Cost vs. Return
I met some folks earlier this week to discuss selling a house. Like most people, they wanted to get as much money as possible from the sale and were curious to know my opinion of selling as-is versus updating the house.
Situations like this are interesting because I’m all about spending money to make money. From time to time, I’ll even lend to folks who are short on cash or create equity share deals where we front the money in exchange for a portion of the increased profit.
But, If I’m going to recommend someone spend money, I want to have a precise idea of what we’re spending it on, how that will affect the sales price, and the return on investment.
The spending has to be strategic.
Cost vs. return matters, and a higher sales price is no guarantee of maximum profit.
This house, which belonged to an estate, was built in the ’90s and looked like what you’d expect a mid-90's home owned by some elderly folks who’d never updated it would appear. Except for some arguably out-of-place granite countertops that had been added, the whole place screamed 1994.
The estate had a few thousand dollars in the bank, and one of the children had the itch to “do a few things.”
But some itches just aren’t worth scratching.
Spending $1 to make $2 is a damn good idea. Spending $1 to make $1.50 might not be a bad idea. But spending $1 to make $1, well, that’s questionable at best.
And that’s where it fell on this house. It’s a lovely house - “good bones” as they say - but without getting into a full-blown remodel, I couldn’t see where spending money was going to yield much in the way of extra profit.
Without going "all-in" most buyers are going to still view the house as a project, and whatever is left from three decades ago will stick out like a sore thumb.
I recommend they sell as-is because my strategy is to create the highest net proceeds. A higher sales price might sound good, but without a return on investment to go along with it, what’s the point?
When I followed up yesterday, I learned they were hiring an agent who recommends they spend some money to spruce things up a little bit. I’ll hope it all works out for them, and I’ll be curious to see how that strategy pays off.