Increase The Value Of Your Home With This Trick

Hey, what's up? My name is Kris Krohn. I have transacted thousands of homes as an investor. And today, I want to talk about a particular trick that I use in increasing the value of a home. In fact, I've got multiple that I'm going to share with you. And there's some misperceptions that I'm definitely going to clean up. So, check it out. How do you increase the value of a home, right? I mean, that's the question that we're talking about today. And today, I'm going to jump in and share a number of things because there's a lot of confusion on what increases value and what doesn't. And people waste loads of money on things that actually don't matter. In fact, I remember I was walking through one of my houses and I was surprised with all the money that we were putting in that we weren't getting nicer fixtures. We weren't upgrading to granite. And when I asked my team, I'm like, why aren't we fixing up this home nicer? They said, well Kris, all the other comps, the comparables, all the other homes in this area, we're fixing it up to that level. Let's talk about why that's important. I actually am going to give you a little test with today's training. And I need you to first of all understand there's a difference between actual value and perceived value. And if you clicked on this video, it's because you really want to understand how do you increase actual value. Let's talk about the difference between actual and perceived. And then I've given you some examples. I'm going to test you and see if you can figure it out. First of all, actual value means the home is worth $300,000. And then I do this thing and now it's worth $350,000. That's actual value increase. Perceived value is I have the $300,000 house. I dumped this money into it and now the house is worth $300,000. What?! It's a little bit wild and crazy. But that's actually the way it works in real estate. So, let me show you. You're going to actually catch on I think pretty quickly. But first of all, let's talk about a 3-bedroom versus a 2-bedroom home. Because there's people out there that have a 2-bedroom home and they could convert a garage or do a little remodel or they could convert an extra room that was a den into a bedroom. I want you to understand that if you don't change the size of the house but find a way to go from 2 bedrooms to 3 bedrooms, there's usually a 20 or 30 or 40 percent increase in value just by going from 1 bedrooms to 2. I mean, it's crazy. If you get with a realtor and say, hey, tell me according to all of the stats and the CMA, the comparable market analysis, what happens if I add a bedroom? And the analysis will add only $1,000. That's true for going for like a 4 to a 5-bedroom home. But 2 to 3 is money. This is condo versus family in thinking. So, the actual value is increased if you add a bedroom. Is this true if you go from 3 to 4 bedrooms? Very minor. 4 to 5 bedrooms, almost doesn't even matter. Going from 2 to 3, it's a huge jump. Not perceived value, actual value. Okay, kitchen remodel, right? You have this house and you're like, we're going to freaking... Like, dude, my kitchen in the background there, it is dope. It's probably got $30,000 of appliances. All stainless steel, top-of-the-line. You know, we've got down cultured marble and I mean it's a beautiful kitchen. 1-inch thick drawers. The nicest kitchen I've ever had in my life. If I were to trade that kitchen out for Formica countertops and like squeaky old dingy cupboards, would the value of the home go down? The value of the home my friend would actually not decrease at all. The perceived value would go down. It might sell slower, it might sit on the market longer or it might have to decrease the price from what it's worth to actually get someone to buy it because they're thinking, I need to do a remodel on this. But I want you to understand that this affects perception. And perception affects how long something sits on a market. So, before I show you these other 3, like for just a moment, think about this. You have a property, you're listing it on the market. It should be fixed up to the caliber of all of the other homes in the surrounding area just like it. If everyone's got granite, you need granite. What happens if your home is not fixed up to the level of the average of everyone else? Your home will take longer to sell. If your home is fixed up superior to the others, you won't fetch a better price. It will sell faster. Because the bottom line is a $30,000 kitchen remodel does not make your home worth $30,000 more. It's still just a kitchen. That make sense? Look at this one. Increase the size of the home. Like literally turning part of the garage into living space. You understand in the next 5 years that self-driving cars will be everywhere, right? The world is going to change. And as that happens, there will be services out there. I believe... I follow some futurists. And they basically say, you won't even need cars anymore. What will end up happening is you'll have a service. And basically, the car will come when you need it to come. You don't even need to house it. Imagine leasing a car that would drive itself off at night. Go to some cheap garage. And what would you do then with your garage space? I believe in the next 10 years, garages, many of them are going to get converted into livable space. This will increase the value of a home. But increasing the size of home, does that actually increase the actual versus perceived value? It actually increases the actual volume. More square footage of livable space drives the value up. Now, you do need to be aware that there is above ground and there is below ground square footage. So, for example, if you have a house that has basement that is unfinished, if you finish it, it will increase the value of a home. However, below ground usually means non walkout basement, smaller windows. Not a lot of... People value a basement less than the upstairs. So, it's not all equal but it still will affect the overall value. Alright. What about this one? When I first got in the game of real estate, I remember that one of my mentors said, Chris, you got to drive around you got to look for houses that have tall weeds. And I'm like, why? He says, it's a sign that someone if they're not taking care of the yard, they're not taking care of the house. And if they're not taking care of the house, that means that they don't have time or money. If they don't have time or money, they're probably in trouble. You could get a good deal on that house. And I did in fact get my hands on in a fantastic deal on a house worth like literally the weeds were like 3 feet tall. Now, I went in and I paid someone to get a weed whacker and mow that lawn down. Did the value of the home increase by increasing the curb appeal? By making the yard nicer? The answer is no. All it did was change the perception of the value of the house. Because someone's going to say, this yard has problems. That doesn't change the value but I don't want to buy it. Or I would have to love the house for a special reason to want to buy it. So, I've got that juxtaposition between actual versus perceived. So, what I'm telling you is that if you take your yard and you're like, no, no, no, Kris. I'm going to put in like waterfalls and like water features. And then we're going to put in like this background like kids area. And then we're going to do this thing over here. You know, climbing wall. Dude, I don't care if you put a half a million dollars into your backyard. Your house will not be worth a half a million dollars more. You will not get that out of it. All you'll do is change the perception. So, if on paper, the bank gives you an appraisal and says that house is worth $300,000 and you're like, wait! I put a half a million dollars into my yard. They're not going to say, well, 300,000 plus a half a million. Your house is now worth 800,000. You know what they'll say? You're stupid. The house is still worth $300,000. But I bet you it'll sell like this because the perception of the value is going to be so high. Is that click? Does that make sense? One more. My roof is leaking and I need to replace my roof. If I replace my roof or if I have an old roof, will that drive the value of my home up or down? Friends, it is perception. It's negotiation. These problems that we're talking about can lower the perceived value and hence people want to pay you less. But from what the house is worth, putting extra money in cannot drive the value of that home higher. That makes sense? So, if the home in ideal condition is worth 300,000, then if you put in granite and you put in a gold toilet and you put in money into the yard, it's not going to go up from that 300,000. However, if you let it dilapidate and have problems and don't fix it up, people will want a bargain. All we're really talking about is the difference between how do I get my home to its highest level of value or if I do go from a 2-bedroom to a 3-bedroom or if I increase the size, then I can actually increase the actual value. Those are really the only 2 things that you can do to drive a higher actual value. Everything else is perception. So, by the way, when I buy a house and I rent it for a number of years and it's time to sell it because I've got thousands. When it's time to sell that house, do I actually like dump a ton of money in there? No. I do an analysis and I say, what is happening in the market right now? Well, homes in the market are not using granite. They're using Formica. In fact, it's a very strong buyers market. So, homes aren't even fixed up all that nice. I'm going to fix up my house to the level of what everything else is selling for. And if you put more money in than that, you can do a calculation. You can say, well, if I do my bare minimum. Replace paint and you know, do paint and carpet. I can increase my selling price by $10,000 but it only cost me 3,000 to do that. So, I'll make 7 grand more. That makes sense. But if we go all out nuts on a remodel and do this and do this and do this and increase all this perceived value, we put 30 grand in and you know what we're going to be able to sell the house for? 7 grand more. So, I'm going to lose $23,000. That is the big thing that I wanted you to get out of today's value is just understanding that there's a game here in real estate and there's some things that matter and there's some things that don't. Most consumers have no idea. They're dumping money into a property thinking, oh, yeah. Man, I'm going to get this money out of here. This is going to make my house way more valuable. In most instances, all you're really doing is affecting perception. You're going to get it to sell faster but you're not going to... You cannot make a house sell for more than the value of a home. Which is really locked in by bedrooms, bathrooms and square footage. Hey, thank you so much for watching today's video. I hope it was educational in helping you become more of a real estate Jedi. A maverick that's out there and able to go out and freaking crush it in the world. For those of you that are looking at us like, wow, Kris. I would love to actually learn how to actually make on real estate. I've got a copy of my book for free. Just click the link below cover shipping and I'll send that out to you. Otherwise, I've got a video coming up right now that is going to share with you how I became financially free at the age of 26 with the knowledge I shared with you today. Click that video. Check it out. Get my book. Engage and we'll see you on tomorrow's video.