6 Property Improvement Projects with the biggest bang for a real estate investor’s Buck

Like in any other type of business, there are various expenses incurred, such as the cost of repairs and improvements, in order to make a property more marketable or to increase its value. These expenses are also subject to tax deduction, which reduces the investor’s taxable income, or the amount owed to the IRS.

Improvement projects seek to boost the value of a residential or commercial real estate property, while repairs are smaller projects that help to maintain the condition of the property without increasing its value. Repairs, such as fixing a broken window, applying a fresh coat of paint to the walls, or fixing a broken appliance, are fully deductible in the year they are completed. Improvements are costly, and while investors can recoup some of the costs incurred, they cannot be fully deducted in the year of completion. Instead, investors should deduct the deprecated cost of the property improvement over its life expectancy, so that only a percentage of the improvement is deducted each year for the duration that the investor owns that property.

That said, investors should only take up property improvement projects that have a great return on investment at resale time, including the following:

  1. Minor kitchen remodel:

Studies show that the kitchen is often what sells a home. In fact, a simple kitchen remodel can provide a return on investment of about 72.1 percent on average. The recoup can be much higher when you utilize money-saving tactics, like vinyl tile flooring and cabinet refacing. It is not advisable to go for an expensive kitchen remodel since the average return on investment is about 57 percent less than what you may get back by using cheaper tactics.

  1. Bathroom Remodel

According to the National Home Buyer’s Association, bathrooms have become more important to homebuyers than kitchens. The bathtub, toilet, and sink should not just look tidy and function without problems. By adding a coordinated color scheme or façade to the bathroom, you can transform a functional room into an area with greater appeal. Even a few additional fixtures or towel racks can really enhance the look, and yield an average return on investment of about 62 percent.

  1. Entry door replacement

The front door serves two purposes: provide security for your family and give a remarkable first impression. Analysts claim that a steel entry door is both presentable and sturdy enough to offer adequate safety, while offering a 73 percent return on investment. The average cost of a single project is about 1,200 USD, which makes it one of the most affordable property improvements an investor can make.

  1. Sliding replacement

Analysts claim that adding fiber cement siding is a great home improvement idea with an estimated 78 percent return on investment. Vinyl sidings are equally good, since they can give back about 70 percent of the investment made.

  1. Create an attic bedroom

Homebuyers are motivated to make a purchase based on the number of bedrooms available, so adding a bedroom in the attic can attract more buyers. In fact, studies show that an extra bedroom can give you an average return on investment of 72 percent. In many cases, since the framework of the room is already in place, an attic bedroom is usually considerably cheaper than adding a new construction.

  1. Replace the garage door

Installing a new garage door is one of the most affordable home remodeling projects, with an estimated return on investment on 72 percent.

Other Upgrade options

While the cost of materials has risen by about 17 percent, remodeling costs have dropped by about 10-15 percent in the past several years, making it more affordable to make multiple home improvements. There are many home improvement projects that can generate the highest return on investment, most of which focus on replacements, maintenance, and enhancing curb appeal. Besides the six listed above, others include: a new wood deck with a return on investment of about 70 percent; vinyl replacement windows with a return on investment of about 69 percent; and a little landscaping on the backyard by installing an arbor or installing a small pond.

Before sinking money into a remodel, investors should first research the latest trends, and what prospective clients are searching for, then strategize on the improvements accordingly.

Property improvement projects that ad value to your home