he uses here is deficiencies. In our case, for instance, the higher priced homes in our neighborhood have gorgeous master baths straight outta Pinterest. We, meanwhile, have a tiny, weird bath with a door to nowhere and four different floor levels (I don’t even want to know) and a cramped shower the size of a phone booth with grout so stained no amount of scrubbing will get it clean (I beseech you on behalf of your home’s future owner: please never use a light colored grout). When a contractor refers to it as a prison shower you know buyers aren’t going to dig it.
“If you’re short bathrooms and that brings you to standard or edges you above competition, that’s probably a very good investment,” Garrett says.
So how can you know where you’re deficient? Here’s your excuse to hit all those neighborhood open houses you know you want to. You’ll come away with more than just house envy. This is what you’re up against when you sell, and “there’s nothing better than seeing it in person,” Garrett says.
Make Your Realtor Your BFF
But it goes beyond haunting the open house circuit. Having a good relationship with a knowledgeable realtor is key. At our request, Garrett came over to do walk-through of our home after we’d done two years of work to give us his feedback and guidance on where our wisest investments would be next.
Even knowing full well we have no intention of selling our home anytime soon, he knows that providing that kind of service keeps him tops (and only) on our list of who to call when we’re ready, and we’ll tell friends about him when they’re looking for a realtor.
“A good realtor is going to want to help you with those type of things,” he says. “They can quickly pull up the comps,” and help you assess where you stand.
Percentages Aren’t Everything
When it comes to watching home values nearby climb, “it’s easy to get wrapped up in percentages,” Garrett says. I know when I saw my zip code sales price had jumped 43 percent in a year I was all kinds of giddy. Garrett tempered my enthusiasm though.
Especially in a growing neighborhood where people are doing some serious upgrades, the sales price increase can be pretty dramatic percentage-wise, he explained. When house prices jump from 100,000 to 130,000 “it’s going to appear that it’s smoking hot because of that percentage increase,” he says, “when the reality is the dollar increase is the same as [as in an established neighborhood] where $300,000 homes saw a $30,000 or 10 percent increase.”
“That’s the importance of calling your realtor and getting zeroed in on what’s happening,” he says. “You have to look more than just six months or a year – what’s the long term history? Go back five years and see what’s happening and what’s causing this? Is employment better, what’s going on with general economy? Is there suddenly an effort to bring up some neighborhoods? [With that knowledge] all of a sudden I’m feeling a lot better because there’s reasons behind it. If there’s a spike, a six month run, and we see prices jump but there’s not really a reason for it then it’s possible you had some flips and it looks like a jump but it’s not the same [as long term growth]. Don’t get lured into something that may be artificially enhanced.”
Don’t Be the Caboose – Or the Engine
While stuck in the middle may not sound too appealing, it’s exactly where you want to be when it comes to real estate, Garrett says. Comparing it to a train, if you’re the engine – or the best house on the block – “you’ve got all these other cars behind you holding you back. On the flip side it’s hard to be the caboose. If you can position yourself where you’re in the middle, maybe toward the front middle that’s the great place to be.”
Of course there will always be “some people that want to be that engine and want everyone to know they’re the engine,” he says. “If they’ve got the financial means I happily let them be the engine … let them pull my price up.”
That said, if you really want those fancy counters, and you’re going to be there a while, ask yourself if you’re willing to spend the money because it’s something you really want, Garrett says. If so – and you can afford it – by all means, go for it. Not all home improvement has to be chasing an ROI — you should love where you live, after all.
Maybe you really like nice things, but you know perfectly well that crazy expensive range is out of line with the rest of the neighborhood. It’s still a lot of cash, but nothing like an entire kitchen reno, so why not treat yourself there? Bonus, appliances are portable. A top-of-the-line stove can go in storage before you sell, Garrett says – just replace it with one that fits in better with the neighborhood.
“The goal is to put yourself in a spot where you’re compelling,” Garrett says, “where people say ‘we’re going to lose this if we don’t move on this right now.’ If one buyer says that chances are others will,” and then you’re getting multiple offers.
To get there you’ve got to have everything nearby houses have, and then just enough more.
“Most buyers today – unless they are looking for a home as purely an investment — prefer to not have to come in and instantly have a project,” he says. “Making it compelling is making it feel as move in ready as possible.”
I don’t know about you, but that sounds like some leeway to let my fixer upper gene have some fun.
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