As homeowners and real estate investors seek to maximize the return on their renovation investments, one expert’s advice cuts through the noise: start by fixing what’s broken. We spoke with Mark Krier, owner of 616 Homes and an experienced real estate investor in Grand Rapids, MI, to get his insights on how to approach home renovations for the best return on investment (ROI).
With over eight years in the industry, Krier’s background in financial markets gives him a unique perspective. “I can’t help but look at everything from a financial standpoint,” he says. His approach to renovations follows a simple yet effective principle: fix what’s broken first, and don’t over-improve.
Fix What’s Broken First
Krier’s advice to homeowners is straightforward: before considering any major upgrades, make sure everything is functioning properly. “The biggest detractor of value in a home is when things aren’t working,” Krier explains. Whether it’s a broken faucet, outdated electrical work, or mold in a bedroom, these issues can turn buyers away immediately.
“Even if it’s not in an important room, like a laundry room, if something’s broken, that’s the first thing you should fix,” he says. Krier also extends this advice to anything in a home that feels outdated or worn out, referring to it as “figuratively broken.” For example, he suggests that a carpet from the 1970s, though not literally broken, may still need replacing as it would be an eyesore for most buyers.
The Dangers of Over-Improving
While many homeowners believe that high-end upgrades, particularly in the kitchen and bathroom, will yield the best ROI, Krier warns against over-improving. “Kitchens and bathrooms are huge drivers of value, but they need to be in line with the rest of the house,” he says. “If you’ve got an average-quality house overall, but you put in a really high-end kitchen, you’re probably not going to get your money back on that.”
The key, according to Krier, is to keep renovations balanced. If one room, like the kitchen, stands out too much in comparison to the rest of the home, it may actually detract from the home’s overall appeal. “It’s about bringing everything up to the same standard,” he advises. “If you have one room that feels way behind the others in terms of quality or condition, start with that room.”
Kitchens and Bathrooms: Great ROI, With a Catch
It’s no secret that kitchens and bathrooms are focal points for buyers, but Krier points out that there’s a fine line between renovating for value and overdoing it. “Conventional wisdom says kitchens and bathrooms are the biggest attractions for buyers, and that’s true,” Krier confirms. However, he reiterates the importance of context, explaining that these upgrades should align with the rest of the home’s quality.
“If the rest of the house isn’t on par with that fancy kitchen you just installed, it’s going to feel out of place,” Krier says. The result? You may not see the positive ROI you were hoping for.
Understanding What’s Outdated
A recurring theme in Krier’s renovation philosophy is the importance of understanding what’s considered outdated based on the price point of the home. Homes under $750,000, especially in areas like Grand Rapids, can often get away with being a bit older, provided everything is functional and clean. “A house from the ’90s at that price point might not feel out of date to buyers because they’re often first-time homebuyers looking for function more than design,” Krier explains.
However, once homes climb above $750,000, buyers start expecting a higher level of quality. “If you’re in the $750K-plus range, even homes from the early 2000s can feel dated,” Krier points out.
When it comes to high-end homes, small details, like outdated trim or bold design choices, can have a significant impact. “Things like orange-toned wood trim or bold design trends from 15-20 years ago can stick out and make a home feel dated quickly,” Krier says. “It’s best to keep designs neutral and timeless, which tend to age better.”
Bringing a Home Up to Standard
For homes that are structurally sound but feel outdated, Krier advises focusing on aesthetic upgrades, such as replacing old flooring or repainting. However, he cautions that these updates can be costly, and homeowners should be realistic about their expectations.
“Bringing a home up to standard can easily cost $200,000 to $300,000, depending on the size and scope of the renovations,” he explains. Yet, even with this investment, homeowners should not expect a dollar-for-dollar return. “You’re lucky if you get a one-to-one return on a full-scale aesthetic update,” Krier says. “Fixing what’s broken is usually a safer bet for seeing a positive return.”
The Safe Bet: Fix, Don’t Overhaul
When asked about the safest way to approach renovations from an investment perspective, Krier’s response is clear: stick to fixing what’s broken. “If you allocate $10,000 to fix things that are broken or outdated, you’re probably going to see at least a one-to-one return, if not more,” he says.
On the other hand, extensive renovations, such as fully remodeling a kitchen or bathroom when there’s nothing wrong with the existing one, may not yield the same results. “If it’s not broken and you’re just updating for aesthetics, you can’t be as confident that you’ll get your money back,” Krier explains.
Conclusion
For homeowners and investors looking to maximize their renovation ROI, Mark Krier’s advice is refreshingly simple: start with the essentials. Fix what’s broken, bring the home up to a consistent standard, and avoid the temptation to over-improve. By keeping these principles in mind, homeowners can ensure they’re making smart, financially sound decisions with their renovations.
