Landlording & Rental Properties

3 Upgrades That Add Little to No Value to Your Investment Property

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
227 Articles Written
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Myth: All home upgrades will increase your home’s net value.

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Truth: You’ve just wasted your time and money.

Yes, like your teacher always told you, it is a free country, and you are definitely more than welcome to make any kind of upgrade you want to your own house. But unless it was just for the sake of your own pleasure, I wouldn’t advise the following renovations, simply because addition does not equal profit.

However, if you are wishing to upgrade your house’s net worth (beyond the cost of the initial renovation itself), you should definitely keep in mind that some upgrades that may seem valuable to you might not be of any significant worth to potential buyers. So here are three of most common upgrades that quite possibly won’t see a return on your investment.

3 Property Upgrades That Add Little to No Value to Your Investment

Addition of a Pool

Honestly, pools are quite the toss up when it comes to the value of the house. It is possible that you might see some sort of return for this addition, but more often than not, it would not even be enough to pay for the addition itself. 

Related: The Top 7 Upgrades Tenants Seek When Searching for a Rental

This is because having a pool onsite could be a turnoff to some potential buyers. A large proportion of homebuyers do not wish to have to keep up with the maintenance of the pool, and those on tighter budgets would most likely not want to cope with the extra expenses that come with owning a pool. Not to mention, it poses as a safety hazard for potential buyers with young children. If you do decide to add a pool, make sure it is a desirable home feature in your local market amongst buyers.   

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Highly Customized Designs

Be sure to stay FAR away from designs that are too personalized. This is purely because your idea of a dream kitchen might not be everyone else’s idea of a dream kitchen. So unless you are planning on living in your house for many years to come, I would recommend thinking long and hard about renovations that are too “custom designed.”

Related: The Top 5 Items to Replace or Upgrade in Every Rental Property You Buy

Over-the-Top Luxury

Always remember the personality of your neighborhood when you are contemplating an upgrade because if your upgrade is too over-the-top for your area, you will be causing the alienation of buyers on two fronts: those potential homebuyers that like your neighborhood might not be able to afford your house, and those potential homebuyers that can actually afford your house would probably prefer to live in a more luxurious area. So being slightly nicer than the surrounding houses can work in your favor, but being a lot more lavish will not.

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Conclusion

If you think there is the slightest chance of selling your home in the future, think first before making costly upgrades. The worst thing you can do is dump your hard earned money into renovations that won’t benefit the value of the home if you decide to sell.

Investors: What would you add to this list?

Don’t forget to leave a comment!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded Sonder Investment Group, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to wholesaling and scaling a business.

    margaret smith
    Replied almost 4 years ago
    One of my favorite gurus, Robyn Thompson, Queen of Rehab, used to tell us to stand at the street facing out from the property- look left, look right. How is the landscaping? Paint on houses? State of exterior repairs? Mailbox status? That is your neighborhood. That sets your basic standard. Going over the neighborhood standard in any of a number of ways, inside or out, will not bring you any return on investment. Similarly, if you keep the house as a rental, don’t let your standard (or tenants’ standard) of overall curb maintenance drop below the others. You want no one to suspect that this is a rental house among home owner properties, as you do want to uphold the values of the neighborhood and attract good tenants during vacancies, and eventually sell at a great price.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Wow that is a excellent point Margaret. Thank you so much for the share. In your career have you ever over-rehabbed a property?
    Mindy Jensen BiggerPockets Community Manager from Longmont, CO
    Replied almost 4 years ago
    I would add one caveat to the pool suggestion: Pools in places where you can’t use them for more than 5 months out of the year. I had an inground pool in a house in Illinois, and the top complaint when I went to sell it was the pool. Florida and California, pools are far more common and even desired. Good article, Sterling.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Thank you for adding that point Mindy! Great to speak with you. It’s been awhile. Did property end up selling in Illinois?
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied almost 4 years ago
    This is a very good topic, it’s just as important to not provide your customers with what they don’t want as it is to provide them with what they do want.
    Darren Sager Investor from Summit, NJ
    Replied almost 4 years ago
    Good article Sterling. What about Solar Panels?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Thank you for the laugh Darren. Please don’t give anyone ideas on here! Glad you enjoyed the read
    David Crutcher Jr. from Nashville, Tennessee
    Replied almost 4 years ago
    Great article! I say this because as a newbie, I ALWAYS thought adding a pool would definately add value. No question. This is the reason I love BP, the people are awesome! @Margeret Smith added something that makes so much sense when thinking of a pool. Thanks guys
    Dell Schlabach Investor from Canton-Akron, OH
    Replied almost 4 years ago
    We are in Ohio and have filled in a lot of pools over the past 10 years. Very few buyers want a pool in this area. But as Mindy mentioned some areas it definitely adds value. For example we spend some time on Marco Island looking at properties to rehab a couple weeks ago, we were told by the realtor that not having a pool we should expect to get 50k less for the same house. Entry level houses were 500-700k. Sarasota Fla, another area we are looking at pools definitely add significant value. So it’s important to know your market.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Glad you enjoyed the article David! Have you purchased your first investment property yet?
    David DuCille Residential Real Estate Agent from Tampa, Florida
    Replied almost 4 years ago
    Even in Florida where pools are super desirable they only add about 15k of value to a home in the eyes of an appraiser and they cost about 30k to put in. Never a good idea , but if you have an opportunity to buy a home that already has a pool.down here than it can definitely be worthwhile
    Dell Schlabach Investor from Canton-Akron, OH
    Replied almost 4 years ago
    We are just beginning to evaluate some Fla markets, nteresting that a 30k pool only adds 15k in value.
    Timothy F.
    Replied almost 4 years ago
    It’s funny because you always hear how a pool adds value to a home. 30k to put in and 15k of value in FL according to David…that’s crazy. Wonder what it’s like in other states.
    Emanuele Pani Rental Property Investor from Boca Raton, FL
    Replied over 3 years ago
    Sterling great article… what do you guys think about screen enclosures? Especially down here in Florida a lot of homes have them and they tend to be rather expensive.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Great question Emanuele. When making these types of upgrades you have to think of your cost and how that corresponds to adding value to home i.e. as stated above the cost of pool installation can cost approx. 30k but only add 15k of value to the property. Hope that helps
    Melvin
    Replied over 3 years ago
    I think it’s important to mention that if you are investing in a neighborhood where the pool is common it is desirable to buy a home with one. If the neighborhood does not commonly have pools and the home you are contemplating purchasing does it might give you some extra pause before purchasing it especially if the seller wants a premium for it. Also having a pool in the back yard where the pool is the yard is undesirable
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Melvin that is a excellent point! Thank you so much for your insight
    Billy Larkin Appraiser from Stoughton, Massachusetts
    Replied over 3 years ago
    This is a very good article. I am an appraiser and I am constantly asked similar questions and the answers are the same. First and foremost upgrade a home for nothing more than your own pleasure. The ideas of upgrading certain elements goes well beyond the topics covered in the article.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Makes total sense. Glad to hear it from someone as yourself Billy! Thanks for the insight
    Tomma Price from Ovilla, Texas
    Replied over 3 years ago
    Sterling, Does your company fund deals for investors? By the way I am from Indianapolis; let’s talk.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Thank you for reaching out fellow Hoosier. I have sent you a DM on your question
    Benjamin Margolit Redevelopment Project Analyst from Newport Beach, California
    Replied over 3 years ago
    Good article Sterling. Comp analysis is at the root of all redevelopment underwriting. Not only will it help you determine which interior and exterior finishes to choose, but ultimately what amenities (pool, patio, rooftop deck, etc.) to provide, as well as how much you can realistically charge in rent, post-redevelopment. If your property is a rental property, especially multi-tenant, always be cautious of upgrades that increase your controllable operating expenses (COE). Do your research (comp analysis) and be certain that the upgrade you provide will garner the increase in rent necessary to not only cover the increase in COE, but also enough extra to make your investment worth while… especially if you plan to value your property at sale as a function of NOI. Cheers!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Well said Ben! Civil engineering I noticed in your background. That explains the intellectual comment.
    Donald Cooley Railroad Conductor / Future investor from New Baltimore, MI
    Replied over 3 years ago
    Great article Sterling, lots of useful information. Definitely easy to go overboard on renovations. I’m also curious if your company does funding in Michigan.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Donald glad you enjoyed the content. We have not looked into Michigan yet, however it is something that is on the radar as we expand.
    Peter Mckernan Residential Real Estate Agent from Newport Beach, California
    Replied over 3 years ago
    Great article Sterling, the pool is always the catch 22!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Glad you enjoyed the content Peter.
    Account Closed Real Estate Investor from Maple Valley, Washington
    Replied over 3 years ago
    If you want to go over the top find way’s for what you have rehabbed to shine in your staging. I got that from my Realitor
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Valid point Tom. Staging is key.
    Dorothy Kay southard
    Replied over 1 year ago
    What’s your opinion on adding a garage ? Read somewhere that it was a 81% return on resale value. ???