Friday, September 8, 2006
INVESTMENT RETURNS
Remodeling can have a direct effect on your home’s value

By LEN JAY
General Manager Sea Pointe Construction

We all know that investments can be risky.  The stock market can be very good one day and very bad the next!  The changes that can happen over night to your investments are as changeable as the weather.  So many things determine whether you will make money or lose it.  The market can be affected by so many outside conditions; it is very difficult to insure your investment is going to make money.  If you invest very conservatively, your return will be just as conservative.  If you “risk” your money investing in high yield returns, you also “risk” losing your money. 

For years the banking industry has been investing in both the stock market and the American home market.  A new mortgage, refinance, Home improvement loan or line of credit, are easier to qualify for when the collateral is your home.  When you are investing in your own home, by remodeling key elements, you can also increase its value as a long term investment with little risk.  Remodeling your home can have a direct effect on its value in today's real estate market.  Naturally, we all want to make money on our investments, as well as enjoy financial appreciation of our property.  There have been many millionaires made by buying, improving and selling houses.  You can even purchase courses on television to teach you how to buy and sell without any money?  The point is, “investing in your home can make the value of the house go up when its time to sell!  Meanwhile you get to live in a home with the style, features and design you desire, while giving any future owner's a reason to purchasing your house over another.  The nicer the house, the better the price!

I have spoken with several real estate brokers and asked what really sells a house?  Most of the answers I received were the same. One of the first answers was “Location”, followed by the “Kitchen” and “Master bath”. Let’s face it; most of Southern California is a GREAT location!

When a close friend thought about moving to a larger house, they called me and their Real-estate agent to take a look at the property they anticipated selling and to offer a few suggestions.  Although the house has a great location and was in good overall condition, it lacked many of today’s more modern conveniences and design features of newer homes in the area.  They asked their agent just what they could do to increase the value of the house and make it more desirable to possible buyers.

They knew they could add several expensive, modern features; however they wanted to only provide items that would improve the house, while increasing the properties value, giving them a good return on the investment. 

Being a very successful real estate agent, she gave them tips on making the house “SHOW” properly.  Many of the things that needed to “show” better could be fixed with a little paint, polish and some imagination.  These items are referred to as “Cosmetic” improvements. When selling a house it is important to keep a clean and well maintained look at all times both inside and out. They needed to remove the “cluttered look” of displaying too many magnets and pictures on the refrigerator which although are very important, actually made the kitchen look messy. She had them remove several of the framed photographs of the family from the mantel and store some of the “extra” furniture which made the rooms look over crowded.  By doing this the prospective buyer is able to “visualize” their furniture and personal belongings making the house more appealing.  As we walked through the house we made a list of items that could improve the chances of selling their house at top dollar. The first thing on the list was the kitchen!  The cabinetry was dated and not the best of quality.  The counters were ceramic tile and although they looked clean, they were starting to show wear on surface areas most used for food preparation.  The kitchen faucet served its purpose, but did not have the sleek look or finish of many of the new faucets now available.  The appliances were operational, but certainly not what today’s “Southern California Gourmet” would choose.  The kitchen floor was a dark plank hardwood, which ended at the family room carpet, giving the appearance of two, small, separate spaces.

According to the list of “Things that needed to be done”, the kitchen was the first project.  They asked me for some professional help in designing the kitchen makeover.  They knew that with so many new products available they would need help from someone who knew what was available.  I took them to visit Sea Pointe’s Kitchen and Bath Showroom where they could see and touch things close up. Although they had an idea of what they wanted, a designer’s input can be invaluable at choosing quality, style and performance as well as affordability. When working with a budget, it is important to have a third party that knows where the money can be spent to get the most from your remodeling dollar.  I had to ask questions like, “Would you rather have the really expensive faucet or could we pick out something not as expensive and buy the warming drawer instead?” The warming drawer would add value to the kitchen and would be a selling feature. After all not everyone has a warming drawer. Yet, all kitchens are expected to have a faucet.  As long as the faucet is attractive and is functional, I believe we should add something that makes a buyer see the home as upgraded.  When working with a set budget, it all boils down to choices and purpose.  Our purpose was to upgrade the house, making it more desirable while not going broke in the process.

The first thing that had to be determined was a budget for the work that would allow a return on the investment.  A good rule of thumb is that a complete kitchen remodel should not cost more that 10% of the homes current value. Therefore, if the home is valued at $450,000.00, the kitchen remodel budget should start at no less than 45K.   Once the budget was set, several items had to be addressed.  Since they were fixing the house for resale, many of their personal likes did not have to play as strong of a part in the decision making.  Debbie loves Dark Cherry wood and ornately carved door styles, however by using Alder wood cabinetry and a less ornate, door style stained to a dark cherry color we were able to lower the cost of the cabinetry and produce a similar look. The new counters planned for the kitchen would be fabricated from granite and would give the kitchen a rich, elegant, distinctly individual look. By installing full height matte “tumbled stone” on back splashes with random deco granite pieces above the counters they created a very current look seen in many Kitchen Design Magazines.  The matte tumble stone back splash and the highly polished granite counters created a warm “Old World” look that compliments the shine of the granite counter and classic rich wood used in the cabinetry. 

The floor was the next challenge.  By removing the dark wood planks in the kitchen and the carpet in the family room and installing a large “stone look” tile, the areas where brought together, making the space look considerably larger while easing the maintenance of a very heavy traffic area.

One of the more difficult decisions that they had to make was choosing their appliances. With the broad selection now available it is easy to get carried away and spend far more than you anticipated.  Since they were selling the house, they wanted quality appliances that would enhance the design of the kitchen and be as functional, without losing money by over investing. Instead of the classic white appliances that were in the original kitchen, they chose to purchase stainless steel appliances which are not only beautiful, but also add a special “Gourmet Look” to the entire area inviting someone to come in a whip up a gourmet meal.

By the time the remodel was complete, the house had an entirely “new” look.  With the advice of a dedicated real estate agent and a knowledgeable kitchen and bath designer, they were able to update the house and stay in budget.   The new owners were so overjoyed with their purchase, they insisted on a 30 day escrow!  When asked what sold them on the property, the husband said “We love the location, but we both can’t wait to start cooking!”

Len Jay is the General Manager of Sea Pointe Construction as well as an active Special Projects Production and Design Manager. He is a member of the Remodeler’s Executive Roundtable, a National Organization for Mentoring and Promoting Professional Remodeling.  He has more than twenty years’ experience in the construction industry specializing in Kitchen & Bath remodeling, and has remodeled hundreds of homes in the Orange County, California area.