223 Bonad Road, Brookline MA 02467
$1M - Sold May 1, 2018
3 Bedrooms | 2.5 Baths | 2,256 S. Ft. | 2 car garage | Marketed by Coldwell Banker Residential Brokerage
54 Harvard Ave. Unit 1, Brookline, MA 02446
$2.65M - Sold April 18, 2018
4 bedrooms | 3.5 baths | 3,457 Sq. Ft. | 2 car garage | Marketed by Unlimited Sotheby’s International Realty
Wellesley Renovation Case Study
We like to use actual data to help clients make decisions about buying, selling, and renovating in such a way that protects their investment and maximizes their returns.
A common question that we hear from clients and that we strongly encourage them to ask us is regarding renovations. "If we finish our basement, will that add to the value of our home? Will we see a return on that investment?" "If I redo my kitchen, I am afraid that I will become the most expensive house on the block, is that bad?" We much prefer to hear this question ahead of time than hearing after the fact...."we put $100,000 into this house since we bought it, will we be able to get that back?"
There are reports that are published by organizations like the Remodeling 2014 Cost vs. Value Report* (www.costvsvalue.com) Homes Report that give some guidelines for returns that different projects can yield. We find that any report of "averages" or "regional" information is typically not specific enough to benefit a client with a particular type of property in a particular location. What we do for our clients is analyze the value of the house that they have and determine whether the new and improved house could be worth the current value plus the cost of the improvement, or not.
Here is a case study for a Wellesley property in 2014. The client has a 3 bedroom colonial in a good location on a terrific lot. The home has been updated and is in lovely condition. Figure 1 describes the expected value of that home today.
The client's home today is worth just about $1M. From looking at the chart in Figure 1, there are very few three bedroom homes that are worth more than $1M and the client should be concerned about investing too much money in upgrading the existing house. If the client wants more house, the advice would be to consider an addition, or to consider purchasing a different house. But if the client spends $100k/200k or more in upgrading this house, the chart indicates that will be money that would be very difficult to recapture if they chose to sell or needed to sell.
Once the client has started to sketch out their needs for an expanded kitchen and family room space, plus the addition of one or more bedrooms, we can start to define the scope of a renovation project and determine whether that can work with this house and if the market can support the cost of the renovation.
We can look at that question as "If I spend $500k renovating and expanding my house, what should this renovation include to insure that I get a substantial return on my investment?" We think this is an astute question for a client to ask, and we can examine the market data to help guide that answer.
My immediate response to the client, and Figure 1 supports this, is that the renovation must include the addition of at least one or more bedrooms in order for the market value to be able to support the expense of the work.
Is four bedrooms enough?
Figure 2 shows that there is potential for a renovation to the client's home. If the client adds about $500k in upgrades and expansion to the existing house, there is potential that the market could support a home price of approximately $1.5M, representing a full return on the investment. That is a terrific result and a better result than can be found in many scenarios. It is a better result than could be predicted by any "average report" or "regional report" and one that we find to be more accurate for the markets where we work.
Is there anything the client could do to benefit further? Could the client benefit by adding a fifth bedroom?
Figure 3 gives us some guidance for the client. The fifth bedroom could potentially be a game changer for this house. At a minimum, this chart should lead us to investigate further the potential of making the final product a five bedroom home and whether the entire package of this home as a five bedroom home could support a market price of $1.5M or more.
These charts can help map a market in a way that is difficult to do purely from intuition or experience. By looking at both historical data, and very recent data, we can notice trends that indicate changes in the way the market perceives certain aspects of properties. There was a time that a three bedroom/two bath home was standard. Then it was a four bedroom home. In some communities, but not others, a five bedroom home has become more "standard" or is expected in certain price ranges. The charts that we make can help define the markets so that these characteristics become clear.
Certainly a thorough analysis of prices and bedrooms in a community or neighborhood can provide a wealth of insights that are simply not available without a client-focused analysis. However, looking at "bedroom charts" alone is not enough for a client to make a decision. By combining this type of analysis across a range of variables....the size of the house, the features of the house, the characteristics of the house and lot, the school districts, etc...we can form a more complete picture of the value and potential of a property. We believe we provide our clients with the most comprehensive and relevant data available.
*© 2014 Hanley Wood, LLC. Complete data from the Remodeling 2014 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.