You think you're adding value to your home- but your really not

[Christie Snapp]

I just read an article on yahoo finance called "6 things you think add value to your home--but really don't" (posted on the bulletins).

#2 on the list is "overbuilding for the neighborhood." Now, this article is directed towards homeowners who eventually want to sell. But this absolutely goes for real estate investors/rehabbers as well. You can increase the the value of your investment up to a certain point, but you have to keep in mind what a potential buyer (or renter) is willing to pay in a given neighborhood, and what the comps are around your investment property.

A co-worker of mine knew an investor who did just that: he overbuilt for the neighborhood. The renovations and appliances he put into his property were not justified by the neighborhood it was in.

He broke a very important rule: Do not rehab a property to be what YOU would live in! Rehab the property for who you will be marketing it to.