Dos and Don’ts of Upgrades

When it comes to choosing the home, the main question an investor should ask when making an acquisition is whether or not the option chosen will contribute to the home’s ability to sell, relative to at actual cost. Obviously, there is a point of diminishing returns if one builds a Taj Mahal in a country of two-story houses. Despite the desire to do everything possible and prepare the place for the tee, resist the temptation. This will only reduce your return. This is especially important since this is an investment, an investment of unknown value, it is not safe to jeopardize part of the potential gain by purchasing design upgrades. unnecessary that are not critical.

More often than not, home builders are aware of this vulnerability. This is more true than ever for investors, for whom they will be providing an overabundance of options and upgrades that are grossly grossed up. This type of financial abuse provides a much needed stream of income for many home builders, such as KB Home, who are known for their cost increases and exuberant options. This system is so elaborate that their design department is a full-fledged company known as KB Home Studio and rivals most high-end design centers. Not only these self-sustaining profit centers, KB Home has a separate business unit with senior vice presidents, AVPs, regional managers, etc. to take care of this organizational monster. The great thing about this device is that it offers a plethora of design upgrades and options that are truly top notch. The only problem is that you usually have to pay an arm and a leg to get these wonderful amenities.

To tell a story, the first time I walked through a KB Home Studio was baptism by fire. I spent over eight hours at the design center, spread over two days. At $ 35,000 and up in upgrades, I estimated it was costing me about $ 4,300 an hour to shop at their design center. You can see why I was happy to get out of there. Also keep in mind that you may need to pay a fraction of the upgrade costs as a down payment soon after selection. It’s almost a certainty and an industry standard. On average, the deposit amount is between 25% and 50% and is generally not refundable. The consequence of this deposit requirement is obvious, in that it makes it more difficult, especially as an investor, to walk away from a transaction.

Despite the latter, you can see on a pure convenience factor, it’s hard not to like that a builder can give you so many options. Having the “convenience factor” available is all good and good; However, it becomes a bit of a trapping issue when the builder offers a simple vanilla tin with no or few upgrades. In these cases, sometimes builders will only go for the ‘code’ meaning, providing only what is necessary for the local housing or building and security department to approve the property at the city or state level. county and gives it a certificate of occupancy. This can mean, for example, no gutters, no landscaping in the front or back, unfinished garages, which usually consist of drywall with a primer coat, or an unfinished garage compound. of the latter but with exposed 2×4 studs, plasterboard, wire mesh. and black installation cover sheet. Other more obvious “standards” include all vinyl flooring and small 4×4 white tiles for kitchen counters, or the cheap laminate for that matter. To top it off, in terms of complete ugliness, you could get the builders’ special quarter-inch clustered marble countertops in the bathroom.

There’s a reason even Home Depot or Lowe’s home design centers showcase these amenities, and that’s because they’re cheap and no one really wants them. As a result, many home builders come up with the standards in order to get the most money out of every home they build. As a result, a new owner and / or investor is essentially forced to purchase options and various upgrades in order to prevent the house from looking like a simple Jane. Having too many regular Jane’s can actually hurt a home’s value. As an investor, it’s up to you to set the balance without spending too much on a new flip flier. It’s the nature of making a business decision: you have to use your judgment. I have seen houses that have been literally destroyed from the inside given the extreme lack of appeal that permeated the house due to the lack of modernization. As an example, spending an additional $ 4,000 to $ 6,000 on upgraded flooring and kitchen counters is probably a good idea. Most rugs, even if they don’t have a stain guard, should work in most homes. Don’t be forced to upgrade to thicker padding for the rug. Just go for the standard quarter-inch, as most builders will try to get an extra $ 700-1200, if not more, added to the cost of the house just for improved padding.

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