The main investment in a house is the return that you get on the money that you would otherwise pay for renting. Meaning, if you buy a house for $500,000, and you’d alternatively pay $50,000/year (~$4200/month) in rent for a comparable house, then your back of the napkin return on that house is 10% (I am not factoring in commissions, interest, insurance, maintenance, which makes the return lower).
Then you hope the value of the house goes up. Typically, people look for a property in a zip code, and then look at the livability of the house for their particular situation. Improvements come in lower on the list. Unless the place is a complete fixer-upper, you usually won’t get 100% return on remodeling. For example, if you spend $100,000 to remodel that $500k house, you may be able to sell it more quickly, but for $550k.
Just don’t remodel it to a lower price point. One of the points in the article is to not reduce the number of bedrooms. Makes sense, as many people filter out 3 or 4 bedroom homes, no matter how big the property is.
Removing a bedroom is one of those home improvement blunders that can ding a home’s worth, even if it creates a larger bedroom — or other living space — in its place.
Read Full Story: 4 renovations that could decrease your home’s value – MarketWatch