Michael Emilio

This is one part of a series where we’ll be looking at the real estate-related rules in Money Magazine’s “25 Rules To Grow Rich By”. We’ll be taking these rules one-by-one and going in-depth as to whether it’s a rule “to grow rich by” or not. Take a look at the rules we’ve covered at the 25 Rules list.

Rule 1: For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.

If there is such a thing as a home improvement “fact” it’s that kitchens and bathrooms are the first places to look at when you’re remodeling your home. They tend to give you more bang for your buck in terms of resale value. The reason for this is that when buyers come to look at your home, they know they will be spending an inordinate amount of time in these two rooms. So if you’re selling your home, then give the buyers what they want!

But wait a second. Are you selling your home? Because this conversation just became way more interesting if there are some out there that aren’t selling their home.

So it this a conversation on selling your home for the most money and highest possible profit at the closing table or is this a conversation on what’s a better improvement to do to live in your home?

What’s better: Just to live in the home

Ok, I’ll give you a quick answer in this case, if you’re just looking to improve your house and you plan on living there for at least a few years. Whatever you want! Seriously. Just do whatever you feel like. Why should you care what the resale value is if you’re going to be living in the house for years and years! How do you even know for a fact you’re going to leaving the house and selling it anyway? For all you know, you might just retire in that same house you’re getting all concerned about future market value about!

If you’re looking at home improvement when you plan on living in the house for a long time, then do so purely thinking from a pleasure, not a profit standpoint. What rooms in your home do you feel the least comfortable in? Do a little exercise for me. Walk around your home. Take a mental note about how you feel in certain rooms. Do you like the way your kitchen looks? Is your bedroom painted the right way, with the fixtures you like? How are the bathrooms, do you like them and is there a comfort level there? How’s the patio? How’s the entrance to your home? Landscaping looks ok?

If you’re doing home improvement from a pleasure standpoint, forget about the profit and focus on how the house makes you feel! You want to feel comfortable in your house, you want to feel happy you live there, and you want to get excited about coming home after a long day at the office or business. You don’t want to blow thousands of dollars on a home improvement project just because you read in a real estate blog that it’s good for profit, yet you have a bedroom that looks like it came out of Saturday Night Fever.

What’s better: Selling the home for the highest possible profit

Now, if you’re doing this home improvement project in order to make some serious money for investment purposes, then we move out of personal emotions and move onto facts and the emotional impact on the potential buyers.

Kitchens and bathrooms are usually the most expensive home improvement projects to undergo. There is some expertise involved, since there are pipes and fixtures to contend with. Water and electricity usage is a huge concern. Infrastructure of the property must be considered. Adding an extra room is also something to consider, since bigger homes usually equal bigger money, but not always bigger profits.

One of the worst home improvement projects you can do is add a swimming pool. Think of a swimming pool as a hole where your money drains into. Many buyers don’t want that maintenance chore of a swimming pool – that’s extra money they have to pay on a regular basis. Either that, or that’s monthly back-breaking work of cleaning their swimming pool. Of course, some buyers will like it – but that’s the minority. For the most part, steer clear of building a swimming pool for real estate investment selling purposes.

Home offices are in the same category as swimming pools. Only a small percentage of your potential buyers will want a home office. Only a minority of buyers will need or want a home office. With these buyers, your home office project will go to waste.

Let’s take a look at kitchens. Don’t think that splurging on a huge kitchen makeover is going to make a monster of a difference in your pocketbook come selling time. Small improvements such as refinishing old surfaces, painting outdated wall colors, and upgrading antiquated or broken appliances definitely gives you the most bang for your buck when it comes to the kitchen and most home improvement projects in general. A good tip in painting is stay with neutral colors – this usually appeals to the broadest scope of buyers.

When it comes to bathrooms, make sure the basics are taken care of. All faucets, showerheads, and toilets must be in excellent working order. Fix all leaks. Painting the walls with a gloss latex paint is a good investment of time and money. Either clean the grout or re-grout if it’s not in good condition. If the bathtub/shower uses a curtain, consider installing a sliding shower door – much classier and definitely in style.

Kitchens versus Bathrooms: Which do I focus on

This is a very situational question. Bathrooms are usually rated slightly higher in most regions, but for our purposes they are almost equal in resale value. Your best bet is to take an honest look at both these rooms and evaluate which is in the worst shape. Simple answer: Fix that one! The weakest link between those two rooms will bring the home value down so if one of these rooms is obviously worse and a major sorespot, then focus all your attention on getting that one done right. And, again, if you’re planning on living in the home for a while, forget what I just told you and just do what you want!

Revised Rule #1: For return on investment, the bathroom and kitchen bring the highest return-on-investment (ROI) almost equally so improve the worst of the two to get the most bang for your buck.

25 Rules | Jump Forward to Rule #2

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