Renovations on condo: yay or nay? (agent, investment, mortgage, mortgage)
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Is it pretty much certain that you will get a better return on your investment if you renovate given that you choose a condo/townhouse that is in a good area for a decent price vs a place that's already pretty much fixed up that's at market value?
Also, anyone have experience of how restrictive an HOA might be towards renovations? Most of the places I'm considering needs complete renovations of just about every room and everything. Major rehauls.
The HOA really has nothing to say about what you do on the 'inside' of your own Condo. The only exception might be the removal and disposal of building materials, and/or the hours during which you can produce significant construction noise (such as tile removal, etc).
We have completed three renovations, one a major renovation that involved the removal and replacement of all the walls. In every case, the renovations have significantly increased the sales value of the condo.
Personally I would be careful. Quite often the main thing that sells a condo building is location, parking, amenities, dues, etc. versus the actual unit. You would not want a $1,000 saddle on a $100 horse.
HOAs may have some restrictions... for example, my HOA doesn't allow would floors in upstairs units (though that hasn't really stopped anyone). Updated condos in my neighborhood sell quicker and for more money than those that aren't. Just don't overdo your updates... make it nice, but don't overspend on over-the-top, luxury stuff.
My sister and Brother in Law completly redid their condo. It was a place built in the 1970's in Glendale Arizona. It looked like it was from the 70's as well. My dad did all the work for them as they had money to buy materials. It took about 5 years and the place is a show place now. They opened up the kitchen and made it part of the living room, creating a great room. The stairs were replaced. It had 3 small bedrooms and now has 2 nice size bedrooms and a small home office. The elecrtical, plumbing, everything was redone. The popcorn ceiling is a bad memory. Interior doors were replaced, light fixtures, new kitchen and 2 baths completly replaced.
The building that they are in is an end unit and all units are living area on first floor with bedrooms on second floor. You do need to know what walls are load bearing if you plan on making those kind of changes. This is not my dads first Rodeo so he spent time getting the permits needed to do this job.
First off make sure the condo association is in good standing and that there is not any big bills coming up and also that they have enough insurance. We ran into a problem this year when a very well qualified client wanted to buy a condo but we found out or should I say her bank found out that the Condo ass. didn't have enough insurance and that our buyer would need to come up with her own flood ins. Another issue we ran into was a small group of brand new condos and our clients bank did not want to be the first to loan in case the others didn't sell. Banks are being very careful making loans on condos in our area.
I knew a guy in the late 90's that was buying condos for about $40,000 remodeling and flipping for about $100,000. Nothing fancy just nice, new and clean. He made a killing. Be careful how much you invest and watch your hidden costs like attorney and real estate agent fees and of course taxes. Otherwise check with your HOA and find out any restrictions. I'm sure they would be pleased to have someone remodel units and make them more desirable as long as you follow the rules. Go for it.
It really depends on your building and your market.
I live in a historic building so everything has to go through the board. Licensed contractors need to be used for certain tasks during renos, do it yourself is okay for other things. These are all spelled out in the HOA docs. You also have to show a set of plans and can only do work during certain hours so as not to disturb your neighbors. Some places are a lot more loose with these types of rules.
In my market, people will do absolutely nothing for the three years they live in a place and expect 100k more than when they bought it. Sometimes they get it, sometimes they don't. Renos CAN add value. Or they can take away, as many people may not like the way the place is renovated.
My best advice is do what you love and forget about profit.
In my experience, renovated units usually don't sell for enough of a premium to cover the cost of the reno. How much profit on the expense of doing the reno makes it worth the hassle? The much bigger factor in eventual profit is the purchase price.
In my experience, renovated units usually don't sell for enough of a premium to cover the cost of the reno. How much profit on the expense of doing the reno makes it worth the hassle? The much bigger factor in eventual profit is the purchase price.
This here is a great answer. I gave an example of my Sister and her husband. They put a lot of work into their place. Still, they are enjoying that place. It is paid off as well. They don't have any intention to move. Both have stable employment. They don't have kids and don't plan on having any as my sister is not able to do that. For them it is the perfect place and they love living there. To put that much money into a place that you would sell within a short amount of time may not work. Realize, they had exstensive work done. A light facelift would be more advantageous for someone interesting in selling within 5 years.
Renovations only pay off if the place was bought for extremely under market value. No matter what you do, you won't get a much over the going rate for other units in that building. For one thing, the banks won't give a mortgage for a huge amount more than the comps are selling for and the other units in that building are your comps.
If the price you pay for the unit, plus all the costs of renovation all add up to less than the going rate for that building, you can make some money. But, no matter what you have done, you aren't going to sell for much more than any other unit in the building.
If you have not done this before, I suggest that instead of renovating, you find a cosmetic fixer for a distressed price, and limit yourself to new carpet and new paint, and maybe new appliances. That unit will sell faster than a unit that is not freshened up, but won't get you a lot more money than the other units sell for. (selling fast is worth money in your pocket)
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