There is rarely a week that I do not receive a phone call asking if it makes sense to add a swimming pool, guesthouse, second story or central air conditioning to a home. Granted, adding air conditioning is not nearly as big of a commitment as adding a 2,000-square-foot second story. One of the first things I ask is, "How long do you plan to stay? How well do you like your home and neighborhood otherwise? How long have you lived there? How much do you still owe on your home? Are property taxes an issue of concern?" My immediate response is that any improvements you make may at best yield 100% return, but in most cases, don't count on a return of greater than what you spend. Perhaps you may receive a return of up to 130% on an exquisite landscape job, or maybe when adding a second bathroom to a home that only has a single bath to start.

On the other hand, adding a swimming pool, for example, may only yield a 50% return, because not everyone wants a pool, and in some cases, a pool can take away a grassy play area for children. That does not mean you should not add a swimming pool. You would add a pool for your own purpose, not as a means to add additional value to your property. As a rule of thumb, if you plan on staying in your location for at least four years, I would not hesitate to make whatever improvements you find suitable to enhance your lifestyle. If your plans could change at any time without notice, you should perhaps rethink your position, knowing that you may not receive a full return on your investment. Your property taxes would probably increase significantly if you were to purchase a new home of greater value than that of the home you are selling, which is also an important consideration to keep in mind.

Contrary to everything I have written, professional flippers have been very successful making profits by taking a total fixer-upper to the studs and transforming it into a virtually new home. Be careful, however, thinking you can do the same if you've never done it before. It's not as easy as it appears. Today, there are primarily two types of buyers: first, those who don't mind a home that needs work and is priced accordingly, and second, those who want a turnkey, absolutely done, state-of-the-art gem that's ready to move into without lifting a finger. Homes that are partially updated but still need other improvements often sell for less than anticipated and to the disappointment of a homeowner, who made the recent upgrades and improvements expecting additional returns.

In conclusion, make the improvements for yourself, not for resale. Shop around for a good contractor who will provide quality work at a realistic price. Be mindful that the more you customize a job to your specific needs, the more you may be straying from a complete return on your investment. Examples of money spent that may not be appreciated by every buyer might be a backup generator, solar heating or a sophisticated sound studio. Of course, if the right buyer comes along with complete appreciation for your improvements, he or she would pay to have these improvements already in place. The problem is there are a limited number of clients seeking those improvements. In comparison, the need for a detached office space would resonate far more on a buyer's wish list.

For more information, please call Ron Wynn at 310-963-9944, or email him at [email protected]. To find out more about Ron and read his past columns, please visit the Creators Syndicate webpage at www.creators.com.

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