In the words of Janet Jackson, “What have you done for me lately?” In real estate, sometimes it’s the other way around. Waiting for external factors to contribute to appreciation can be an awfully disappointing strategy – particularly if location wasn’t carefully considered when you purchased your home.
The dynamics of property investment have evolved. If you’re around my age (mid-30’s… early 30’s if anyone asks), you’ve likely been charmed by the stories of your parents’ home. Built for less than $100,000, it’s now appreciated 100+%. Far be it for me to tell you about Santa Claus or even debate the massive plot inaccuracies of Disney fairytales, but here’s the skinny on property: sometimes time and a property’s location can’t do all the heavy lifting. As an aside, if she was really his soulmate, would Prince Charming completely forget what Cinderella looks like and have to rely on a shoe to find her? C’mon.
The best advice that can be given in order to protect your investment is simple: short term investments can lead to one ultimate long term return. Take a car, for example. Sometimes the make and model alone is not enough to protect its resale value. Constant upkeep, maintenance and general care/attention all help to ensure the resale market values it over the other cars of its production year. A house can be viewed the same way. Change the tires, wax the paint, check your oil.
Short term investments can lead to one ultimate long term return
If your home has the same carpet (never cleaned), the same paint (never touched up), the same roof (never replaced), the same mechanical (nev- you get the point), the sum of all of those status quo items lead to a depreciating asset (location and time notwithstanding). You have used up the life of these components and some of the value of your home. Without constant investment, the return becomes less likely in the current market.
To help protect your investment, we’d suggest that when building your home-owning budget, you identify small projects in your property that can be tackled each year. The replacement or refresh of even small things can help to give your property a leg-up on the competition when it comes time to sell. Not all investment needs to be monetary either. Sweat equity can pay off in dividends for those with the time to commit. Painting, landscaping and simple maintenance are all things that may not require a third-party (YouTube is your friend).
If you’re not willing to consider (or funds won’t allow for) a full kitchen renovation or investment in structural or mechanical components, smaller updates can help to set your property apart. Some of the more impactful cosmetic ones we’ve seen: countertop replacement or backsplash updates (porcelain subway tile can go a long way), designer-inspired lighting and mirrors (small investment, huge style quotient), fixture replacement (kitchen faucet, bathroom faucets) and paint. You’d be shocked what a can of paint can do. And while you’re at it, think about professional cleaning (including your carpets) prior to any listing.
Recent clients of COMMUNITY have asked us to weigh-in on some updates before the listing of a home. From countertops and appliances to paint and new carpet, these cosmetic upgrades can be the difference between a home sitting on the market or impressing buyers from the very start. If we were in a seller’s market, this type of investment is less likely to be required. But in the very competitive buyer’s market (for condos in particular) the money invested up front can help to limit carrying costs and shorten timelines for sale. Upgrades can’t be done in isolation – have a REALTOR® weigh in on where you spend your money so it can help (rather than hinder) a sale. Combined with a realistic price, your home can be “on the list” for potential buyers.
As a brief aside, appreciation based on location is certainly something that’s possible. External factors such as being along a new LRT route or being located in a new school catchment are just two examples of this. Subdivision (despite some resistance in certain neighbourhoods) has also benefitted those possessing derelict homes with 50′ frontage. This post isn’t meant to say that appreciation can’t occur, but rather to shine a light on how to keep your property on-pace to retain value if external factors don’t play in your favour.
Cost of Living
Megan has a sobering sentiment that helped me with less-than-ideal appreciation during the sale of my own home. It’s related to the cost of living. When analyzing the market value of my first condo, it was apparent that prices hadn’t increased the amount I’d hoped for. The realization that there is a cost to live helps to keep dollars and cents in perspective. No – I didn’t experience a huge gain or appreciation. However, my cost of living was minimized and far less than what it would have cost me to rent for the same amount of time. This “sunk cost” can help to alleviate disappointment in an less forgiving market. My maintenance and cosmetic upgrade investment was minimal during the time I lived in the condo – that was reflected in my final selling price as well. Live and learn. In my new property, I have committed to small improvements that will help set the property apart when it’s time to sell.
From a REALTOR’s® point of view, it can be very disheartening to have to deliver the news that a home has not increased in value since a potential client’s first purchase. Particularly when appreciation in the YEG market seemed to be a guarantee in days gone by. Remember, this is not your parent’s market. Keeping a REALTOR® in your rolodex, and consulting often, will help to ensure your market knowledge is increased and there’s an informed opinion to help guide you in the lifecycle of your purchase. We love to hear from you – no question is inconsequential. Keep in touch so we can help ensure missteps are minimal and appreciation is within reach.