The real estate market generates wealth and improves the quality of life of investors and homeowners. Real estate investors have different approaches they can take to achieve these goals. Some buyers prefer a move-in-ready home so they can move there or rent the place soon after closing. Others are looking to renovate a property to enhance its value or make it more optimal as a home. Consider the pros and cons of these different approaches as you prepare to make your next real estate investment.
Move-in ready homes
There can be some variance in the condition of move-in-ready homes. A home can be considered move-in-ready if it is ready for occupancy according to all relevant laws, local building codes, and industry standards. Although this is not generally the case, there can be some imperfections in the cosmetic aspects of a move-in-ready home. For instance, there may be some wear on the paint or old appliances that could stand to be replaced. In most cases, move-in-ready homes are free from most visible imperfections, but you should remember that a home does not need to be perfect to be move-in-ready.
What constitutes a move-in ready home is the working condition of core components of the house, such as electrical infrastructure, plumbing, and climate control systems, as well as the general soundness of the structure. Most properties you can find in the North Shore area are move-in-ready, as high-end property tends to be well-maintained. Choose a move-in-ready home if you want to be able to enjoy your new property as soon as the sale closes.
Home renovations vary widely. There is the proverbial “fixer-upper” that an investor plans to renovate to rent or resell, but there are also higher-end homes purchased to remodel. Home renovations can also be made to use the home as your primary residence. Here’s a great article from the National Association of Realtors (NAR) that advises homebuyers interested in renovating their property. If you take a strategic, calculated approach to renovations, renovating can be lucrative in any market tier. Choose a home renovation when you are interested in becoming more involved with your investment.
Given the extravagant luxury characteristic of North Shore, N.Y., real estate, you will likely be starting with a home that is already quite nice if you purchase in this area. Nevertheless, this is a historic area that goes back a long time. As such, you may find homes built long ago, and as such, they may require ongoing maintenance and renovations to remain current.
For a fascinating example of how the area’s real estate has been preserved and renovated, read this 1974 Times article. It describes how one historic North Shore home was partially bulldozed and then rebuilt into a modern 5,000-square-foot home one-fourth the size of the original mansion. The possibilities remain endless, even today.
Splitting the difference
Regardless of the condition of a home when you purchase it, you can always make renovations to increase its value. For investment purposes, it is crucial to keep in mind that there may be a point of diminishing returns when it comes to continuing to renovate a finished luxury home.
You may also want to consider market factors while deciding whether to purchase a move-in-ready home or a property to renovate. There are numerous ways the market could affect your decision-making about your home purchase. For example, in times of low inventory (i.e., a seller’s market), you may want to allow for more flexibility in your choice of a home. Here’s a chart from the Federal Reserve showing housing inventory in Nassau County since 2016. As you can see, the 2020s kicked off with a relative dip in inventory spurred by high demand within a booming real estate market. This NAR market data shows how prices have increased over time.
Personal financial factors may also come into play. In many cases, you may be able to purchase a home and renovate it at a lower cost than if you had purchased the same house in move-in-ready condition. You may also want to consider how your decision may affect tax filings or other aspects of your personal finance.
Before making any significant move in real estate, it is best to consult with your real estate agent. Realtors not only sell homes but also work with clients to optimize their approach to purchasing a home. A realtor may be able to weigh in on additional factors that affect your decision.