- How can I improve the value of my property?
- As a home owner you have very little say when it comes to overall economic market conditions, however, there are several things that influence that are very much within the scope of your control. These issues include:
- Condition of your property,
- Specific home improvements
- Neighborhood stability and safety
- Quality of neighborhood schools
The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Though markets vary, that has occurred several times in recent history -- including the early 1970s, late 1980s, late 1990s, and almost exponentially from 2000 thru mid-2006. Although prices have fallen since and we may never see such a rapid rise in real estate again, it's been shown time and time again that a period of increasing prices always follows a economy that has fallen into recession.
In any economy, specific home improvements can increase the value above the cost of the . According to Remodeling magazine, which publishes an annual remodeling report, a remodeled bathroom returns 81 percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent.
Increasing square footage will nearly always result in an increase in value, and the addition of an extra bedroom and bath most often will yield the largest return. Not only will increasing the bedroom and bath count in your home increase value, but it will open your home to a much broader spectrum of buyers making resale easier and quicker,
One caveat, however. Don't improve the size of your home to much more than about 10% the size of the other homes in your neighborhood. For example, if most of the homes in your area are 1,500 to 2,000 square feet and your addition makes your home 3,000 square feet, you run the risk of 'over' improving your property. A buyer probably will not pay the same price for the extra square-footage, as he would if your home were surrounded by other 3,000 square-foot homes. The bottom line is to measure the cost of any improvements you want to make against the overall values in your neighborhood. If you "over improve" for the neighborhood, you may not necessarily recover your costs or boost your property value significantly.
In terms of return on investment, swimming pools in northern Ohio are considered a luxury rather than an investment. That is, add a pool to your backyard in Ohio purely for your enjoyment, because you will probably realize very little of the installation cost in terms of added value to your home. Not only will a pool usually not increase value commensurate to the investment, but many buyers look upon backyard pools as maintenance top heavy, not to mention safety and litigation risks. This will narrow the "pool" of buyers that ordinarily may have put your home on their short list.
The safety and security of a neighborhood can affect property values, too. If you live in a high-crime area, an organized community watch program not only will lower the crime rate but give home values a boost, too. Eliminate crime and the perception of it, and you increase the value of your property.
School system ratings are often overlooked by homeowners especially those whose children have grown beyond the need for public education. However, they will almost never be overlooked by buyers. The quality of area schools is often listed as a buyer's top-most priority. Constant vigilance by area homeowners as to the quality of education in neighborhood schools plays an extremely important role in maintaining the desirability and thus value of real estate in any community. To improve your schools is to improve the value of your property.
Finally, when considering any home improvement, remember, quality pays. Well-planned and well-executed remodeling jobs are usually a good investment, while bad work seldom enhances value or livability.
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- Will a neighbor problem reduce the value of my property?
- Think about it. When a REALTOR sells your home, he or she is also 'selling' your neighbor's home as well as the entire neighborhood. These all go hand in hand to affect the curb appeal of your home. A cluttered landscape next door can detract from the positive aspects of your home, and thus reduce the true value of your home in the eye of the buyer. If you have a neighbor problem, review your local ordinances or call your jurisdictional representative. A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. Parking of a large motor home in a driveway may also be prohibited. There may be ordinances against peeling paint, overgrown yards, loud music, and all night parties. And most cities prohibit parking any vehicle on a city street too long.
It also may be worthwhile to check into local . An operator of a home-based business usually is required to obtain a or permanent zoning change in residential areas. In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department.
If you live in a development with an association you may also be able to turn to the placed in the deed to force unruly neighbors to shape-up. Most deeds in developments have restrictive covenants that control set backs, easements, pets, home businesses, rentals, fencing, vehicle storage, and even drying clothes in the back yard, paint color, and open garage doors.
Before bringing in lawyers or the authorities, you may want to make a copy of the pertinent ordinance or restriction and give it to your neighbor to give them a chance to correct the problem. And the adage, "Good fences make good neighbors," didn't become an adage because it was untrue.
Resources:
- "Neighbor Law: Fences, Trees, Boundaries and Noise," Cora Jordan, Nolo Press, Berkeley, Calif.; 1991.
- What repairs should the owner make?
- If you're an owner thinking about selling and want to get top dollar for your property, you probably need to make all minor repairs and selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer that allows a buyer either to back out if numerous major deficiencies are found or negotiate their repair, which will often cost you more than if you had made them beforehand.
In the go-go from 2000 to 2006, sellers, although making their houses look 'pretty' through cosmetic fix-ups such as painting and staging, did not have to spend much money or put too much effort in the way of deferred repairs, such as new roofs, windows, or furnace replacement. Buyers bought the homes 'as is' and were glad to get them at almost any price. In the years to follow, however, making such repairs are proving to be the only way to get your house sold, especially in markets where there is a large inventory of houses that require very little work.
It would seem that you could simply discount the work that needs to be done. This is proving not to be the case. Buyers do not want to go through the hassle of making the repairs even at a discounted price for the home. It's far easier to borrow more to get a home with fewer necessary or impending repairs. If your home is not in the 'fewest possible repair' category, it will be difficult, to sell your home for anything near market value.
Beyond these purely mechanical repairs, buyers today are far more conscious of environmental dangers that a home might impose. During an inspection environmental hazards may be uncovered, such as radon gas coming from the basement, or asbestos covered water pipes, peeling lead based paint, leaking in-ground oil tanks, or toxic mold in the basement or attic. These are conditions that the buyer or mortgage lender will probably want repaired before allowing the purchase to close.
If you think your home may be at risk for one or more of these hazards, have the inspection done before putting the home on the market. If a problem is found, you can repair it so that the buyer is never confronted with the issue.
- How much will I spend on maintenance expenses?
- Those who study such things generally agree that you can plan on annually spending one percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of homeownership.
Newer homes, of course, will cost far less to maintain than older homes, especially for the first five years. After that the maintenance costs catch up rather quickly.
New or old, it will pay to maintain your home on a regular basis. Buyers see value in homes that are well maintained, and will pay top dollar even for homes that have not been 'updated' per se, but have nevertheless been properly maintained.
- What are the pros and cons of adding on or buying new?
- Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house:
- How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?
- How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?
- What do local zoning and permit?
- How much already exists in the property?
- Are there affordable properties for sale that would satisfy housing needs?
Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.
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- What kind of return is there on remodeling jobs?
- Remodeling magazine produces an annual that answers just that question. The most important point to remember is that remodeling a home not only improves its livability for you, but its curb appeal to a potential buyer down the road.
Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. You might also expect to recoup 58% of the cost of adding a home office, according to the survey.
See ► Home Sellers -
- Can you deduct the cost of home improvements?
- What you spend on , such as new windows, can be added into your home's , or amount of money invested in a home, which reduces when it comes time to sell. Capital gains are determined by the difference in price from the time a home is purchased and the time it is sold, minus the cost of any permanent improvements.
However, the 1997 tax changes virtually eliminates the capital gains tax for most homeowners (the exemption is $250,000 for single homeowners and $500,000 for married homeowners). Still, it is worthwhile to save all receipts for permanent home improvements just in case. They also can be useful documentation when it comes to marketing your home when you sell.
If, in your case capital gains is still an issue, don't confuse a home improvement with a home repair. Replacing a roof is not a home improvement. You simply brought the same depreciating roof your home already had, back to its former value*. However, building a three-tiered deck to replace a single tier deck may be an "Improvement" since something of value was permanently added to the existing structure.
Repairs might add value to your home in the eyes of a buyer, but will not increase your home's cost basis in the view of the IRS. Consultation with a qualified accountant is always prudent when dealing with this issue.
* Replacing a roof may still be considered an improvement if you replaced asphalt shingles with, say, clay tiles. The added cost of the clay tiles and their costly installation may be deductible as an improvement.
See also:
- Are there government programs for rehab?
- See► Real Estate Guide: Your Mortgage (Fixer-uppers) - Government Programs for Rehab.
- What are some guidelines to follow when trying to find a contractor?
- See ► Real Estate Guide: Home Ownership (Hiring A Contractor) - Guidelines
- Where can I get a list of architects?
- See ► Real Estate Guide: Whom To Contact (Resources) - Architects.
- How do building codes work?
- See ► Real Estate Guide: Homeownership (Building Permits and Zoning) - Building Permits
- What are some resources for info on home improvements?
- See ► Real Estate Guide: Whom To Contact (Resources) - Home Improvements.
