We've all exhibited this in one form or another.
The most useful example I could think about this is buying that brand new car. You've heard the story.
The minute the car leaves the lot it's lost tremendous value and is now obsolete.
So can this happen to your home? And if so, what can you do to stop this depreciation from affecting one of your largest assets?
When you purchase a home, regardless of being new or previously owned, you purchased it at the market value of that time. And as we have seen, in a very extreme way in Calgary, the market can fluctuate and affect your home's value depending on exterior factors.
Real Estate Always Appreciates
But I'm here to tell you, real estate always appreciates. What you buy today, with time, will appreciate its value in one of two ways.
If you buy, live, and hold a single-family or semi-detached home, with the passing of time and vicinity of your home to amenities like schools, retails, services, etc, your home will appreciate in value.
The other way is through cash flow generation that allows you to generate income from the property that can be used to appreciate your wealth. But for this post, we will stick to single-family homes.
My parents purchased their home in Hawkwood in 1995 for around $150,000. Now, it's worth close to $450,000. By them just living and our family enjoying the home, it has appreciated in value.
And I know what you are thinking, that was a very long time. Of course, it will appreciate. Well here is a more recent more example for you.
We purchased our first home in Auburn Bay in 2011 after we got married. We lived there and enjoyed some wonderful memories and grew our family in that home. We sold it in 2016 for about $50k more than we purchased it.
We had the advantage of buying a home in a new community that was still growing and developing itself. When it became more desirable we decided to move on. But note the years we bought and sold, not the strongest of markets.
Okay, It Appreciates...But Can It Become Obsolete?
The quick answer is yes. It can. And when I say "obsolete", I'm referring to the discounted return it is getting.
Ever walked into a home with yellow carpets? A completely closed-off floor plan? Lino flooring?
These are all items that are making the home obsolete. Albeit there is nothing wrong with a closed floor plan or lino flooring, but for today's buyer these are undesirable items.
These are also items that will cause the buyer to come in with a lower price when making an offer because they have the mindset of completing renovations. But we all know from a buyer's perspective, a floor reno will cost 1.5 times more just because it will be something to hold up their time to enjoy the home.
My article, "How Buyers Can Take You To The Cleaners" outlines a few more examples. Check it out below.
But in addition to the dated materials, you could also be adding to the chances of your home being obsolete because of some of the renovations you do. 🤔
Everyone loves a custom kitchen or basement. A space specific to your wants and needs and will serve you best in your home. An example of this would be a built-in sauna in the basement. Although a wonderful addition to the home for you, it might not be the best improvement for a potential buyer.
And how do you think the buyer will look at that sauna if they don't want it? 💰💰💰
That's right. They are looking at the cost of removing it, replacing it with finishing, and their time.
So what can you do to protect your home from these circumstances of obsolesces?
Renovate Where It Counts
Watch HGTV for a couple of shows and you will hear this all the time,
"Kitchens and bathrooms are where the returns are"
The part that these shows miss is the cost of doing these renovations are probably the most expensive to do in your entire home. From replacing tile, rearranging water access points, cabinets, countertops, etc.
So when you are buying your home, you want to make sure you are looking at homes, that from the get-go, fit your overall feel for the layout of these two particular areas.
If you do this, then all you need to do through the years are give these areas a facelift every so often with the new type of flooring being used (currently its LVP or luxury vinyl plank) and modern paint color.
Ensure the layout is what you want and can age gracefully with time and all it would take is some maintenance to obtain the best return for your home. This is much easier said than done. I'm sure someone in the 70s thought the yellow carpet would be in style forever 😊
If we are talking about homes that are not open-concept and don't flow to one another, then the goal is to show the maximized space each part of the home can provide. This can be done through much of the same work as kitchens and bathrooms.
You'd be surprised how low-cost flooring and paint are to change and how much return you get in your home with these changes.
Using brighter colours, modern flooring, baseboards, and casing will help the room feel even bigger and give the buyer the blank canvas to use the room for their purposes like a studio, bedroom, or office.
Although the obvious answer is renovating where it counts, there is also one more key component that mitigates your home from becoming obsolete. And it's the one thing we cannot build anymore.
Location, Location, Location!
I'll say it once more, Location! This is the one component your home will have or any new development in Calgary. As the city expands, we are moving further and further from the core and away from infrastructure to support the communities. How often do you hear about new communities waiting for transit, roads, schools, etc to catch up to their community to be utilized?
Take for example Edgemont, a community in the NW of Calgary and a brand new community like Sage Hill. They aren't that far away from one another, however, to get to downtown, you'd much rather be in Edgemont than Sage Hill, with easy access to Jean-Laurie.
Or you can also look at the school situations in new communities. Most schools are AP (Advance Placement) and the IB (International Baccalaureate®) is a bit rarer. A community like Edgemont is more desirable from a school perspective because it offers the latter based on its school designations.
Even though the homes are built in the 1980s and 1990s, the community is still very sought out to this day.
At the end of the day your home, when selling, is at the mercy of what is important to the buyers that come through. These small changes and mindset of what is important when you are buying will keep you ahead of the curve for years to come.
I hope you enjoyed this piece and it brought you some value. Please feel free to share it below on any platform. If you'd like to reach out to me about finding or selling a home, please feel free to email me at email@example.com or book a meeting with me below.
Thank you, take care, and stay safe.