Not all renovations are worth the investment. Especially when it comes to investment properties.
With your own home, any project could be worth the investment by bringing you years of enjoyment. But with investment properties, you need the renovation to provide sound financial returns to justify the expense and hassle of the renovation.
Here are five renovation projects that just aren’t worth it.
1. Finishing the Basement
Finishing an unfinished basement sounds like a good idea. Who wouldn’t want more living space?
Surprisingly, many buyers aren’t impressed with a finished basement. Lots of buyers simply want the storage space an unfinished basement provides. Or they want to tackle a basement renovation on their own so they can create a space suited to their unique needs.
Unfortunately, property owners typically only recover $0.48 per dollar spent finishing a basement. With an estimated price tag of $10,000, you’d be wasting about $5,200.
2. Making Rooms Larger
When your investment property has tiny bedrooms, it can be tempting to make the rooms larger to make them more appealing to renters or new buyers. This could mean combining two small bedrooms to create a larger bedroom, extending the bedrooms into other living spaces, or even increasing the square footage of the home by extending the bedrooms outside of the original structure.
No matter how you consider adding size to the rooms, it’s going to be expensive. PropStream users have the advantage of using the Rehab Estimator to get local pricing information on labor and materials. Without that intel, you could end up paying far more than expected for a project with a negative ROI.
3. Adding a Pool
Again, this doesn’t look like a bad idea at first glance. Many property owners think of a pool as a guaranteed way to increase the value of a home.
However, pool installations generally carry only a 43% ROI, with property owners recovering just $25,000 of a typical $57,500 pool area. Plus, if you plan to hold your investment property for the long term, pools can create a maintenance nightmare with constant chemical adjustments, cleaning, and repairs required.
4. Trendy Fixtures
If you’re planning to fix and flip, trendy fixtures might be a decent investment, assuming you can find the fixtures at a reasonable price.
But if you’re holding your investment property long term, trendy fixtures are a terrible investment. These fixtures might look great now, but in five years, they’ll be dated. To attract new renters for each turn, you’d be replacing all the fixtures every five to ten years.
You’re better off sticking with classic designs that will remain in style.
5. Over-Improving in Any Room
Your investment property is not the place for luxuries like bamboo flooring, a gourmet kitchen, or a jet tub. There are less expensive alternatives that hold up better over the long term. But, more importantly, renters generally don’t expect these luxuries and aren’t willing to pay for them.
Consider this: upscale bathroom remodels return just $0.87 per dollar spent, but mid-range bathroom remodels return a whopping $1.71 per dollar! Focus on mid-range renovations for the best ROI.
Whatever renovations you’re considering for your investment property, use Propstream's tools to forecast your costs and make sure you’re happy with the projected ROI before you get started!