Now that you’ve utilized the great tax breaks your home has provided, what are you doing with your tax refund? Are you going to splurge on the expensive sunglasses, shoes or bag you’ve been eyeing or will you reinvest it into your home and increase future resale value? I know I know, you REALLY want those sunglasses, but what’s going to happen to those in a year? Chances are, they’ll either go out of style or you’ll forget about them only to find them scratched up somewhere in your car or purse. Basically, money down the drain for a few months of use.
Instead of thinking about your tax refund as discretionary cash, think about it as earned income. That’s right, you earned that money and you were just letting the government borrow it for a little while. Taxes are essentially a forced savings plan so instead of blowing it on temporary excitement, invest it back into your home and increase its resale value so when you’re ready to upgrade to a bigger/better place, you’ll get top dollar for your investment. Let your money work for you.
There are so many things you can do to improve your home, whether you have $500 or $5,000 to spend. By making small changes (or big ones if you have the cash flow), you can slowly add value without having to do a full blown remodel.
Everyone wants to make their home the perfect space for themselves and their family, but sometimes, the changes and additions aren’t very marketable and can potentially decrease the desirability of your home. Here’s an example of how different changes are interpreted by buyers. Let’s say you paint every room in the house neon green because it’s your favorite color. When it’s time to sell, no problem, just a few coats of paint and you can get the home back to neutral territory. However, If you decide to get a custom rainbow patterned floor, that’s a much more difficult, time consuming and costly to fix. When a buyer comes to look at your property, they’ll be assessing how much money and work will be needed to tone down the home and make it fit their own style. You don’t want to scare buyers off with all the custom work you’ve done that’s too unique for the average person.
I know what you’re thinking, rainbow floors are extreme and you’d never do that. Sure, maybe the changes you’re making aren’t as extreme or obvious, but they still impact the desirability of your home. You can’t please everyone; however, there are a lot of things that are commonly requested by buyers and can easily be incorporated into any home so when it comes time to sell, you’ll have more people who will appreciate these changes.
There are the obvious changes like additional bathrooms or updated fixtures, but there are others that you may not be aware of, or even consider. When you live somewhere and make it your home, you can lose sight of a lot of things that are obvious to people looking at the property with a fresh pair of eyes. This is where I come in. I deal with buyers on a daily basis. Whether it’s when I’m assisting them in finding a home or if they’re considering a property I helped list. By being exposed to so many different types of people, I know what the most requested things are on people’s “must have” lists, other than location and number of bedrooms and bathrooms of course.
These upgrades, coupled with the current status of the market, will impact resale and purchase values in 2017.
The first quarter of the year has already been full of changes in the real estate market, with an increase in median home prices in LA County, from $490,000 in January 2016 to $520,000 currently, the rest of 2017 is sure to shake things up. The current salary needed to afford a house in LA is $98,000. This does not take into account people with debt or student loans that won’t be able to swing the 10-20% down payment needed to make monthly mortgage payments manageable. To add fuel to the fire, experts are predicting an interest rate increase of fixed mortgages that will likely discourage some buyers. We’ve already seen a change in rates since the election, but it’s expected to rise in three steps throughout the year. And if you’re looking to purchase, don’t wait much longer since a slight rise in interest rates can mean a change in your debt-to-income ratios. Call me and I’ll sit down with you and explain in detail.
All these changes are likely to decrease the buyer pool. That’s good news if you’re in the market to buy, less competition; however, if you’re trying to sell your home, it’ll have a greater impact than you’d expect. If the number of buyers is decreased, the chances of your property being “the one” will be a lot slimmer especially if you have unique, custom features that will be costly to change.
Want to know more about how 2017 predictions will impact you and what your tax refund can do for the value of your home? Let me help you figure out the best way to stretch your dollar and make your home more appealing to the average buyer. Even if you’re not considering selling, there will come a time when you’ll be ready for an upgrade or to downsize and I’ll make sure the money you put in now will pay off when that time comes.
Before you spend your hard earned tax return on a frivolous purchase, call me to discuss how you can use it to make your property more appealing and valuable.