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Home Improvement 2006  

Paying the price

  Once you've attached a price tag to your next project, check out if and how you can afford it.
Remodeling investment properties? Aim for the middle

The first rule of remodeling for investment is this: You are not going to live in this house. Your sole interest is getting the best price for the house in the shortest amount of time. Or, if you're planning to rent it out, you want to sign a lease and stop paying the mortgage yourself.

So, every time you find yourself lingering over granite countertops, crown molding and $10 drawer pulls that look like little forks, knives and spoons, ask yourself, "Will it increase the value of the unit? Will it help sell or rent the unit faster or for a higher price?" If not, put it down and back away. This is about making money, not making a personal design statement.

What's more, there are rules for resales and rules for rentals.

You might legitimately agonize over stainless-steel appliances on a resale house because they're considered an upgrade by today's buyer -- the new appliances could increase the sales price or reduce the selling time, both of which will add to your bottom line. You wouldn't think of putting them in a rental unit, though, unless you're in a high-end market that is willing to pay extra for style points. Otherwise, they're too expensive, it would take too long to recoup the investment and they're going to get beaten up by tenants. Black appliances are just as elegant and won't show dirt, grime and fingerprints nearly as much.

So whether you are planning to rent out a property or resell it, you need to invest your rehab dollars wisely.

First, curb appeal counts. All of the experts will tell you the same thing: People buy and rent properties from the outside in. If you can't get them out of their cars, they can't see what's inside. That translates into giving the front door and the exterior a fresh coat of paint, or pressure washing brick or vinyl siding, and replacing any damaged wood, broken windows or screens. Clean up the landscaping by removing any dead trees and trimming or taking out overgrown shrubs. Obviously, any junk or clutter in the yard has to go.

"A fresh, clean, light, airy appearance is critical for both renter and buyer," says James Randel, author of "Confessions of a Real Estate Entrepreneur."

"I bought a property when I first started that was just so frigging dark and dreary, we cut in a new big picture window and took down a tree that was blocking all the light," Randel says. "With a $1,000 expenditure, the sun just flowed into the house. It was like a whole new house. The value went from $100,000 to $180,000."

But don't think curb appeal stops at the front door, says Robert Irwin, a Los Angeles-based real estate investor and author of eight books, including "Find It, Buy It, Fix It."

"When they open that front door, the first impression is critical, too," Irwin says.

Inside the house, you'll get the biggest bang for the buck in four places -- the kitchen, the master bedroom, the master bath and the front entryway.

"If you're going to put some money in, put it there," Irwin says.

A fresh coat of paint in a neutral color is standard advice for any house that's on the market; the pros also recommend ripping out old carpet, no matter how well it's been maintained. For rental units, many investors opt for laminate hardwood or tile floors for the ease of upkeep.

-- Posted: April 12, 2006
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