To upgrade or not to upgrade? That is the question.

Most improvements made to a home are to add value when it's time to sell it FIRST and for personal enjoyment second. But since the housing bubble popped in 2007, the return on investment (ROI) on home improvements is not what it used to be.  Which brings us to the question, when you're buying a home, should you look for outdated homes that need upgrading to get a better deal OR look for homes that have already been remodeled with a higher price tag?

When you're purchasing a home, whether it's your first or third, you will usually have some ideas of what you want the house to have.  Taking on a construction project can be daunting, especially if it's one that involves contractors--which is pretty much ALL of them! Ever since the 'housing boom' of the 2000's, channels like HGTV or have been full of do-it-yourself home projects, design ideas, & dream (and nightmare) remodel shows. These shows spark the inner interior designer in all of us and cause consumers to entertain the idea of either wanting to upgrade a home they're looking to by or expanding their contractor vocabulary when identifying features in a home they're looking to purchase. Buying a property that needs upgrading is always less attractive than an upgraded property to new buyers but even more so now with low home prices.  In my recent experiences, you are better off purchasing a home already upgraded and paying the slight increase in price.  You'll end up spending less overall than buying the same home at discount and doing the same upgrades after purchasing it. So in other words, if you're looking at two comparable homes, paying $20K more for the home with the updated kitchen and bathrooms is a better move than buying the fixer-upper, which may cost you $30K or more to duplicate the kitchen alone.  Even if you look at this route as simply financing the upgrades, you're paying less overall for the upgrades so you still come out on top---assuming that you don't have a team of contractors at your disposal and are able to pay cash.  In the Metro Atlanta market,  finding a $250K home with features usually found in $400K homes was almost common place in 2009-2011 and are still found in foreclosures entering the market today.

If you're looking to do some updates before you sell you home consider this.  Over the last 5 years, home buyers have enjoyed amazing home prices and selection. As inventory has shrunk over the last 18 months, we're beginning to see investor flips entering the market for sale as well as traditional sellers (like you)  that are not underwater and are finally able to sell. The ROI on upgrades has not been what it used to be. Lately, adding heated, square footage has been the only guarantee to add instant value to a home. Kitchen and bathroom upgrades used to be automatic value boosters, but a lot of recent sellers will tell you that the $40K kitchen upgrade didn't do much to boost the price of their home in our current market. We are currently in a seller's market and I suggest sellers leave the property as-is. If you're going to take a hit on the sale of your home, it should be from the proceeds of the sale of your home (potential revenue) versus losing money on upgrades you do to potentially increase the value (out-of-pocket funds).  Only do actual repairs that a new home buyer would likely request to be done after having a home.  Most of your competition that upgrades properties before selling them are investors using their regular team of contractors; they can complete projects for 30-50% less than you could as a novice hiring new contractors that you have no relationships with.  Since those investors likely paid less for their property as a foreclosure or short sale than you you did as a retail consumer, it make is worthwhile for investors to upgrade the properties they flip. inspection.