This update misses the recent swoon, but otherwise is reflective of my investment performance. June was actually rather uneventful month for the market. The market and my portfolio was relatively flat over the period, failing to extend the significant gains of the last month.
While expect things to be relatively choppy over the next few months, I believe the overall trend will be down. The market recovered too much too quick. We are still waiting for the proverbial other shoe to drop. This is not to say I think there’s any great crisis looming, but rather the U.S. needs to work through some very serious consumer debt issues. The days of free credit are over (and that’s a good thing in the long run), and consumers have and will continue to pare down to reflect that new reality.
I recently obtained a few quotes for renovations to my current residence, and my rental property. I had been thinking about renovating the kitchen and bathroom. After receiving the quotes, I’m not so inclined. The renovations would have cost at least 50k for each apartment. At that cost, it just doesn’t make economic sense.
Most people do not recoup renovation costs at the time of sale (unless you’re developer). I had planned on renovating not as an investment but because I wanted a nicer kitchen and a deck. I wanted to renovate the rental property as a matter of maintenance. However, at a cost of nearly $50k for each apartment I have to question if this tack is one I want to take at all.
I live in 1 bedroom condo. I’m unlikely to live in this condo more than 2 years, and likely less than that. I have to ask myself what is the value of that renovation for me over that two years along with the inconvenience of a month of being sans kitchen? Studies have shown in the past that kitchen remodels recoup 90% of the cost. Effectively I would be paying 5k to have a nicer kitchen for two years, assuming the 90% return on the remodel. I do not believe that assumption holds in the current housing market. I think I would be more likely get back 60% of my cost. Assuming a 60% return, the price of nicer kitchen is 20k. I would be willing to pay 5k for having a nice kitchen for the next two years; I’m not willing to pay 20k for that privilege.
So what about my rental unit? My original plan was to hold onto the unit for the forseeable future. However, now that I’ve decided that I’m willing to move, my whole game plan is up in the air. I might sell the rental unit to put towards a new place to live. That uncertainty means I need to scrap any renovation plans. Why spend money on renovations that might not be cost effective?
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