Six Ways To Lose Money Upgrading Your Home
One of the joys of home ownership is being able to do pretty much whatever you like to your home. If you want to put in purple carpets and paint the walls with happy faces, go right ahead. That is, if you know you will be in your home forever and a day. If on the other hand you think you may be selling in the next few years, you may wish to give some serious thought to the issue of payback on various renovations.
Some things, such as modest upgrades to kitchens and baths, will often have a good payback while other things such as landscaping are 50/50 in most cases. Some things can actually create negative value or at very least, give very little payback when you compare your investment to your new home value. Here is my top 5 list of ways you might lose money on upgrades:
- Over Improvement: If you are in a subdivision where the average home has a value of say, $225,000, you shouldn’t put in a $50,000 kitchen nor should you spend $50,000 on landscaping the back yard. The neighbourhood values will prevent you from recouping a full value.
- Installing a Swimming Pool: Chances are that the cost of the pool will far outweigh any benefit you would get upon sale. First of all, you will severely narrow the number of buyers that may be interested in your home since not everyone wants a pool. You know the rule about supply and demand. As demand goes down with fewer buyers, so does the price. Now on the other hand, if you are in a million dollar neighbourhood where infinity pools with waterfalls are the norm, it might actually be a good investment.
- Things that get dated quickly: Some home improvements are almost guaranteed to be passé in a short period of time. Anything electronic such as a bulky surround sound or entertainment system, is likely to be a liability within a couple of years. Same with very trendy carpet colours, light fixtures and counter tops. For major investment items, it’s safest to stay with classic, tried and true improvements that have stood the test of time.
- Bad Taste: Oh my gosh, this is a tough one as taste is said to be personal but sometimes, it’s so bad that it would be safe to say the vast majority of the main stream public would agree. For example, painting the walls of your living room black (don’t laugh – I’ve seen it) and installing a disco ball is not a really good idea. Nor is dark green shag carpet in the bathroom. If you are really not sure, please ask your friends and maybe a pro or two for their opinions of your planned upgrades.
- Converting the garage into living space: Most people would prefer the garage and if you are in a neighbourhood where garages are the norm, this is especially true. If you really need more space, finish the basement or maybe it is time to move.
- Not doing the upgrades properly: I can’t tell you how often we have home inspections and then find out that a home renovation has caused problems with improper wiring, plumbing and even drywall. We’ve seen footings give away, roof lines separate and other pretty scary consequences of bad renovations. Use a reputable contractor and do it right!