Can a renovation be a good investment?
I own a small clapboard house in Brooklyn Heights. While the house is big enough for my small family’s needs, there is a very large yard and plenty of FAR available. I am seeing single family homes in the neighborhood going for $1000-$1500 per square foot, so my thinking is that we could spend $500/sq foot adding onto the house and have ourselves a good investment, plus a nicer/bigger house. On the other hand, everything I read in general says that renovations almost never pay off (but they aren’t specifically talking about NYC or adding square footage.) So, my first question is: Am I nuts to even consider this as an investment opportunity? Second, what sort of renovations add the most bang for your buck in terms of resale? We don’t have an en-suite bathroom in the master. Is that very important to prospective buyers? Also, currently our washer/dryer is in the kitchen. Do you all think a laundry room adds a wow factor? What about adding a bathroom or bedroom? We also have an office/den that we are currently using as a baby room. Would converting it to a proper bedroom (changing from 3+den to 4 bedrooms) add, subtract or do nothing? Thanks for your thoughts.
lauranyc
in Real Estate - General 12 years and 4 months ago
6
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6 replies
brokelin | 12 years and 4 months ago
I think what Bruce said is all true. But I don’t see why you would put yourself through a renovation while living there, especially if the home is sufficient for your family’s needs, just for an investment with only future buyers in mind. I think in your location your house will sell when and if you go to sell in any event, and that you don’t need to worry about keeping up with expectations like en suite baths and laundry rooms and proper bedrooms just to sell it. Sure, you’d add value, if you don’t overrenovate. But doing it now, if you don’t have a plan to sell it in the fairly near future, may not be wise if renovating for the money you will make on the sale is your main purpose. Because styles and expectaions change so frequently. For example, the ubiquitous stainless steel and granite have been around for awhile now, and will soon be outdated…can you predcict what the future trend will be? I know what I like, but I sure can’t. Renovate for yourself in mind, if you decide you want to for your family’s needs…don’t do it for future resale. People might want something other than what you do, and then you’ve lost them as buyers, where they might have been happy to buy and renovate themselves.
mijohnson | 12 years and 4 months ago
Hey, you are definitely not nuts for wanting to renovate your home to make money however, if the space that you have is enough for you, keep it as is. Expanding your home will mean your spending more money on furniture to fill in the space especially if your not planning to sell right after renovation.Then your stuck spending more money filling in the new space that you have created. You can always sell people on the FAR space but you must think of those that would appreciate the house as you and your family have had the chance to. You may get some bang for your buck with the finishes. Most people that are coming into the Brooklyn neighborhoods especially Bedford Stuyvesant are looking for detail. The condo, cookie cutter look is so played out. The ensuiet bath is not at important as having a bathroom in the hall. Unless the plumbing makes sence and it will be an easy convert, you may be looking at a bigger hit to the pockets. Now the laundry in the kitchen is a little old fashion, unless you get a buyer that appreciates detail. Someone that likes a more modern fell, it may be best to put a laundry room in the basement. Dont recuse the square footage inside of the house unless you use up some of that FAR yourself. That den/office will serve the same use unless you are thinking of making it bigger. If the room doesnt have a window it may be very expensive to put one in. Its the size of the room that plays the biggest factor in that decision or how big you can make the room. If there is no increase in the size of the room leave it as is. Detail is really big for buyers now a days.
NeoGrec | 12 years and 4 months ago
Is your house landmarked? If so, be aware that even a rear extension will be severely constrained by the rules and regulations of the city’s Landmarks Preservation Commission. But if that’s not an issue, I’ll say that the weakest feature of many rowhouses is the back and that any well-designed effort to bring more light into the rear of the house can radically improve the overall feel of the house. Ultimately, though, I agree with Bruce’s comments. If you have the money, fine. But it would be easy to spend an awful lot, increase your mortgage perhaps more than you’re comfortable with, and not necessarily achieve a hugely enhanced quality of life.
greenmountain | 12 years and 4 months ago
Great answer bruce, but I see a lot of recent renovations, the superficial kind, flips; intended to increase sale price, living space or number of units. Sub-standard plumbing and electric is covered up. Water damage is painted over, without stopping the leaks. Joists are cut to change fixture locations. Charming historic features are trashed, as too expensive to restore. Some properties are “renovated” this way 3 times in 20 years. Short term value may be realized, but how do we calculate the long term damage? Consider the often and recently renovated 43 Garfield Pl. You can buy the whole house for $950,000. And you can break your neck on those new basement stairs, apparently meant to increase value with a bigger kitchen. It was Brownstoner House of the Day, but does anybody want it? It looks to me like an owner or two away from demolition and reconstruction.
brucef | 12 years and 4 months ago
We have examined this situation in great detail, so I hope to help you avoid re-inventing the wheel. While home sales (especially condo’s) are frequently driven by square footage, you own a unique property that to some degree trumps square footage. Not knowing your details, I am forced to generalize, however I can tell you the most important factors. Those articles about which improvement to a suburban home pays off best on resale have nothing to do with you. I have little doubt that your stated concern (ie, will I be adding significant value compared to my investment) is unnecessary. Yes you will greatly increase your value. Now, wasn’t that easy? The greatest issue is liquidity. If you stay in your home indefinitely, you will not be able to spend all that new value. The only way to realize your significant gain is to sell. “But we don’t plan to sell” “We like it here” So the only gain you will have in the meantime is your greater enjoyment. Which is nothing to sneeze at. I do recommend customizing your home so it works best for your family. Work with an architect with whom you feel comfortable. That will prevent “white elephant” errors. If you can deduce your timetable for selling, you can influence how “generic” your design needs to be. The sooner a sale, stick with whites, forget trying to outguess what someone else will want. Staying longer, go for what appeals to you, It will be gutted by anyone wealthy enough to buy in the Heights.
brokelin | 12 years and 4 months ago
It all depends on the potential buyers for your home. I don’t care about en suite, and often prefer not to have it, depending on the number of bathrooms and the house layout; others really want it. I prefer a laundry room, especially if it is big enough for side by side WD, even if in a closet, but hate closets with stacked ones, and don’t like them in the kitchen at all, others may differ, doubt it though. I’m not sure what would make an office/den/baby room into a proper bedroom, again it depends on the buyer. Many need a bedroom for an office and don’t care it is a proper bedroom – what does that mean, anyway, adding a closet to the room, or changing out french door(s) for a solid door? It really depends on the house. I think what matters most for appreciation is doing a quality job with good design, materials, craftsmanship, and going with the style of the house well – all that matters more than than what you actually do, I think, for value. You could do all that poorly and not really add much value at all.