Dos and Don’ts for Updates

When it comes to opting for the home, the main question an investor should ask when making an acquisition is whether or not the selected option will contribute to the home’s salability, relative to the actual cost. Obviously, there is a point of diminishing returns if one builds a Taj Mahal on a land of dwellings. Despite the need to do your best and cover the spot to the tee, resist the urge. Doing so will only reduce your return. This is particularly important given the fact that since this is an investment, an investment of unknown value, it is unwise to risk some of the potential profit by purchasing unnecessary non-critical design upgrades.

Most of the time, home builders are aware of this vulnerability. This is more true than ever for investors, for whom they will provide a large number of options and upgrades that are very marked. This type of financial exploitation provides an income stream that is essential to many home builders, like KB Home, who are known for their lush options and cost upgrades. This system is so elaborate that its design department is a corporation of its own, known as KB Home Studio and rivals that of most high-end design centers. Not only are these profit centers independent, KB Home has a separate business unit with senior vice presidents, AVPs, regional heads, etc., to take care of this organizational monster. The great thing about this gadget is that it offers a host of updates and design options that are truly top-notch. The only problem is that you usually have to pay an arm and a leg to get these wonderful amenities.

To tell a story, the first time I went through a KB Home Studio, it was the baptism of fire. I spent more than eight hours in the design center, divided into two days. With $ 35,000 more in upgrades, I estimated it cost me about $ 4,300 an hour to buy from their design center. You can see why he was happy to get out of there. Also note that you may have to pay a fraction of the upgrade costs in the form of a deposit shortly after selection. This is almost a certainty and an industry standard. On average, the deposit amount ranges from 25 to 50 percent and is generally non-refundable. The consequence of this deposit requirement is obvious as it makes it difficult, especially as an investor, to abandon a transaction.

Despite the latter, you can see on a factor of sheer convenience, it’s hard not to like that a home builder can offer you so many options. Having the “convenience factor” available is fine; however, it becomes a cheat problem when the builder offers a simple box with no or few updates. In these cases, builders will sometimes just go to the “code,” meaning they will only provide what is necessary for the local housing department or building and security, at the city or county level, to sign the property and let you provide a certificate of occupancy. This, for example, may mean no rain gutters, no front or rear gardens, unfinished garages, which usually consist of drywall with a primer coat, or an unfinished garage consisting of this. Last but with exposed 2×4 posts, drywall, chicken wire. and black installation cover. Other more obvious “standards” include all vinyl flooring and small white 4×4 tiles for kitchen countertops, or cheap laminate for that matter. To top it off, in terms of utter ugliness, you might get the builders’ special quarter-inch grouped marble countertops in the bathroom.

There’s a reason even home design centers at Home Depot or Lowe’s highlight these amenities, and it’s because they’re cheap and no one really wants them. Consequently, many home builders offer the standards to get the most money possible from each home they build. As a result, a new owner and / or investor is essentially forced to buy options and various improvements to keep the house from looking like a plain Jane. Having too much plain Jane can hurt a home’s value. As an investor, it is up to you to define the balance without spending too much on a new change of track. That’s the nature of making a business decision – you must use your judgment. I have seen some houses that were literally destroyed from the inside out due to the extreme lack of appeal that permeated the house as a result of the lack of improvements. For example, it’s probably wise to spend an additional $ 4,000 to $ 6,000 on upgraded flooring and kitchen countertops. Most rugs, even if they don’t have stain protection, should be suitable for most homes. Don’t be pressured into upgrading with thicker carpet padding. Just go for the quarter-inch standard, as most builders will try to get an additional $ 700 to $ 1,200, if not more, added to the cost of the house just for the improved mulch.

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