Property Cost VS Value

As the saying goes, Price is what you pay. Value is what you get.” 

Same with Real Estate. It means that we won’t necessarily get a dollar for dollar return on  what we have spent to improve a property. The market will be the driver of how much value there is for any improvement. In other words, if you built a house that costs you more than a million, it doesn’t mean you’ll get the same amount back if you sold the property.

The best example of a cost vs value shortfall is an inground swimming pool.  We have all seen the new, beautiful custom pools with fire features, fancy waterfalls, zero entry, custom lighting schemes, etc.  They are truly a sight to behold and probably afford the homeowner (and all of their suddenly new found friends) hours of relaxation and enjoyment.  Their kids are probably the rock star of the class when they invite everyone over for a swim party. The problem with this scenario is that the cost to install that fancy custom cement hole in the backyard can easily exceed $60,000, while most areas in the Metro New Orleans market will only value that pool at $8,000-$12,000 . This is not usually a happy conversation to have with a homeowner.  There is certainly value in the pool, however, the value is in the use of the pool, and not in the property itself. 

A great resource to review prior to undertaking any home improvement project or addition is www.costvsvalue.com  There are free downloadable charts comprised of annual data which researches home improvement costs and returns on investment in your metro area, the greater region as well as nationally.  The 2019 guide lists the top three improvements with the highest percentage of cost returned in value in the New Orleans market area as: adding a manufactured stone veneer (118%), garage door replacement (92%) and a deck addition (89%).  

The moral of the story is if you build it – ie the swimming pool, they may not always come – with the cash equivalent when it’s time to sell.

“© 2019 Hanley Wood Media Inc. Complete data from the Remodeling 2019 Cost vs. Value Report can be downloaded free at www.cost vs value.com.”

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