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Monday, December 19, 2011

Diminishing Returns–Think Before Your Next Improvement

They are really not difficult to spot if you go looking.  The owner had their reasons I am sure.
It may now be the only 4,000 square foot home in a neighborhood of 1,500 sq.ft. ranch style homes.

Or, it may have started out as an 1,800 sq.ft. home but grew through the years as the owner’s needs grew.  Hint: Sell and move up!

This is not an economics lesson on increasing and decreasing returns.   I will leave that for academia.

But every home owner should consider the concept when considering a home improvement.

I have known some who wanted to increase the value of their home by putting a pool in the backyard.  The attitude of many who move to Florida is “since we live in Florida we must have a pool!”   I always say – put it in if you are going to use it.

There are not many improvements that will allow recouping 100% of the investment. (Are there any?)

But there are improvements that will help get your home sold.  Most of these are in the kitchens and bathrooms.

Decreasing returns relates to added improvements that do not add any value but it should also apply to not performing needed maintenance (repairs and preventive).

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