ROI
Return on Investment When It Comes To Your Property!
I decided to write this piece because it is one of the most frequently asked questions I get asked by clients on how they should spend their money to see the best return on investment. First let's start with the true definition of ROI, “Return on investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested.” In layman's terms it means what one may receive back from money invested into something such as property, a product or a business. When it comes to remodeling your home or buying new property the best way to see a return on investment in my opinion are as follows:
Number One: Purchase the worst looking house in the best neighborhood!
Now if you are a billionaire and do not care about seeing a return on your investment then yes please buy the turn key ready home that does not need any work done to it. But if you are like 99% of the country, let alone world ,then please buy the home that's located in the best neighborhood with the worst looking curb appeal! Interiors and landscaping can always be upgraded over time but location CAN NEVER BE CHANGED! Say it with me, “ LOCATION CAN NEVER BE CHANGED! I see so many people every day buying the turn key ready home because they are trying to keep up with the Jones. Financially this is not smart for your bank account or retirement plan! Especially in today’s times with everyone posting on social media I understand why people see the need to buy the “pretty home”, but if you think financially and not emotionally about your next home purchase I promise in time it will be the home you always wanted!
Number Two: Know what areas of your home to spend your money on!!
They’re certain areas and items of a home that bring the most value when it comes time to sell. Kitchen, master bedroom/ master bath and updated flooring. These three areas/items will bring you in more offers than any other part of your home! Whyy you may ask? Because these are the three areas that no one wants to live through when remodeling their home. Always think about it from a buyer's perspective. When you are walking a home what do you look out for? Most people that walk through my homes always say they are looking for an updated kitchen with updated appliances, walk-in closet and a large master bathroom. A major eye sore for anyone when entering a home is also outdated flooring! No one wants to move into a home to then have to redo it all, as well as live through the reno! Updating paint colors, interior doors and light fixtures are always items a buyer is willing to live through, but not having a kitchen for 4-8 weeks on top of re-doing all the flooring is a major hassle for buyers! By focusing your money on these three areas you will see the most return on your investment and be able to move onto the next project as quickly as possible!
Number Three: COMPS COMPS COMPS!
One of the biggest mistakes I see on the market are homeowners spending waaaay too much money on a property that does not support it! For example: if you purchase a home for $600,000 and then spend $50,000 on only the kitchen you are NEVER going to reap those rewards in a short amount of time! Now you may be thinking, how does someone spend 50K on only the kitchen? Believe me when I say that I have seen it all! They end up purchasing the most high end appliances with marble counter tops and custom cabinets made of real wood and the next thing they know they are in it for 50k! This is NOT, I repeat NOT a smart investment! You never want to spend close to 10% on a room where comps in the neighborhood don’t support it. If the best home on the block in your neighborhood is worth $700,000 then please do not spend 100K on your remodel! Always pay attention to the market you are living in even if you are not planning on selling your home for a while. This will help you in the long run if you ever need to move or rent your property be able to cash flow a profit.
So just to recap; Always look for the worst house in the best neighborhood, know which areas of the house to spend your money on and A LWAYS know the comps!Usethesethree items as your road map when remodeling your home next or flipping your first! I will leave you with this. The stock market on average has a 6% ROI. If you EVER find a property that can bring you 7% or higher on your next investment, please buy it immediately, as well as remember this percentage when putting money into your existing property!