Boost Your Real Estate Investment ROI with an Updated Floorplan
To some property investors, the floorplan of a home may seem like a secondary issue. Things like upgraded appliances and a modern appearance often attract the most focus, with the layout of rooms falling by the wayside in the fix and flip or rental preparation process.
However, failing to pay adequate attention to a house’s floorplan can be a costly mistake. While granite countertops are certainly nice to have, that won’t be the thing that ultimately wins over a buyer. Many homebuyers go into the purchase process knowing they want certain things, like a spare bedroom to use as an office or an open floorplan, and all of the fancy touches in the world won’t change these base needs. Delivering an updated floorplan that meets the needs of the current market is among the best ways to boost ROI, especially when the needs of the market call for certain features over others.
When fixing and flipping your next project or preparing a new property for renters, don’t let floorplan be a secondary priority. With so many advantages to residents, investing energy into improving layout offerings may be the best possible way to command higher prices – especially in the era of COVID-19.
Why Floorplans Matter
The needs of the market change all the time, for all kinds of reasons. Trends ebb and flow, construction conventions change, and homeowners’ needs evolve. For example, family size is dropping, so some families are no longer looking for lots of bedrooms and would rather see an open layout.
Floorplans may seem like a superfluous aspect of a home, but for many buyers, the layout is anything but. A jumbled floorplan can turn off home shoppers, leaving your property on the market without any interest.
Today, the needs facing homeowners are diverse, but there is one new unifying factor altering the preferences of renters and buyers: COVID-19. With so many economic and lifestyle impacts, people looking for property have more unique goals in choosing a new place to call home than ever before. And, with things like work and school from home seeming like the new normal, the space within a home means far more than it did just months ago.
COVID-19 and Real Estate
The economic consequences of COVID-19 are dire. With so many areas of the country effectively shut down, at least in part, the financial ramifications are likely to last for quite some time. While things in California are looking up, over 7.7 million people have filed unemployment claims since the crisis began – and that isn’t going unnoticed in the real estate market.
However, economic limitations don’t mean that people aren’t buying. In fact, the opposite is true, for a few different reasons.
The Value of a Home Is More Evident
In many areas of California, like the Bay Area in which housing prices are very high in exchange for very little in the way of space or amenities. However, with museums, gyms, and restaurants closed or operating at limited capacities, the value of a comfortable living space is now more apparent than ever. A closet-like apartment is fine when most of a resident’s time is spent outside the home, but COVID-19 has stranded even the most social of social butterflies inside indefinitely.
While some people aren’t bothered by limited space, many are. As such, those in tiny apartments are starting to look outside downtown or high-cost areas for a more comfortable living experience.
Homeowners Need More Room
Prior to the onset of COVID-19, only around 7% of U.S. workers had the luxury of working from home (WFH) on a regular basis. Roles with WFH privileges were often limited to highly educated white-collar positions, like executives, managers, and employees in banking and finance. However, the pandemic changed that virtually overnight. Many jurisdictions nationwide ordered any worker who could perform most of their job duties from home to do so, sending millions to home offices.
While some people were in a good position to transition to a remote work experience, many others weren’t. Some companies had no experience with virtual work, leaving users struggling with inefficient technology and poor equipment. However, the biggest issue for most workers was, and is, space related. Most people, even in areas with a low cost of living, don’t have the extra room to accommodate an office. This means desks end up in bedrooms, living rooms, or basements, and that’s not often sustainable long-term. These issues are only compounded in areas with remote schooling, which includes many counties across the state.
Families that expect to be handling distance learning or working from home for a long period of time may plan to move to make life easier. As more and more companies are committing to full or partial WFH and schools are staying remote for the full Fall 2020 semester, a growing number of people will be on the hunt for more space.
How to Change a Floorplan
Now that you’re aware of the changing needs of today’s buyers and renters, it’s important to take these lessons to heart. What worked even a year ago may not work now, and that’s something you need to keep in mind as you move forward with renovations. Since the market presently favors buyers, not sellers, making your property the best it can be is absolutely crucial.
As the current market demands more space at home to accommodate things like home offices and homeschooling, you may need to make changes to the floorplans in your newly acquired properties. These fixes may seem complex, but can be the difference between breaking even and a nice return on your investment.
For homes that feel cramped, dark, or out of date, removing walls can be the best strategy moving forward. Modern homebuyers have shown an increasing enthusiasm for open floor plans, and this trend doesn’t appear to be changing.
Many older homes, particularly those built in the 1950s to 1970s, are quite segmented in a way that feels outdated. With these properties, removing walls can create a more modern appearance, reducing restrictions between kitchen and dining areas, or kitchen and living areas.
It’s important to note that removing walls and creating an open floorplan shouldn’t come at the cost of reducing privacy. With the increased focus on working from home, turning a small office into a breakfast nook off the kitchen may repel buyers, not attract them. As such, walls should be removed thoughtfully to improve flow.
Be sure to work with contractors to ensure walls aren’t load-bearing and removal won’t compromise the integrity of the building. While removing load-bearing walls is possible, it’s a more costly endeavor due to the need for beam placement elsewhere. Removing walls can also challenge existing plumbing, vents, and electrical wiring.
Create Additional Bedrooms
When private space is at a premium, extra bedrooms can make or break a sale. Far more people than ever before require home offices, often in a spot in which they can hold private meetings without being easily disturbed by children. To accommodate this need, adding on an extra bedroom can significantly boost ROI.
Extra bedrooms can be included in many ways. In some cases, this is as easy as adding a wall in an overly large bedroom or den area, while in others, it may require finishing a basement. However, if there’s no room inside the home, it may make the most sense to build an addition.
Additions can be costly, so determining whether an extra bedroom fits within renovation budgets should be a priority. This step can be best for smaller homes that are otherwise relatively modern and don’t require substantial updates in other areas. Be sure to partner with a contractor who can provide accurate estimates and knows all local zoning laws before planning a large expansion.
When adding an extra bedroom, it can sometimes make sense to add a master suite rather than a smaller room. If the existing bedrooms in the home are on the small side and there is no clear master, it may be a negative for a buyer. As such, adding a large bedroom with an en-suite bathroom can a great way to attract those seeking space.
Add Additional Bathrooms
Bathrooms can be a key selling point for buyers. While some people won’t mind a single bathroom for two people, more home residents means more competition. Even if a home is otherwise perfect, a lack of bathrooms can turn a sale from a sure thing to a “no thanks.”
Adding bathrooms, particularly when there’s room to do so already, can be a good way to boost ROI. Buyers or renters are willing to pay more for extra amenities, and that means things like more bathroom space. A half bath, for example, can be relatively easy to install as it’s much smaller than a full bath and doesn’t require the extra plumbing required to install a shower.
Even if a home has more than one bathroom, an additional half bath can be helpful if both bathrooms are concentrated on one floor or in one part of the house. For example, if there’s a bedroom or office in a finished basement but the only bathrooms are on the second floor, a half bath on the first floor or in the basement itself can be an advantage.
If you’re planning to add bedrooms, adding a bathroom to accompany more sleeping or workspace should be a point of consideration. If, for example, you’re adding a fourth bedroom to a three-bedroom house that only has one and a half baths, buyers may be hesitant to move in a larger family without a second place to bathe. This will be property-specific, of course, but should be a part of your evaluation process when planning layout changes.
COVID-19 has changed so many things about modern life, from work to play – and the real estate market hasn’t been spared. As the needs of homeowners evolve to accommodate pandemic-related trends, property investors need to be prepared to shift, too. With so many people working and learning from home, a layout conducive to privacy and focus means more than ever. By prioritizing an updated floorplan on your next fix and flip or rental project, you can increase the return on your investment by best meeting the needs of the current market.