Issue 95 – Renovations: How to Make the Most Bang for Your Buck

As we start to see slight momentum in the market, sellers are more sensitive than ever to the ways they can create value and differentiate their property against the sea of inventory.

Here are a few great ways to set your home apart from other homes on the market and spur positive responses from buyers who may not have the budget to extend past the purchase.

Clearly, sellers are looking to garner the highest price possible. Hence, the million-dollar question has become: “To renovate or not to renovate?”

Whether you want to create a more comfortable and luxurious living experience for yourself, or because you want to make upgrades to increase resale value, renovations must always be done with mindfulness.

So, let’s dig in and discuss the dos and don’ts of what really creates inherent value.

Some of the most valuable ways to retain great value is to upgrade simple items. This may include new flooring, a beautiful skim-coat paint job, or creating clean lines in a kitchen and/or bath with a muted color scheme. You do not need a lot of money to make your home look luxurious. That is where the value play is well done.

My top-five recommendations for upgrades that bring the most value are: installing energy- efficient central air conditioning as opposed to window units, updating flooring with high-quality, classic materials which will prevent scratches, perfectly painting all walls using a neutral color, and upgrading bathrooms and kitchens with new appliances, streamlined, elegant fixtures using top-notch materials. Energy efficiency that can save buyers money in the long run is always appreciated according to Brickunderground’s recent article about what renovation projects are wins and sins.

If you opt for just one thing on the renovation list above, I would say it is a toss-up between upgrading the kitchen or bathroom.

The kitchen and bathrooms are the jewelry of the apartment. People tend to want the most beautiful kitchen — and ironically half of my clients do not even have time to cook!

According to Bankrate’s recent article about top home renovations that yield the most return on investment (ROI), a minor kitchen remodel typically raises sales value greatly. The key is to keep it simple. Replacing countertops, cabinet doors, fixtures, and flooring, along with purchasing new, energy-efficient appliances, and repainting the walls, yields a far greater percentage of return rather than a major remodel that changes the room’s layout or size.

An Investopedia study published in late 2023, concurs. It denotes that a minor kitchen renovation is far likelier to bring overall resale value than a major one. Similarly, it makes more sense to complete a cosmetic bathroom remodel rather than gutting it and completely rearranging its layout.

Of course, kitchens and bathrooms are primarily about function, but any savvy homeowner knows the true value comes from form. Therefore, upgrades to these two rooms are the most valuable in terms of resale.
Fun fact: creating a powder room, for example, can be valued at as much as half a million dollars!

This is a “simple” way to invest minimal money and lighter effort while creating maximum impact and value. In terms of reselling, you do not have to spend a ton to display good taste. This is where I feel most of the confusion lies in renovation.

The look and feel of the apartment will determine whether you want to restore its original pieces or upgrade them to more modern versions. Maybe it is my Commonwealth background, but I am always a sucker for a nice bathtub, so I think if you can keep the original or create a refinished cast iron bathtub, please do so! There is a whole new generation who rips out the bathtub and just wants a big, tall glass shower. I feel that a five-piece set is the most valuable commodity of a primary bathroom and should always be acknowledged and retained, even if the owner doesn’t necessarily want to use it. For resale value, it is gold!

Making thoughtful changes that are on par with new developments in terms of carefully curated finishes creates a long-term play at the high-end game.

Conversely, it is essential to be realistic about what can and cannot drastically affect the value. Sure, installing central AC will make your property more desirable – and people are willing to pay the price to save the headache and expenses of doing it themselves. However, there needs to be a careful balance about what you take on before selling. If something is prohibitively expensive, you may not recoup the return due to inflation that for this type of work. The operative part of resales is “sales.” You want to sell at an optimum price. The overall increased sales price should cover the cost of any pre-sale renovations you make.

It is also important to never make any highly personalized or trendy changes. Smart-home features can quickly become outdated, and over-the-top luxuries are out. Avoid putting in hot tubs – well, anywhere.

Buyers must be able to see themselves in the home they are viewing, so it is best to always choose neutral colors and designs. Avoid anything esoteric such as Venetian plaster, drastic color choices, busy wallpaper patterns, or uniquely colored or patterned flooring. New buyers like decorating according to their own tastes, but appreciate – and will pay for – capital improvements that were made prior to their purchase.

For example, I sold an apartment to a client in the finance sector. The park-facing property had great bones, and after completing the $700K renovation, the apartment doubled in value! So, the outlay of $700K resulted in a double-down play.

But that is where mindfulness was key. Most importantly, the bones of the apartment were good. When I say “bones,” I mean that the proportions of each room were perfect, the location of bathrooms, and the ratio of bathrooms and closets were excellent, there was good light placement throughout the floor plan, and the kitchen was appropriately placed. Dressing up dark dwellings or apartments with challenging flows does not always yield a large profit when selling.

As with everything else in real estate, timing is crucial. You want to get your property on the market when it is a seller’s market and when the pricing can handle factoring in the expense of your upgrades.

In terms of resale, who wants to spend more to sell? I certainly wouldn’t want to do so. When you pay for upgrades you enjoy, the ultimate point is they must also yield well over time so they don’t lower your home’s value.

While renovations can seem extremely pricey and scary due to the unknown variable of doing something they have never done before, most people know they want their property to be “magazine beautiful.” So, if one knows the ins and outs of how to do that affordably, it can be a great value on resale and a smart long-term play on investment.