Focused On Increasing Your Real Estate ROI? Leave These 9 Renovations Behind

April 29, 2019 by Jorge Lopez

Designers discuss the sketches inside the house.
Choosing which renovations to perform on your Houston investment property is equally important to working with the right contractors. You need to determine what work you’re going to do with the same level of diligence you use to vet your contractors.

Not all work is necessary or a priority. For example, it’s basic maintenance to clean the carpets and paint the walls between tenants. If the microwave is losing power, it’s a good idea to replace it. Adding a bedroom to a one-bedroom unit is also a good idea because you’ll attract more applicants. However, adding more than three bedrooms isn’t a smart move.

A 2003 study by the National Association of Realtors documents the characteristics that increase and decrease the price of new housing, provided the square footage remains the same. The study concluded that while factors like central air and nine-foot ceilings increase the purchase price, some additions reduce your ROI. For instance, vinyl and aluminum exteriors sell for 4% less than houses with brick.

When renovating to increase ROI, here’s a list of renovations to avoid:

1. Adding more than three bedrooms

Generally speaking, each bedroom you add to a property adds approximately 4% to the total value. However, adding more than three bedrooms doesn’t do much unless the house is already large.

If you’re willing to increase the square footage of your home to add a fourth bedroom, or if you’re renting your unit as student housing, those are the only circumstances that would make it worth the expense.

2. Adding a tiny bedroom to make your property a 3-bedroom unit

While it’s true that three-bedroom homes are in more demand than homes with one or two bedrooms, don’t add a tiny bedroom to bump your property up to three-bedroom status. People don’t want tiny bedrooms the size of a walk-in closet. They want bedrooms they can feel comfortable in. The moment a potential buyer sees a tiny bedroom, they’ll feel disappointed, and that lowers your chances or renting or selling your home.

Keep in mind that adding bedrooms to your Houston rental property may require you to add a bathroom as well. The general rule is one bathroom for every two bedrooms. If you add a third bedroom, and none are master bedrooms, you’ll need to add a second bathroom.

If you do add bedrooms, be sure to follow the laws regarding what constitutes a bedroom. A bedroom generally needs to have a closet and a window, and an entrance that is accessible without having to go through another room first.

3. Converting the garage into a bedroom

Garage conversions are popular, but not everyone wants a garage conversion. First of all, most people use their garage as a storage area for bulky items they don’t want to put outside or in a shed. Many people still use their garage to park their cars.

Converting a garage to a bedroom eliminates the most popular storage room in the house. Even when your property has a basement that can be used as storage, it’s not convenient like a garage. For example, potential buyers who regularly have garage sales won’t be interested in your property. Nobody wants to haul bulky items from the basement, through the house, and out to the driveway, just to make a few bucks.

4. High-end luxury smart appliances

Creating a smart home is a worthwhile investment when you work with a listing agent who understands how to convey the benefits to potential buyers. Unlike visible features, a smart home won’t sell itself. However, unless your property is in an extremely affluent area, you probably don’t need to go overboard. Basic smart appliances and systems are sufficient.

Installing a smart thermostat in your rental property won’t directly boost your ROI, but it might facilitate a faster sale. People love controlling aspects of their home with a smartphone app, including brewing a pot of coffee before they get out of bed.

A smart thermostat is appealing because it makes it easy to save money on heating and cooling costs. Smart thermostats have plenty of programming options that include detecting when the house is empty, and will go into eco-mode to save even more energy than standard thermostats that cycle their programs 24/7.

5. Custom cabinets

If your cabinets look decent, you don’t need to replace them, and it’s definitely not worth investing in custom cabinets. Custom cabinets can cost thousands of dollars, and they won’t automatically increase your ROI. It’s easier and cheaper to repaint or reface your existing cabinets.

6. Granite counter tops

Have you seen the price of granite countertops? They’re expensive. You can get custom countertops made from cheaper materials that look like granite. Granite countertops will make your kitchen and bathrooms look nice, but they won’t increase your ROI.

7. Expensive chandeliers

Chandeliers are sometimes a nice touch to a dining room or large living room, but don’t spend too much money on one. If you must buy a chandelier, get an inexpensive one from a professional lighting store, and avoid spending more than you’d spend on overhead lighting.

8. Finishing the basement, especially in a high flood area

A finished basement shouldn’t be on your list of priorities when your property is in a high-risk area for flooding. A basement that floods will collect mold, and you’ll need to remove large portions of drywall to fix it.

Finished basements flood frequently, so it doesn’t make sense to invest time and money into finishing a basement.

9. Basement laundry

Nobody wants to do laundry in the basement. Basements are cold, smelly, and creepy at night. Keep your laundry room upstairs and accessible from the main part of the house.

Are your hands full? Green Residential can help

Between repairs, maintenance, and renovations, it’s not easy owning rental property. A property management company can help. At Green Residential, we’ve got decades of experience in the industry. Whether you’re looking to sell or rent your property, we’ll help you determine which renovations will increase your ROI and rent your property faster. Contact us today for a free analysis to get started.

Jorge Lopez

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