So you’re buying a property with your Self-Directed IRA. Once you get past the deal making, the paperwork of purchase, and the tedious talking to attorneys that is almost inevitable, then you get to place your paws on the property itself.
Obviously you’re not going to be living there, (thank you very much Prohibited Transactions,) but that just means you’ll be able to give it an honest investment appraisal. And that means that you’re going to be thinking about renovations.
Once you get past the easy ones (a new paint job and removing the closet carpet that has been there since Nixon,) little mental warning lights might start flashing. That new hot tub you’re thinking about – is it really going to pay for itself in the long run? And what would a potential renter most like seeing anyway? New windows? Kitchen cabinets? A dedicated Blu-ray display featuring a 24 hour loop of Elvis’ greatest concerts?
In short, what are the most cost effective renovations you can make that will add the most value to your property? Although it’s hard to scientifically answer this question, there is an annual report that tries to give a pretty good guess. The Annual Remodeling Cost vs. Value Report compares standard costs of specific renovations with real estate agent appraisals of value added. You can search by current year and geographic area, and find out what real estate agents consider the most profitable improvements. It always pays to do specific research but here’s a list of the top 3 for 2018 that provide the highest return from the cost of investment:
In addition to these, real estate agents have noted that specific upgrades can also have a tremendous impact on sale value. This will usually be true when there is visible wear in a specific place in the house, and a refinishing or replacement will make it look like new. For example, wood floors can quickly start showing age even through minimal usage. A professional refinishing of the floor can go a long way to giving your home that special “it” property which is so appealing to potential buyers. Now that you have a frame of reference for thinking about how you want to rehab your property, go for it.
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