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The most profitable real estate improvements

If you want to know how to add market value to your home by making profitable improvements, perhaps before putting it up for sale, be sure to read “101 Cost Effective Ways to Increase the Value of Your Home” by Steve Berges. The author, a 25-year home builder and real estate investor, shares the facts about which home improvements are most profitable and which probably won’t increase your home’s market value more than their cost.

As a longtime investor in rental houses, I had a good idea which home improvements were the most profitable. But I quickly discovered from this new book that “visibility adds value.” If the improvement isn’t highly visible (such as foundation repairs), it probably won’t gain much (or any) market value.

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Unfortunately, the book doesn’t include a nice, simple list of the most profitable home improvements. Instead, it leads the reader through several chapters listing the 101 cost-effective ways to improve your home’s market value, room-by-room.

Berges has a five-star rating system for virtually every possible home improvement, such as painting (one of the most profitable and least expensive improvements), to attic and wall insulation (one of the most unprofitable improvements).

The author, in my humble opinion, is too generous with his star ratings. For example, he says adding a “powder room” adds a “moderate” three-star increased value to the home because it is a small room with limited visibility. I’d like to know where he gets his statistics. Frankly, very few homes I’ve seen even have a powder room.

But Berges is “right on” with the majority of his evaluations as to how much market value most improvements add. To illustrate, he says room additions add moderate value, meaning they add from 90 cents to $1.10 for each dollar of cost. Based on my personal experiences with room additions, he is a bit on the generous side.

This is an excellent book to consult before making a substantial improvement to your residence. Suppose you are considering spending $30,000 or more to install an in-ground swimming pool. This book could save you from making a major financial mistake.

Berges says swimming pools have a “low impact value.” That means for every dollar spent on a new pool, you will be lucky to add 50 to 90 cents to your home’s market value. Additionally, he cautions pools often detract from home marketability to prospective buyers with small children because of the danger of swimming pools.

If you are getting ready to sell your home, and are considering updating it before listing for sale, reading this book can be very profitable time well spent. To illustrate, Berges recommends adding new kitchens appliances and including them in the sales price even if your kitchen isn’t updated. He rates new appliances as a five-star improvement.

However, some high-rated home improvements are surprising. For example, adding a pantry rates a five-star improvement value rating, according to Berges. Except in luxury up-scale homes, how many homes have you seen that have a pantry for storing food items? As a regular attendee at home builder national conventions, having toured hundreds of model homes, I can’t recall any modest-priced homes with a pantry.

Chapter topics include “Your Home is Your Greatest Asset’; “Required Approvals’; “Everything You Need to Know About Subcontractors”; “General Property and Grounds”; “Exterior Structures”; “General Exterior”; “General Interior”; “Interior Rooms and Components”; “Structural, Heating and Plumbing”; and “Electrical.”

This new book provides a quick and easy resource to determine if a contemplated home improvement will be a profitable investment, especially if you expect to sell your home within a few years. It also provides an excellent guide to which improvements will add the most market value and which should be avoided because they add little or no value. On my scale of one to 10, this superb new book rates a solid 10.

“101 Cost-Effective Ways to Increase the Value of Your Home,” by Steve Berges (Dearborn Publishing Co., Chicago), 2004, $18.95, 247 pages; Available in stock or by special order at local bookstores, public libraries and www.amazon.com.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

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