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The Guide to Maximum Return on Investment Flipbook PDF
Offering guidance to getting the most out of your upgrades and remodeling of your home
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THE GUIDE TO MAXIMUM RETURN ON INVESTMENT
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Table of Contents
Is Remodeling Worth It
Page 3
Where Should You Invest
Page 6
B.R.O.I. - Bad Return on Investment
Page 11
Trends to Avoid
Page 15
ROI interior Improvement
Page 19
Don't Out Do the Neighborhood
Page 22
ROI Exterior Improvement
Page 23
Conclusion
Page 25
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Is Remodeling Worth It? The classic dinner table discussion. “When are we redoing the bathroom?” “Where is my new kitchen?” “Do we have enough saved up to put an extension on the home?” All of those questions put serious financial burden’s on people’s plates.
Instead of jumping right into it, let's discuss if the investment is worth the return. Is that added addition worth staying in the same home, or should you upgrade to a home with more bedrooms and square footage?
Surprisingly, remodeling was never a focal point on an individual's mind until the Home Market crash happened in 2008. Before then, it was a normal occurrence for a family to get up and move when the house “became out of date” or they needed more square footage to live comfortably.
After the 2008 crash, the interest rates skyrocketed to all time highs, people did not have the availability of funds to purchase a new home. Instead, homeowners started renovating their homes. The trend has only grown ever since. The home improvement industry is estimated to be worth well over 400 Billion Dollars per year.
With the emergence of HGTV, DIY Network, and even YouTube, people have become self-proclaimed contractors. Most individuals are learning how to improve their homes without dishing out money to that costly contractor.
All in all, by putting the efforts in, you will most likely make your home a quick sell when you decide to list it. The question to ask, what to remodel and how much to spend on it in order to make your return on investment logical. Many factors come into play when you are taking the next step.
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First, how long are you planning to stay in the home? Although that Open Floor plan that everyone is looking for right now, does not mean that it will still be the “fad” ten to twenty years from now. That extra money you spent on granite countertops could be a thing in the past by the time you try to sell. The World is evolving every day. From the Walkman to the CD player, the CD Player to the iPod, to the invention of the Smart Phone, which buried any type of music device. To sum it up, if you wait too long to sell after you remodel, it might be time to remodel again. This equals the dreadful “Bad Return on Investment” (B.R.O.I) (pronounced BROY)
Furthermore, you put all of the sweat and hard work into finishing a project (or hiring someone to complete it.) You spent those months without a kitchen, without any living space, all members of the house breathing down each others necks. Was it worth it just to add few thousand dollars into your pocket when you sell a year down the road?
Your palace is now in mint condition, giving you the opportunity to relax and kick your feet up. The enjoyment factor also comes into play. You will not see on paper the price tag on your home raise, but you will be able to feel the value of your well being have an incredible Return On Investment. It is a game of Pros and Cons.
This book will discuss where and how to best spend your money when making improvements to the home. This will include balancing satisfaction and enjoyment with your gamble of a Return on Investment (R.O.I) While some topics will make you feel weary in your stomach, especially if you have already completed the upgrade before reading this book, I will stay persistent jamming them in your head. I am going to make these guidelines second nature the next time you sit down to develop a plan for raising the value of your home, and your lifestyle.
Although there are many blogs, videos, and books (Just like this one), the market is different in every neighborhood. Contacting a Real Estate Agent for their guidance is the first
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thing to do. Our expertise in your local neighborhood can determine where, what, and when to invest your money. Some neighborhood values go up with certain improvements done. Even just landscaping the property by cutting down trees can give more value to the home than that $20,000 new kitchen.
Are you ready to start this remodel?
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Where Should You Invest?
What is the first thing that jets to an individual’s head when talking about home improvements? The kitchen, the bath, creating an open floor plan, and other things HGTV glorifies to you. That being, while Home Depot advertisements flash across the screen and are included in every commercial break. Sorry to break it to you, that is not what is going to give you a great ROI.
Here is a trivia question for you. Percentage-wise, What is the highest ROI you can do on your home?
Ready for the lightbulb to go off?
What is the first thing a home buyer is going to see before they walk into the house? What is the first thing they need to lay their eyes on in order to continue the tour? The Front Door. The front door brings a whopping 101.8% return on investment. The front door represents who you are as a person. Do you have the bold and assertive personality where the door sticks out, or do you have a broken down, off-colored, about to fall off the hinges, that bring out your insecurities about life, type of door?
In this section, we are going to discuss your Return on Investment in areas of Replacements, Remodeling, and Additions. In these, I will explain the highest ROI improvements that you can complete in order to enjoy your home to its full potential while also increasing your resale value. All percentages that will be discussed are statistics generated by “Remodeling Magazine” (Hanley Wood Media, Inc. 2020)
Replacements
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Replacements are the most simple and cost-efficient projects that homeowners can complete. Below are the top four ROI replacements that you can complete:
Entry Door - 101.8 % ROI Stone Veneer - 92.2 % ROI Garage Door - 88.5 % ROI Siding - 84.3%
What do all four of these have in common? They are on the exterior of the home. The first thing buyers start processing when deciding if they want to move forward on the home is how the curb appeals to them and their personality. New front door, replaced siding with a nice stone veneer finish, along with a fresh, garage door that does not creak every time that it is opened, can result in a huge advantage in the homeowner's decision on putting in an offer.
Grant it, that $500 added value after the installation of a new door doesn't seem to jump off the page when you are dealing with six figures. The way to be looking at it, you are given $500 to get rid of that eye soar you see every time you walk up to your house.
Those tiny investments start to add up. Those few, simple, and easy projects just increased your home thousands of dollars and opened up to more potential buyers interested in your home.
Remodeling
The kitchen, the area in your home where the family cross paths with numerous times a day. If its eating breakfast, grabbing a drink from the reiridorater, or cooking dinner, a member of the household always winds up in the kitchen area. At this point in time, they are the biggest
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selling point when home buyers are looking at the interior of the home. If you sell them on the kitchen, it will compromise their original “Must-haves.”
Although it is an expensive project, the remodeling of a kitchen average ROI is 79.3% Where homeowners make the wrong turn, they put expensive things that will not gain value. For example, installing a $3000 sink faucet will not increase the value. Going with the most expensive backsplash, will not increase the value. I am not saying go cheap on things, just be wise of what you really need. That $3,000 faucet dispenses the same water as a $100 faucet does.
Other smart remodeling projects:
Attic Bedroom - 72.9 % ROI Bathroom - 70.3% ROI Basement - 70.3% ROI
As stated earlier, all of these projects are costly. Before jumping into picking up the sledge hammer to start the demolition of your kitchen, sit down and calculate your needs, not your wants. Do not go in saying you want to spend $10,000 and finish the job $20,000 later. These are expansive investments, do not turn it into a B.R.O.I. A more expensive product doesn't mean it is a higher return.
Furthermore, if you are planning on making a move in five years, every homebuyer has their own taste. Basements can be finished in many different ways. Some will like hardwood, some will like carpet. The smartest thing to do (If you want the finished basement satisfaction but still do not want to have a B.R.O.I ) , is put neutral panels on the walls, and a cost-efficient carpet or lament as the flooring. It is inexpensive and the new home buyers can come and adjust it to the style of their choice.
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Additions
The classic question, to relocate or to extend your home. Outgrowing your first home purchase is a common occurrence with young couples. They purchase a home that they can financially afford at the time. A few years down the road, they have already outgrown their residence. Is an addition the right move? Or should you start home shopping?
Additions are the costliest and come with the lowest ROI out of any home improvements. This project is only for the ones who plan on residing in the home for another ten to fifteen years.
Top Return on Investment Additions: Deck - 77.3% ROI Garage - 63.7 % ROI Master Suite - 63.2 % ROI Bathroom - 54.8 % ROI Sunroom - 46.5% ROI
Relating to remodeling, putting more money into the project does not mean it will have a better return on investment.
Utilities
You can assemble the most cost-efficient, dazzling kitchen, bathroom, and basement. If there is one thing that will turn homebuyers around, it is the functions and interior walls of the home.
Although they might not notice on the initial walkthrough, they will be knocking on your door asking for money due to that dangerous outlet, leaky pipe, and furnaces at the end of their life. 9 of 25
The furnace, A/C unit, and other like items that make the home function are also a very big focal point when the buyers are debating on putting in an offer or not. Having up to date utilities shows that you care about the home and took care of it. The newer utilities are also more energy-efficient.
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B.R.O.I. - Bad Return on Investment
A few general questions to ask yourself when thinking of making home improvements:
“How do I know that this project will indeed add monetary value to my home?” “Is this project a necessity or am I just listening to the suggestions of money-hungry contractors?” “Are these new appliances going to make me happy?” Or “Am I just buying them to add value to my home when I sell in a few years?”
I, personally, can not answer those questions for you, but If you have any doubts when you ask yourself those questions, it is a better idea to hold off and re-evaluate your answers down the road. In this section, I will summarize what changes will set yourself up for a BROI.
New Carpet
The feeling of soft carpet on your feet. Very pleasing and comfortable to your feet when standing shoeless after it has just been laid down,. The only problem, after a few months, the carpet is now worn down. This puts pressure on the new home buyer to bring in a professional crew to clean the carpet before the move in.
Carpet is also on the decline. People are purchasing homes and ripping up the carpet to replace it with hardwood or manufactured flooring. Carpets are germ carriers and develop odors that cannot be fully removed. The new vinyl flooring is also more durable than carpet, easier to clean, roughly the same price, and gives the room a more tasteful appearance.
Personalized Conversions
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This is where it is hard to balance enjoyment and your Return on Investment. Everyone has certain niches that they enjoy. Although the enjoyment is there, they have the possibility of being expensive projects that may devalue your home. One example includes a wine cellar. You spent hard money and work building the perfect cellar. You store all your wine and you feel as if the cellar is the focal point of the home. The expensive conversion is going to turn away more buyers than it will bring in. Most will come in and do their best to convert it. They will have this in mind while putting in their offer. The classic “Man Cave” where the husband can have his alone time, have the buddies hang out and model the entire basement/room to his wants. In doing this, a lot of structural fixtures ended up being changed. So what could have been an open floor rec room, there is a unmovable bar stretched across the floor, abnormal shelves built into the walls, and multiple holes throughout from missing the dartboard too many times. This will turn buyers away, especially if they are upgrading from a smaller home due to having more children.
Personalizing your home is a necessity to your well being and enjoyment factor. If you were not able to do that, you’d be living in more of a rental than a home purchase. In order to not lose the value on your favorite things, try to compromise on how you are structuring the project. Make it more of a permanently temporary set up. Do not put the amount of money in that you would remodeling necessities such as kitchens and bathrooms.
Garage
The garage, also known as the “above-ground basement” it is great storage area along with keeping your car nicely parked away from the elements. Some people make the decision to convert the garage into more living space. When homebuyers lay eyes on that beautiful two-car garage from the outside, but walk in to see a space large enough to fit a Prius. The rest of the garage has been savaged by living space, with no possibility of return it to its original purpose. This aggravates some buyers to the point that they will want to end the showing right on the spot. 12 of 25
I am not saying you cannot use the garage as a living space, that is a personal preference. The thing is to not spend a boatload of money to, as stated before, salvage the garage. You can make that extra play area, home gym, recording studio. Relating back to the personalized conversions, make it permanently temporary. Some buyers will like that workout space. You need to construct the space so that in a day, you can turn it right back into that two-car garage those home buyers are looking for.
Inground Pool
Those hot summer days, grilling burgers, hanging out with friends, and family, while relaxing poolside. Is it actually worth the price tag of investment? The answer actually depends. You will never add the amount of value to the home that you spent on putting in the pool. The only opportunity that will give you the possibility of breaking even, is if it is in the correct market. In New Jersey, you have roughly three months to get used to the pool. In areas that have 12-month utilization, and have the sun beating on the property daily, it gives the opportunity to break even on the installation, possibly add a small value to the selling price. Furthermore, some buyers, especially those with young children, view the pool as a hazard. Others view the maintenance that is needed to be put into it. You have also immediately eliminated any potential buyer that does not have the capabilities of being able to swim. So why does the answer “depend?” I explained in the beginning that the enjoyment factor is put into place while deciding to add additions to the home. This section started off with a scenario of sitting poolside hanging with friends. If you are planning on installing the pool to add value to the home when selling a few years later, it is a B.R.O.I. If the installation is there to enjoy for another twenty years, you get the luxury of that pool side. Overall, the installation of an inground pool is fully for your enjoyment. The installation of an above-ground will not add value and will potentially have the buyers request you disassemble it. The favorable outcome of going with the above-ground is that it is not as costly as the unground pool. it is also easier to comply to the request of removing the pool, rather than having to fill in the pool (which that request does happen) 13 of 25
Conclusion
That extra thousand dollars doesn't seem that high when upgrading your necessity to the “deluxe version”. It fills the “little extra” void that you have in your body. Those “small” upgrades start adding up and begin to burn holes in your pocket. Overspending on luxuries will get the home sold fast, but more than likely will not come in a spitting range of breaking even for the effort that you have put in. You have the right to be happy and comfortable while residing in your home. Just find cost efficient ways to upgrade, especially if you are strategizing to upgrade your home solely on resale value. Furthermore, every home improvement is subjective. One direction you go in with style, another person might not feel as if that fits their needs, and vise versa. So enjoy your home, just enjoy it smart.
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Trends to Avoid
So you made it past the B.R.O.I and ready to start developing a plan to make the home improvements that you have dreamed of. There are a few things that homeowners make a mistake on when they jump right into the remodeling.
Architecture
We spoke about having that beautiful curb appeal when potential buyers are driving up to the property. Homeowners start their improvements without doing their research. Architecture can really drive up the value of the home. The thing is, it has to match the style of the home. For example, putting column bushes next to the doorstep of a one-story ranch. It will make it an eye soar to the home, and also make it appear smaller. Find the right style that matches up with your home. Furthermore, find the style that will fit to the neighborhood.
Oversized Kitchens
Those monster chef center islands seen on HGTV are glamorous. They are even more glamorous when they are set up in front of a live audience. Homeowners make the mistake of putting that center island that they saw on Master Chef. Unless you are a chef who has other chefs come over for dinner making parties, the center island does not have to take up the hole kitchen. Cutting down the island and making space for a kitchen table, or installing a breakfast nook, will add more value to the home and is more appealing to potential home buyers.
Old World Poser The elegant European style in your home can be luxurious. This takes us back to the emphasis of turning your money into value. In order to fit the elegant style, it will be a costly 15 of 25
investment. Homeowners start to try and cut corners by using replica manufacturing. If it is not authentic, the cheapness will show.
White Appliances When clean, white appliances look phenomenal. It shows that you take care of your home because the white shows any dirt that might come its way. That is the main reason why you should go with a different color. People’s lives are too fast-paced and busy to make sure the home is spotless every day. If it is a semi darker shade, that month without cleaning shows as much as a few days without cleaning when appliances are white.
Carpet
The times of carpet being a ginormous aspect of a home are long over. Pull up that carpet, lay some hardwood or wood-like manufactured tile. If you want that warm feeling (although floors are even coming heated now), put an elegant rug that can be easily replaced or removed.
Gold
We all see those commercials urging people to invest in gold. That is because it is around an all time low. It gives a flashy look to the home if they are throughout the entire house and cleaned on the daily. The gaudy gold fixtures and hardware were a huge selling point in the 80s. Now, it looks outdated.
Look more into a polished brass or nickel.
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Cheap Wood Paneling
Wood-paneled homes are beautiful. If you already have top of the line wood paneling throughout the home, do not touch it. Relating back to the “Old World Poser” section, if it is cheap, people will see right through it.
Actually, if people see the cheap wood paneling, it might have them thinking that you are trying to cover something up such as unfinished walls.
Tiled Countertops
The number one investment to seek for the short, or long term investment. If you have tile, consider removing it. They are hard maintenance and if you have a chip happen, the amount of work put into fixing them. Also, do you want to be cleaning the grout on a daily?
Popcorn Ceiling
Having popcorn, or any textured ceiling shows that you have not kept up to date with your home. It was huge from 1950-1980, now it is an eyesore and makes me feel as if I am staying at a local motel. Also, popcorn ceilings show that there is a possibility of lead-based paint and asbestos. Make sure this is all cleaned up by the time inspection occurs, along with your own health. Issues like this can make or break deals.
Paint Families, especially those with young children, have their rooms painted in a way that the children represent themselves. That bright pink or Jets green in the bedrooms. It is the boldness that turn home buyers away. Although many of their first projects are to repaint the home to their style, they subconsciously will be distracted by the room's color. 17 of 25
while you are living there, do whatever you want with the walls. When it is time to sell, time to rethink that room you painted your little Jimmy ten years ago.
Jacuzzi Bathtubs
Scarface can relate, a jacuzzi just bleeds elegance. The jets also reek of bacteria that build up over the years. It also uses a tremendous amount of water (80-100 gallons) and has the possibility of taking up most of the bathroom space. A small tub attached to a stall shower takes up close to the same amount of space of that jacuzzi tub, saves on utility cost, time management, and overall health.
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ROI interior Improvement
Neutral Colors
This is for resale value. Do not paint your home a color that does not fit your taste if you are planning to stay there for a while. For the ones selling soon, neutral colors are easy on the eyes. They showcase home features without losing the personality of the home. Crazy enough, neutral colors are even more of a must in today’s world. Back in the day, a homebuyer would show up at the Real Estate Office looking to buy a home. Now, they can take their own tours from the comfort of their own home. That bright yellow is going to be displeasing to the eyes. Where neutral color, with professional photography, will highlight the room without there being a distraction.
Neutral Colors:
Medium Green: Coziness Gray: Sophistication and modernity White: Shows off home features Blue: Soothing Light brown: Makes the room feel smaller
Although neutral colors are the way to sell your home at maximum value, you should still contrast it with a different color. If the home if fully neutral, it may seem like an unfinished home with no personality. Try to stick to the ratio of 80:20 when it comes to neutral color and the color of your choice.
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Craftsmanship
Authentic and replicas are easily spotted when it comes to craftsmanship. Those homebuyers learn to spot these short cuts as they tour homes.
Bold Front Door
Exactly what I opened up the book with stating. The front door is the highest ROI money can buy. A darker door with neutral home colors subconsciously pushes the buyers into letting “little things that can be fixed” get put on the back burner.
Utilities
Cost-efficient replacements are key in the short, and long term of remodeling the home. In the short run, it will appeal to buyers as new appliances. Furthermore, it saves you a large amount of money over the years with the cost efficiency of the newer “green” appliances. Furthermore, a huge appeal that is going on right now when it comes to utilities, is the “Smart homes.” Everything is evolving in the technology world is now “smart,” put your home in the same category. For you, it is cost-efficient. For homebuyers, they are most likely moving from a home/ apartment that does not have the capabilities that smart appliances/utilities have. All they do is see the beautiful displayed smart thermostat and are immediately intrigued by the home.
Stainless Steel
Early in the section, we spoke about the white kitchen people mistake of putting in. Now the oppositions of how to go, stainless steel.
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Stainless steel appliances go with any color. If you decide you want to paint your kitchen mustard gold, the stainless steel still matches with it. While going a different route, you may have a tough time contrasting the color of the appliance with the room color. Furthermore, they are a breeze to clean. Just a quick wipe down and they are shining like new. When potential homebuyers
Crown Molding
What automatically creates the word “elegant,” Crown Molding. An easy installation to do to any room to make it stand out to any homebuyer.
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Don't Out Do the Neighborhood
How much should you plan on upgrading during your remodeling project? Upgrading a room can range from a few hundred dollars all the way to tens of thousands of dollars. This section is going to be geared towards getting a high Return on Investment. If you do not plan on moving for another twenty years, that R.O.I might be paid off in happiness. While developing a strategy, you might go with the thought of trying to upgrade as much as your pocket can afford. Yes, it will be the most astonishing home on the block, yes it will sell quick, yes, it has the chance to backfire on you when you decide to list it. The first thing to do, look around and see what the neighborhood has to offer. How is their curb appeal? If you have any knowledge of it, how are their interiors designed? A $400,000 buyer is going to be looking in the $400,000 neighborhood. They are not going to go to the $300,000 area to pay the price of a $400,000 market. At the same time, someone who is looking in a $300,000 neighborhood, cannot afford to pay $400,000 for that HGTV exclusive home you have just remodeled. Use the tools around you while creating a strategy. Although Zillow and other searches that can be done online are far from accurate, they still have the possibility of giving you a benchmark of the area. But the best way to go, call a Realtor. We write Comparative Market Analysis and can guide you for the whopping price of zero dollars. I was called to a home one time to complete a CMA for them because they wanted to know if building an addition to their home would be a good R.O.I. I inspected the house, developed a report of the homes in the area, and gave them a report of the value number amount the home has the potential of raising if they were to put the addition on. Don't be that hardheaded individual who does not take the advice of others and wants to do everything by themselves.
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ROI Exterior Improvement
Curb appeal, curb appeal, curb appeal. Did I say curb appeal yet? Let's get right into it.
Front Yard
That dreaded day you schedule to mow the lawn, having to cut the hedges on the bushes, it can get repetitive and aggravating. Grant it, you do not have to worry about your resale value while you are living there. But when it comes to R.O.I, do you honestly want to live like a slob and have overgrown grass, leaves all over the yard, and no pride of ownership? If you do not keep your lawn looking precise while it is listed, you need to have some type of intervention. If you cant do the landscaping yourself due to a disability, elders, or even laziness, there are many landscaping companies in the area. If you are on short on cash, the neighbor’s son or daughter down the street would be happy to do it. The Return of Investment on a landscaped home is more than 150%. Now before you go to the Garden section of Home Depot and start filling your property with random pots of flowers, sit down and create a game plan.
Step 1
Cumulate a list of things that you would like to include, based on the surroundings you already have. For example, do you have a stone patio leading to your front door? If so, consider planting a flower bed around the perimeter with bright, vibrant colors to help boost the positive feeling of your landscape. Have an oversized tree in your yard. Placing a birdbath underneath it will put a beautiful touch on it. Creating a plan will also help you develop a budget. If you want to get ultra-fancy, call in an architect who can guide you in tasteful combinations.
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Do you feel was located “there,” it would be great shade for the deck? Create privacy when you have friends over, or hide an eye soar of something on your property or a near by one. Do your research on which look to go with. If you randomly plant a tree that takes thirty years to grow, or does not grow to the length that you have envisioned, it is not going to improve your life very much. Furthermore, know where your utilities run under the ground. One horror experience, a family planted a tree near their sewer line. The tree’s routes ended up damaging the sewer line, resulting in the owners having to pay to fix the line after it came up during the inspection. For more on trees and the direction to go, the National Tree Benefit Calculator will give you tree value information.
Lighting
Although buyers are most likely going to be taking a tour of your home during the day, outdoor lighting on the boundary of your home and property are essential.
Advantage of outdoor lighting:
Prevent tripping or falling Adds a style to the home Emphasize spaces that you worked hard on (such as a garden on the side of the home. Reduces the risk of burglariesIn ways, it can save you money when it comes to Homeowners' insurance. Insurance companies give discounts to homes that do not have burglary claims, etc.
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Conclusion
I hope this brief discussion on the risks and rewards on home improvement has given you some educational information before you decide to take the next step in remodeling.
If you would like more specific information on your Return on Investment, please contact me. My email is [email protected] . I will gladly go into deeper detail on each investment.
Looking to list soon? I also have available “Home Selling Secrets.” I also have available “The Next Chapter” written for first time home buyers.
More information available below, but not limited to:
1. Flooring, walls, and lighting 2. “Cooking” the new kitchen 3. Living room upgrades and renovations 4. Bedroom and attic renovations 5. Bathrooms Key Points 6. More on Additions
Thank you for taking the time out of your schedule to enjoy this book.
Connor Rush Highmark Real Estate Denville NJ 07834
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