Does replacing electrical/rewiring improve home value?
Realtor · Schertz, TX · Member since 2015 · 226 posts · 53 votes
Does replacing electrical/rewiring improve home value?
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Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y@Miles Stanley, yes, it will increase the value. But the question you should always ask is does it increase the value ENOUGH to justify the expense?
If you go onto just about any free website that estimates the cost vs. value-add to a SFH for improvements, you will find, without fail, that the repair/upgrade that benefits the most is paint. Paint is cheap but improves the value by a significant amount. Other remodels like bathrooms and kitchens only add about 65 cents per dollar spent on the improvement.
Plus, who cares about resale value? You are BRRRRing this property, right, so you intend to keep it. All you care about is the appraisal. In my town, appraisal is mostly invluenced by the following factors, in no particular order:
1) finished, livable square footage
2) number of beds
3) number of baths
4) central HVAC vs. other type of heat/cooling source
5) garage space
6) yard fencing
Beyond that, pretty much everything is going to suck more money out of your pocket than it returns.
Maybe appraisers in your market work differently, but in my town I would expect to pay around $5,000-$7,000 for a complete rewire, up to code, by a licensed professional, that would replace every foot of active wire. I doubt it would boost the re-sale by by much more than $2,000, and it may have $0 impact on an appraisal. A clear loss, from a BRRRR view point because the appraisal value and the re-sale value are not the same. I know this because I have recently had 2 properties with fuse boxes appraised for re-finance, and when making adjustment for comparison to comp sales I have never seen the appraiser adjust even $1 of value for upgraded electrical. A home buyer might pay a little more, but not the full $5,000-$7,000. Renters won't pay a dime more in rent either. If it works, they'll pay.
33 Replies
- Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes6y
Had the same dilemma with a house we are remodeling in northern California. We chose to go with new wiring and a new 200 amp service. This route has allowed us to modernize the home with features local buyers expect like outdoor soffit lighting and contemporary can lights throughout the living areas. No results yet in terms of return on investment but the investment proved to be relatively modest to the gain we are expecting on resale.
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes6y
@Miles Stanley, yes, it will increase the value. But the question you should always ask is does it increase the value ENOUGH to justify the expense?
If you go onto just about any free website that estimates the cost vs. value-add to a SFH for improvements, you will find, without fail, that the repair/upgrade that benefits the most is paint. Paint is cheap but improves the value by a significant amount. Other remodels like bathrooms and kitchens only add about 65 cents per dollar spent on the improvement.
Plus, who cares about resale value? You are BRRRRing this property, right, so you intend to keep it. All you care about is the appraisal. In my town, appraisal is mostly invluenced by the following factors, in no particular order:
1) finished, livable square footage
2) number of beds
3) number of baths
4) central HVAC vs. other type of heat/cooling source
5) garage space
6) yard fencing
Beyond that, pretty much everything is going to suck more money out of your pocket than it returns.
Maybe appraisers in your market work differently, but in my town I would expect to pay around $5,000-$7,000 for a complete rewire, up to code, by a licensed professional, that would replace every foot of active wire. I doubt it would boost the re-sale by by much more than $2,000, and it may have $0 impact on an appraisal. A clear loss, from a BRRRR view point because the appraisal value and the re-sale value are not the same. I know this because I have recently had 2 properties with fuse boxes appraised for re-finance, and when making adjustment for comparison to comp sales I have never seen the appraiser adjust even $1 of value for upgraded electrical. A home buyer might pay a little more, but not the full $5,000-$7,000. Renters won't pay a dime more in rent either. If it works, they'll pay.
- Flipper/Rehabber · Winchester, VA · Member since 2019 · 56 posts · 16 votes6y
It completely depends on your numbers and how long you plan to hold. You can install GFCI breakers or outlets and work around it that way and have your up-to-date outlets, but eventually....it will need to be updated. And like what @Darius Ogloza mentioned, a 200 service is standard these days and allows for future expansion/renovation possibilities.
Also, what do you want to do now when construction is already taking place vs. do you want start new construction later to take care of a problem you know exists? It almost always will be cheaper to do things sooner than later.
My 2 cents, as an electrician.
Good luck!
- 6yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
I disagree. Electricity is the unsexy upgrade that no one cares about - unless it ISN'T done. (Same with plumbing)
I'd definitely do it, but I wouldn't count on anyone noticing until the inspection. The goal is to sell the house, not have it fall out of contract because the electrical hasn't been upgraded.
- 6yWhitney HuttenPro MemberInvestor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
@Miles Stanley Tough call. Are you needing to replace the box and mast? If yes, then you may want to consider it as you can upgrade with a better water heater and HVAC over time (or if you sell, maybe the next buyer can put in a hot tub;).
Also, I agree with the 3 prong outlets and making sure all rooms have multiple outlets (if you do this upgrade). That will increase perceived rentability. The downside, it's kinda like redoing plumbing... you save yourself headaches, but does the tenant or next buyer really care... maybe yes... maybe no.
- Realtor · Schertz, TX · Member since 2015 · 226 posts · 53 votes6y
@Michael Jackman @Erik W. @Darius Ogloza @Andrew B.
Thanks all!
Like I said in the post, returns aren't necessarily everything and they should be balanced with liability AND future resale as Mindy suggests. Liability is definitely a concern since it'll be rented. I'd be concerned if there's an injury due to electrical and they discover that the house is faulty AND that we knew about it as the owner...seems like a bad time to me.
True, since I'll be BRRRR-ing it, resale isn't as critical now, I should have said appraisal. But still, i may decide to sell it at some point and this monster will rear it's head at that time.
I'm leaning toward doing it, but still lots to consider. Thanks!
- Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes6y
I'm kinda surprised a house built in 68 doesn't have a ground, I thought it was code before then. Is that common in your market? If you are holding long term you should do it. The savings aren't worth later headaches from insurance companies and your increased exposure to liability.
- Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes6y
It will not increase "market" value.
It will help bring your property up to market value.
Without this being done your property will not get it's best value.
There may be cheaper ways. Talk to your electrician about replacing all outlets with GFCIs. This should eliminate the hazard associated with ungrounded receptacles.
- Realtor · WV · Member since 2018 · 454 posts · 310 votes6y
This would really depend on so many other factors that the others above have already pointed out. If the outlets not having a ground is your primary issue there is another solution. If you switch those outlets out to a gfci outlets, the tripping mechanism in the gfci will give you the safety portion that having a ground would. This is a pretty common second option to address the safety portion of this problem. Discuss this option with a few home inspectors and electricians and this may be the way to go.
Good Luck! Aaron
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes6y
@Miles Stanley, I get it. You don't want to get sued. Neither do I. That said, I own a dozen properties that have either a fuse box in them and/or at least 1 ungrounded outlet. The National Electronic Code does not require grounding for older buildings that are grandfathered in, provided they are properly identified as such: either by labeling them as ungrounded or simply using a new 2 prong outlet to replace and existing 2 prong. So you are OK from that aspect.
As others have said, there are cheaper, code-approved ways to accomplish your goal via GFCIs or single point bonding. You need to do whatever helps you sleep better at night, but just keep in mind that "liabilty" is a word some contractors use to get fatter paycheck. It always pays you to ask around and get informed on precisely what your liability actually is vs. listening to fear-mongering as fact.
- Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes6y
As far as the appraisal goes, it is the kind of thing I would mention.
Updated electric service and panel, and per whoever the entire house was rewired. I would also hope there are permits or you have a problem. But, the buyers expect electric to work. If it does not, it is worth less, because it needs to be fixed. IOW it does not add much market value. Same with a roof, plumbing, etc. You expect it to work.
I think if it ain't broke or worn out or a hazard, don't fix it.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes6y
@Miles Stanley you can still hook the 3 prong outlets up to a hot and neutral without the ground. It will work fine, and then it looks normal. As for laptop protection, I think the surge box protects that(?) on the laptop cord. On a recent flip I’m doing, there is no grounding on a similar aged house. They did have the panel grounded and some of the wires they used have a ground but most don’t. I installed tamper resistant outlets (don’t cost much more) but it’s safer for kids incase they want to play with the outlet(avoid). For safety, you can easily replace all the breakers to make sure they will trip in certain instances. I can’t say lacking the ground is as safe as having it, but driving isn’t safe, nor is cooking etc in certain applications. Having outlets without the ground or “two prong” outlets is pretty ghetto in my opinion. I’ve seen 3 prongs on groundless numerous times. Someone please advise if there is some extreme risk I don’t know about by changing out to standard outlets. Replacing wiring is a ton more work than expected (experience) and involves a lot more detail than hoped for. To do it right involves lots of “homerun” wires that feed to specific purposes to comply with code. For example, each bathroom should be fed independently with their own 20amp circuit that feeds Gfci outlets. A kitchen must have a designated 20 amp gfci circuit. A washer needs a dedicated wire generally and an electric dryer also. Also, there will probably need to be an independent wire run for the microwave, dishwasher and garbage disposal. To meet code now days you can’t just have 4 circuits anymore, so I would be very clear about what is being performed by the electrician when they say full rewire to code compliance. Generally the panels also need 2 -8’ grounding rods driven into the ground. It’s a lot more detailed than it used to be and could end up being pricier if your electrician doesn’t stay true. Also, count the cost of the wall work(!) because they will be cutting into your walls when they can’t fish a wire. I’d say the best time to do a rewire is when your panel is somewhere it does not make sense and you find a proper place for it... then rewire.
- Real Estate Agent · Kansas City, MO · Member since 2015 · 61 posts · 35 votes6y
@Miles Stanley don’t do it unless most of your comps did. I never replace the two wire that doesn’t have the ground other than when I remodel the kitchen and baths when I am getting them. Find another electrician. He doesn’t understand the business you’re in.
- 6yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
If the wiring is in poor condition or dangerous I would change it. Since you are holding this property under the BRRRR strategy you can leave it as is if it's not dangerous. It will benefit you in the long run by changing it when at some point you go to sell. I have two properties one with old wiring the other updated. Most buyers will go with updated with all other things being equal. You will lose from an opportunity cost. Since you are already rehabbing it this is a choice you will need to make. I flipped a house last year and the first wall I opened electrical wiring taped together. The more we did the more we found wrong. It was dangerous. It cost us $3000 and time, but it was the right thing to do.
Good Luck.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
@Account Closed having three pin outlets without ground is against electrical code.
@Miles Stanley grounding became common and required by code in most places in the early 1960s. Does the wiring use metal conduit and metal electrical boxes? If it does, then you can often just use the conduit for ground connection.
I agree with @Mindy Jensen that electrical doesn't really add value. It is one of those things like a furnace or water heater that people just expect to work correctly.
As far as the safety ramifications. Your biggest risk is in wet areas. You really want GFCI in the kitchen and bathrooms. You can even install GFCI in other areas and just mark them as "not grounded". If the electrical system is otherwise safe, I may look at cheaper alternatives like this. Get a second electricians opinion.
- WorldWide · Member since 2016 · 1k+ posts · 1k+ votes6y
what Joe said.
"He says it would improve home resale value..."
It looks like the electrician is trying to increase the value inside his wallet on this one instead. Is anything actually "faulty"? (besides not having a ground wire) I would make sure all your electrical connections in the attic are not twisted together and actually have a junction box, as well as making sure the box is not Federal Pacific. Once you start tearing into things you can't see, the price ceiling will be limited only by availability of space in your wallet. - Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes6y
You've received a lot of replies with good info. Do not put in 3 prong outlets though unless they're GFCI outlets. Even a GFCI outlet does not provide a ground if one is required, it merely adds a safety factor. Also, they cost about $17 each vs about 50 cents for a normal receptacle.
If this were my rental, I would only consider rewiring if the wire was old enough to be cloth covered. If it's a Romex type plastic sheathed wire, I wouldn't do the whole house. However, one thing you may want to consider is adding a few circuits as most older homes are sorely lacking in that regard. How's your electrical supply and load center? If it's inadequate, you could upgrade the service, add some circuits here and there and be in better shape from an operational standpoint.
One thing I've found on some older homes is that the wire actually did have a ground conductor, it just wasn't used. (either folded back or snipped off)
How difficult it is to change wiring has a lot to do with how the house is constructed, ie on a slab, with a basement or a low crawl all factors in. - Real Estate Agent · Owatonna, MN · Member since 2017 · 221 posts · 152 votes6y
@Miles Stanley when I did an appraisal internship, electrical upgrades added no value. Obviously though, it is a selling point for buyers
- Real Estate Agent · Fort Lauderdale, FL · Member since 2018 · 360 posts · 213 votes6y
If the county is requiring to change the box (Breakers) Change it, again if it needs to be updated to code and bring electrical capacity to home. IF not, don't even bother. BRRRR and move forward. It won't impact drastically the value of the home
- Realtor · Schertz, TX · Member since 2015 · 226 posts · 53 votes6y
@John Teachout
@Joe Splitrock
My wife was with the electrician when he was there, but he made some comment to the effect of "you can only have 1 GFCI per 'loop'". I've seen the advice of putting GFCI's everywhere you want more protection, but this seems to go against what the electrician is saying.@Brock Thomas @Kenneth Garrett
He says he works with a lot of flippers that never like what he has to say lol. I can see why, who wants that news!?
The other thing that sucks is that an electrical rewire would be the ONLY reason I would need to tear into the walls, they are in great shape otherwise except for some needed drywall patching. I did some research and it appears having multiple GFCI's on one circuit can cause them to trip each other in certain circumstances which can eventually wear out the internal circuitry. Research also says having ONE GFCI at the most upstream point in the circuit will protect all downstream outlets...which would have to be 2-prong per code (and which doesn't solve the 3-prong need issue for certain devices).
Hmmm...tough one. Considering all advice, my gut's telling me to rewire, but I will definitely be speaking again with this electrician about the details and will be seeking 1-2 more opinions.
Thanks all!
- Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes6y
In terms of value as a former appraiser, I would first say it depends and second, in general, no. Mindy said it best, others said the same less eloquently. In most cases electrical is the sort of thing that adds no value if it works, but detracts value if it doesn't - like a foundation for instance - windows too in many cases (windows are more of a grey area).
What I question is why a 1968 house is not grounded. Having 2-prong receptacles (also called the outlet) does not necessarily mean a system is not grounded, it might mean the ground does not extend to the device via the third prong ground terminal a 3-prong outlet provides.
Again, I would be shocked if that system is not grounded. I would not be shocked (lol no pun intended) if the ground is broken along the way somewhere. What is most common to find in a house of that age, and even older ones for that matter, is a 2-wire system encased in a ribbed metal (I think they call it BX), along with metal outlet boxes. What those systems do is use the metal wire casing and metal boxes to ground the system. With modern systems that use plastic boxes, you have to have the third wire for the ground, with the metal systems you do not. However, if your metal system has a break in the ground somewhere (due to a loose connection somewhere) you will need to trace it back and find it so you can tighten it.
So, if you do in fact have a metal system, then the first thing to check is if the panel itself is grounded - that could be the whole problem right there. Once you establish you have a metal system and it is grounded at the panel, you can trace each circuit and verify each one is grounded all the way through each location to the end of the circuit. You can then swap out the 2-prong with a 3-prong, and the screws that hold the outlet in the metal box will ground it to the system. While that will work, code might require the new 3-prong be grounded via the provided ground terminal on the new outlet, using a jumper wire to the metal box with a ground screw - the problem with that is often the old boxes don't have a ground screw or threads, and you need to tap new threads in each box for the ground screw - super fun.
All said, I am not an electrician and this is internet advice!!! But, maybe our advice is better than the electrician you have, if they are so sure that rewiring your entire house will increase value - lol!!!
Get a second opinion. Good luck.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes6y
@Miles Stanley changing a 2 to a 3 prong can’t make the outlet any less safe. The benefit would be you can use tamper resistant with 3 which protects children. To say it’s not to code is probably accurate, but is it safer, less frustrating? I would say so. There is a lot of stuff that’s not to code. Basically any house built before the 70s or 80s is almost entirely not to code, but it’s good to come up with cost effective solutions.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
Originally posted by @Miles Stanley:
@John Teachout
@Joe Splitrock
My wife was with the electrician when he was there, but he made some comment to the effect of "you can only have 1 GFCI per 'loop'". I've seen the advice of putting GFCI's everywhere you want more protection, but this seems to go against what the electrician is saying.@Brock Thomas @Kenneth Garrett
He says he works with a lot of flippers that never like what he has to say lol. I can see why, who wants that news!?
The other thing that sucks is that an electrical rewire would be the ONLY reason I would need to tear into the walls, they are in great shape otherwise except for some needed drywall patching. I did some research and it appears having multiple GFCI's on one circuit can cause them to trip each other in certain circumstances which can eventually wear out the internal circuitry. Research also says having ONE GFCI at the most upstream point in the circuit will protect all downstream outlets...which would have to be 2-prong per code (and which doesn't solve the 3-prong need issue for certain devices).
Hmmm...tough one. Considering all advice, my gut's telling me to rewire, but I will definitely be speaking again with this electrician about the details and will be seeking 1-2 more opinions.
Thanks all!
That is correct, only one GFI per circuit and everything down stream is protected. You could also install GFCI circuit breakers at the panel. It is fairly easy to retrofit and it will protect the entire circuit. That really addresses the safety concern.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
Originally posted by @Account Closed:
@Miles Stanley changing a 2 to a 3 prong can’t make the outlet any less safe. The benefit would be you can use tamper resistant with 3 which protects children. To say it’s not to code is probably accurate, but is it safer, less frustrating? I would say so. There is a lot of stuff that’s not to code. Basically any house built before the 70s or 80s is almost entirely not to code, but it’s good to come up with cost effective solutions.
Yes it can make the outlet less safe, because the person using it has no idea it is ungrounded. There is a difference between something not being to code because code changed and something not being to code because someone violated code. If you convert 2 prong outlets to 3 prong, that is a violation of code and is not considered safer UNLESS you install GFCI and label the outlet as "not grounded". Whenever you see three prong outlets on no-ground circuits, it is usually some homeowner who took it upon themselves to "fix" the problem. They would have installed two pin when it was done in the 1960's.
Installing GFCI monitors the current on the circuit to make sure it is returning to the panel board. It prevents electrocution by current flowing through a persons body, instead of back through the circuit. It greatly increases the safety when operating ungrounded equipment. Even in a grounded system, you should always upgrade to GFCI in wet areas. It is cheap. It is like smoke detectors. They were once not required, but that is no reason to not install them in older homes.
Even with GFCI you can still have problems with equipment not operating properly. Some electronic equipment uses ground. You can end up with hum noises on audio equipment. Computer circuit boards are grounded. Taking away ground will make a device more sensitive to damage from ESD (shocks, power surges, lightening). In other cases it is a safety hazard. For example a microwave cage is grounded. You can end up leaking microwaves into a room if you didn't connect it to a grounded circuit. Power tools have grounding on the metal exterior, so if there is a short circuit, the current goes to ground instead of through your body. The user manual will state clearly what devices should only be used with a three wire grounded circuit.
As a landlord, there is risk if you are swapping outlets and something happens. It is different if the occupant uses a converter, because they are knowingly bypassing ground. The danger is someone who sees a three prong outlet assumes it is grounded, which is why they should be labeled "Not Grounded".
I have an electronics degree and have worked in the power equipment field for 20 years, so I know way more about grounding than any normal person should ever know, haha. I am just trying to share my knowledge, so please don't take my response the wrong way.
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