Should I Update Before Trying to Sell?

When deciding to sell a home in today’s market, investors and homeowners alike often ask me to tell them what they should do about updating their home and what will give them the most “return on investment”. According to the National Association of Realtors’ “Cost vs. Value” Report, the average returns for most updates/ remodels yields between 65%-95% nationwide. The trouble with using these figures is that in any given area of the country, there could be more or less demand for the type of updates needed. DO refer to the Cost vs. Value Report to see the average demand for particular types of updates, however. 

There are a few reasons why you should take these statistics with a “grain of salt” and not as an absolute truth. For instance, the quality of the work could have a lot to do with how much profit or loss is yielded. We all have seen homes that people have “claimed” to be updated only to find ourselves wondering how bad it must have been before the work was done! If you have a competency for knowing what appeals to the masses in terms of potential updates, then there is a good likelihood you can still make money in real estate on your remodeling efforts. 

Next, your proficiency at obtaining quality but inexpensive labor and materials can attribute to your profits/losses when it comes to measuring your “R.O.I.” If you are handy and take advantage of local surplus inventory stores to get your materials, your base investment will obviously lower than someone who hires an expensive contractor to do the work. Taking this type of cost reducing strategy can definitely assist you in being more successful with a fix and flip business model.

Finally, the localized competition in the area could dictate whether or not you should spend the money to remodel before selling. If there are several like properties in the area for sale that need updating and you can differentiate yours by spending a little to make yours move-in ready for someone, then do it! However, if doing this would make yours exceed the highest sale price in the neighborhood, then maybe you should just “stage” the home to be the most appealingly decorated of the group. This will avoid you having problems getting the home to appraise once you do get a contract from a buyer. 

What other questions or issues have you run into when it comes to making improvements in real estate or working with a fix and flip investing model?