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How to Measure the Return on Your Home Improvement

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The property market is really buzzing, not only in the UK but also around the world. European properties are attracting a lot of investors, while the US market is filled with great-valued properties that offer strong long-term gains. The short-term market is even more interesting, making house flipping (buying a house, repairing it, and selling the property for a capital gain) exciting again.

House flipping is indeed a good way to benefit from the property market over a shorter period of time. You can invest in certain home improvements to increase the value of the property. The key ingredient to success in this market is knowing how to measure the return of each home improvement.

The Basic Calculation

Before we get into more aspects to consider, we need to take a look at the basic calculation. I spoke to the top realtors from HomeATX, who specialize in Lake Austin homes, and we talked about waterfront properties both in Austin and nearby areas. You only need to browse through a few properties to understand the potential of house flipping. All of the properties in the area are equipped with home features that any homeowner would love.

According to the top realtors I’ve spoken with, different areas around the house promise different returns. The kitchen and bathroom – particularly the main bathroom – usually offer the most value. You can add 75% to 100% (even more in some cases) of the home improvement cost to the value of the house if the improvements are done to these areas. Other rooms don’t offer as high a return as these two.

The Important Details

Of course, the room in which you invest is just one part of the equation. Other details you also need to consider include when the renovation is done (newer = more value), the uniqueness of the feature (unique = more value), and the functions you add to the property as a whole (more functions = more value).

A set of energy-efficient, double-glazed windows installed to replace existing windows in the property is a good example. Double-glazed windows are functional and add a lot of value to the property itself. A newly installed set of windows will also attract more buyers, making its return even higher.

A Few Things to Keep in Mind

Before you go ahead and start pouring money into your next property, there are a number of important things to keep in mind. First of all, too much is never a good idea when it comes to house flipping. Investing too much in home improvements doesn’t always lead to a substantial increase in property value.

In fact, moderation is the key in this market. Before investing more of your money, ask if the next homeowner would invest the same amount to get the return (i.e. features, improvements, etc.) you get. Only move forward if the answer to this question is a solid YES.

Just like investing in other competitive markets, house flipping can be challenging. Using the tips we covered in this article, however, will help you to boost the value of a property with the right home improvement and renovation projects.

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