let's say an owner owns a house that is in complete need of renovation from top to bottom...but the house is in a decent neighborhood in a generally expensive area.
Does the house gain in value at the same rate per year as other properly maintained houses in the same area? To me, it doesn't really make sense that it should...the cost to bring the house up to standard also goes up...so the only appeal of such a house would be an under market price.
Thanks for any feedback.
@Carl Johnson in theory yes a fixer upper should appreciate at about the same rate as a nice property. That is because the value of a fixer upper is based on what it will be worth after being renovated. If the value after being renovated goes up, it follows that the before renovations value should go up.
Of course that is just theory. There are to many variables on any particular property to make a generalization useful. What happens if the fixer upper deteriorates over time? Sometimes the cost to renovate can jump. In the last 15 years this has happened. It used to be good enough to put in fresh carpet and paint, now people want granite counter-tops, ceramic tile and hardwood floors.
Well, if you say appreciation for a specific neighborhood is 2%, a renovated 500K house will appreciate more than an unrenovated 300K house, even at the same 2%.
That said, appreciation is really defined by recently sold comps. So how renovated and up-to-date are other houses in the neighborhood? If most are dumpy, the higher value ones will typically see less appreciation because of it.
Thank you for the replies!
There is a law when one re-gutted from floor up to leave a wall to avoid paying more taxes. If that wall or foundation is same as the rest of neighborhood it will appreciate at same rate. If fact buyer wants to see exactly what you saved and what you scrapped.
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