When it comes to choosing a home, the main question an investor should ask in a purchase is whether or not the selected option will contribute to the home’s salability, relative to actual cost. Obviously, there is a point of diminishing returns if one builds a Taj Mahal on land of sprawl houses. Despite the temptation to go all out and decorate the place all the way to the tee, resist the urge. Doing so will only reduce your return. This is particularly important given the fact that since this is an investment, an investment with unknown value, it is unwise to risk some of the potential profit by purchasing unnecessary, non-critical design upgrades.

Most of the time, home builders are aware of this vulnerability. This is truer than ever for investors, for whom they will provide a plethora of options and upgrades that are highly marked. This type of financial exploitation provides an income stream that is indispensable to many home builders, like KB Home, who are known for their exuberant cost options and upgrades. This system is so elaborate that its design department is an entire corporation of its own, which is known as KB Home Studio and rivals that of most high-end design centers. Not only are these profit centers independent, KB Home has a separate business unit with senior vice presidents, AVPs, regional heads, etc., to take care of this organizational juggernaut. The best thing about this device is that it offers a lot of design enhancements and options that are truly top notch. The only problem is that you usually have to pay through the nose to get these wonderful amenities.

To tell an anecdote, the first time I went through a KB Home Studio it was a baptism of fire. I spent more than eight hours in the design center, divided into two days. At over $35,000 in upgrades, I figured it would cost me about $4,300 an hour to shop at their design center. You can see why he was happy to get out of there. Also note that you may be required to pay a fraction of the upgrade costs in the form of a deposit shortly after selection. This is almost a certainty and an industry standard. On average, the deposit amount ranges from 25 to 50 percent and is generally non-refundable. The consequence of this deposit requirement is obvious, as it makes it more difficult, especially as an investor, to abandon a transaction.

Despite the latter, it can be seen in a factor of sheer convenience, it’s hard not to like that a home builder can offer you many options. Having the “convenience factor” available is all very well; however, it becomes a trapping issue when the builder offers a plain vanilla box with few or no updates. In these cases, sometimes builders will just go “code,” meaning they will only provide what is necessary for the local housing or building and safety department, at the city or county level, to approve the property and grant it. a certificate of occupancy. This, for example, can mean no rain gutters, no front or back landscaping, unfinished garages, which typically consist of drywall with a primer coat, or an unfinished garage consisting of the latter but with exposed 2×4 studs, sheetrock, chicken wire, and black installation cover. Other more obvious “standards” include all vinyl flooring and small white 4×4 tiles for kitchen countertops, or cheap laminate for that matter. To top it off, in terms of complete ugliness, you might get the builders special quarter-inch clustered marble countertops in the bathroom.

There’s a reason even the home design centers at Home Depot or Lowe’s feature these conveniences, and that’s because they’re cheap and no one really wants them. Consequently, many home builders offer standards to get the most money possible out of each home they build. As a result, a new owner and/or investor is essentially forced to purchase options and various upgrades to keep the house from looking like plain Jane. Having too much of a simple Jane can actually hurt a home’s value. As an investor, it’s up to you to define the balance without spending too much on a new tract change. That’s the nature of making a business decision: you have to use your judgment. I have seen some houses that were literally destroyed from the inside out due to the extreme unattractiveness that pervaded the house as a result of lack of improvements. As an example, it’s probably a good idea to spend an extra $4,000 to $6,000 on upgraded flooring and kitchen countertops. Most rugs, even if they don’t have stain protector, should be suitable for most homes. Don’t be pressured to upgrade your rug with thicker padding. Just go with the quarter-inch standard, as most builders will try to get an extra $700 to $1,200, if not more, added to the cost of the house just to improve the infill.