One point to bring up. Unless your home is in pretty dire situation and unless you are going to do all of the work yourself, you may be better off not doing anything besides a thorough cleaning and painting. Most home improvements are net losses. Even the big ones (bathrooms and kitchens) tend to only recoup 70-80% of investment. If your idea is to do work to maximize your return on the home sale, then you should probably just put some money into cleaning, staging, painting, and any needed maintenance. Remodeling (unless the place is really torn up) is usually alot of lost money. I am sure 60K into a 140K place would not nearly return the investment. This used to be less the case, but now, in this market, those upgrades and stuff simply do not pay for themselves and alot of buyers would rather have either the lower sales price or some concessions at close so they can pick out stuff such as any new flooring, etc.
For example...Say you take a note out at 60K for 2 years at 4%, that is roughly 65K in costs with interest even if it is zero closing costs.
Now you put 60K into the house.
IT's value is likely to only go up 30-40K in 90% of cases. Maybe as much as 45-50K if you do all the work and make absolutely the smartest choices. So lets assume the best outcome of roughly 50K return on 60K investment...
Now the home sells for 190K (140K + 50K)
after an average 10% in realtors fees and concessions which is fairly normal, you clear 171K. Subtract out the 65K loan and interest and you have cleared 106K on the deal.
Now instead, you spend 2K on some new paint and cleanup. You sell the same home for 140K now. Subtract out 10% fees and concessions. You have 126K left over. Now give the buyer 5K towards new flooring/etc and subtract the 2K spent on paint/etc. 119K left over.
By not taking out the loan or putting alot of work into the place you have made an extra 13K on the home sale.
Those are pretty reasonable and accurate numbers and that is assuming an 83% return on total investment with the first scenario which is highly unlikely. Simply put, you are going to pay interest on the loan, higer commissions on the higher sales price, and loose money on the improvements.
That said, there are some exceptions. If you are doing the work soley for your benefit and are not worried about the return on investment would be one thing. Also, If you bought a home very cheaply and are doing all of the work yourself, you can about break even doing the work.. The bottom line is that the interest and higher commissions are almost always going to offset your gains in value even if you got 100% return on the remodel which almost never happens. Even the really professional house flippers only get by because they only buy properties that are way underpriced, they buy their products in bulk at a discount, and they have crews that do the work for less money because they have a steady work load with the investor/flipper.
In any case, good luck in either way.
