I was evaluating a house just down the street, the owner is looking to move and I got to say the house is pretty tight. It has all sorts of upgrades, granite counter tops, tile floors, Top of the line appliances and a beautiful back yard. And they want $190,000 $20,000 over what the market is worth…
“All the upgrades I’ve put into this house.”
If you fall under the category “investing for beginners,” it is inevitable that you are going to come across a home chocked full of upgrades.
For a new investor, it can be very challenging, especially when you haven’t really evaluated how to figure out a deal, and you got these well meaning owners telling you they have the granite countertops, the Jacuzzi, the wet bar and outdoor pool with waterslides… you get the point.
Remember, while upgrades can add some value, location and square footage are the biggest determinant of worth. If you are in a neighborhood with homes in the $150,000 range, and the owner has put in $300,000 worth of upgrades that does not make that house worth $450,000, not even close.
Sure, that is an extreme example. There are, however, many people, who love their home, put in all sorts of “fat” upgrades, thinking that it is going to quadruple the price of their home, only to be disappointed when they go to sale.
So for the “investing for beginners” investor, if you find yourself in a potential deal with an owner or realtor, who is feeding you a bunch of upgrades and such, make sure you don’t get carried away and stick to what your research tells you.