Maximizing Appraisal Value vs Only Increasing Perceived Value

[JonPaul Kessinger]

As a new investor undertaking my first BRRRR project, I'm seeking advice on raising the appraisal value of a property without overspending on improvements that only enhance perceived value. I've encountered conflicting advice regarding strategies like painting, landscaping, and kitchen upgrades. I would greatly appreciate your insights on where to allocate my capital wisely. If sharing pictures of the property aids in your evaluation, please let me know.

Question: How can I strategically increase the appraisal value of my property while avoiding unnecessary expenses that solely impact perceived value? I want to make smart, cost-effective investments that yield the highest return on my capital. What recommendations do you have? I have to gut the kitchen and one bathroom so should I go higher end or just average? Should I spend a lot on Landscaping and painting the inside and outside of the house to increase the appraisal? The house is in a B neighborhood and there are not many comps close by (within 10 miles).

Thank you for your support and insights. I look forward to the responses and engaging discussions to come.

Best regards, 

JonPaul Kessinger 

[Brad S.]

Appraisers (I am one) are going to classify the house for condition and quality. Then, they will attempt to find relatively similar recent sales to compare to your house. So, your goal should be to have the appraiser give the higher classification for the least amount of cost - to you. 

As you say there are few comps available, they will expand their search criteria back in time (possibly using sales from many years prior) and estimating a market trend adjustment (adjusting up for an appreciating market and vice-versa for a depreciating market, etc), they will go to other nearby neighborhoods (even if they are many many miles away) and find recent sales, adjusting for location (Superior/Inferior neighborhood - if warranted). 

So, using @Account Closed 's idea, look for any sales in the area, even miles away. Try to find a neighborhood that is relatively similar, in a similar "market area." You can ask any local realtors to get their opinion also. One thing I do is ask the vendors. Example: when I am getting flooring for a project, I ask the flooring supplier what are the more popular floorings being used now, etc. 

On the appraisal front, let me give you the general definitions for the quality and condition classifications. You are most likely going to be in the Q3/Q4 and C3/C4 range

Q2 - Custom designed, could also be high-quality tract, high-quality details/ornamentation/interior refinements, high-quality workmanship/materials/finishes
Q3 - generally high quality, individual or designer plans, above standard tracts or individual site, significant exterior. Ornamentation/well-finished interiors. workmanship/materials/finishes are above standard
Q4 - standard plans, average ornamentation/refinements, materials/workmanship/finish are stock with some upgrades

C2 - no deferred maintenance, no repairs required, most or all new building components, recently renovated/similar to new built
C3 - well-maintained, Limited deferred maintenance, partial updating/rehab
C4 -normal deferred maintenance, adequate maintenance, minimal repairs required

Basically, if you fully rebuild the house or extensively remodel it, and change all utilities (all new plumbing lines, new electrical, new roof, etc.) you would be C2. Most remodels would be a high C3 or low C2. And most remodels will also be high Q3 and rarely Q2.

Ok, that is probably way more info than you wanted or needed.  :P

So, basically, my suggestions are to put granite or quartz (or some other "solid surface" countertops). I'd get the ones on the less expensive end - the appraiser most likely won't know the difference and will still see it as being "modernized." "Good enough" quality cabinets. Again, the appraiser most likely won't know the difference between solid wood cabinets, mdf or ? I personally would use a mid-line quality cabinet though, with soft-close drawers and plywood boxes and probably a shaker style door. You should be able to find them pretty inexpensive - but I'm spoiled, since I am close to a port. Stainless steel appliances - mid level. For basic properties, I like a micro-hood over the range - takes care of 2 appliances (microwave and hood).

See if you can find a good "big box" store for some other materials, like flooring and tile. We have Floor & Decor stores here (CA) which are great, but you may something similar. Home Depot, Lowes, etc, are ok, but there may be some that are better. 

Generally, I'd say go more mid-end on quality, no need to go high-end unless you are doing a high-end house and going for that clientele, but low end can sometimes be readily noticed.

Don't know if that helps, but good luck!