Welcome to the Pocket List, investors 👋

Here’s what we’re getting into today…

• The top ways to destroy real estate value

• How much housing prices have skyrocketed is sickening

• Your FREE pocket listing

Plus, a whole lot more.

Let’s make some money today, shall we?

First, let’s check in on mortgages…

The 411 on rates… Yes, that’s a 6 in front of the 30-year fixed mortgage rate. Rates fell dramatically (again). And a huge chunk of the drop came yesterday after inflation data came in as expected.

THE LEAD

How (not) to add value

It’s hard to believe that HGTV is celebrating its 30th birthday this year.

The Property Brothers, Chip & Joanna, and countless others have had a major impact on real estate and real estate investing, whether we like it or not…

• Everyone knows what a load-bearing wall is (or at least enough about it to be dangerous)

• A new generation of investors thinks flipping is risk-free and renovations are easy

• Shiplap. So. Much. Shiplap.

It’s hard to keep track of all the trends that HGTV has ushered in. Like modern farmhouses. And open concept. Or all-white kitchens.

All of this got me thinking about the easiest ways to destroy value in your flip, rental, or primary…

• Home office conversion. This got pretty popular during the pandemic. If you can do it for cheap, fine. But investing more than a few hundred dollars to build out a “home office” is lunacy. Don’t for a second think a home office is more valuable than a bedroom.

• Pools. If you see a pool… run, don’t walk, away. They can be a nightmare for landlords - from a liability and maintenance perspective. And they provide little, if any upside for resale value. While the average price for an inground pool is $90k+, they’ll only increase the value of a property by a few percentage points (if you’re lucky).

• Garage conversions. Turning a garage into “living space” is almost as bad of an idea as putting in a pool. Many buyers are looking for a garage they can, you know, use as a garage. Think: storage for cars, mowers, or the kid’s stuff. They don’t want a poorly insulated bedroom for adult children.

• A high-end kitchen or bathroom. Yes, kitchens and bathrooms add value. But at some point, they provide diminishing returns. According to one study, you can only expect to recoup ~30% of a major kitchen remodel.

• Sunrooms. Just don’t. They rarely ever increase the value of a home.

Those are the major investments to avoid, but there is no shortage of minor mistakes that destroy value in rentals or flips…

• Loud colors. Keep it simple.

• Curb appeal. Would it hurt to mow the grass at your rentals?

• NOT making quick & easy energy-efficient updates. These are cheap, easy, and buyers care about them.

💭 Mr. Pocket Listing says… It really comes down to this: you need to know your numbers.

You wouldn’t buy a property without running a full analysis (… I hope). And improvements or renovations shouldn’t be any different. The easy part should be calculating the cost.

The tougher part? Figuring out what sort of return you can expect. One way would be to look at comps in the area that made similar updates. Speaking with agents could also provide some insight. And, of course, there are some online resources that calculate ROIs on renos.

WHAT ELSE?

More headlines I’m keeping an eye on…

• Here’s how much housing prices have skyrocketed over the last 50 years (Read)

• Dave Ramsey: It’s a great time to buy a house. Experts: Not exactly. (Read)

• Down Payments Fall From Historical Peak: See How Much You Need To Put Down To Buy a House Today (Read)

• Barbara Corcoran: If You Wait for Real Estate Interest Rates To Go Down, You’ll End Up Paying More (Read)

• Top Compromises Buyers Will Make to Reach Homeownership (Read)

• Renters need to make 36% more than in pre-COVID years to afford today's average rent, Zillow says (Read)

• Affordability Pyramid Shows 66.6 Million Households Cannot Buy a $250,000 Home (Read)

Let’s get tactical…

• Florida Is the Perfect Rent-to-Own Market—Should You Take Advantage? (Read)

• My partner and I are remodeling our house by ourselves while living in it. It hasn't been easy, but it's rewarding. (Read)

• Where real estate agents can find listings today (Read)

• These 2 Things Changed My Worldview of Single-Family Rentals (Read)

• 4 Surprising Factors That Might Impact Your Home’s Value (Read)

• This Is the Biggest Mistake People Make When Buying Real Estate (Read)

• 3 Home Renovations Worth the Cost, According to Millionaires (Read)

Mr. Pocket Listing’s favorite property of the week (a guy can dream, can’t he?)…

PROPERTY TOUR

It’s time to get a pulse on markets around the country…

(1) FL Gulf Coast // Homeowners Are Slashing Prices In This Popular Region—Is There a Golden Opportunity For Investors? (Read)

(2) Buffalo-Cheektowaga-Niagara Falls, N.Y. is #2 // Homes are overvalued in much of the U.S. — with these 5 states leading the list (Read)

(3) Austin, TX is only #7 // 9 Southern Cities Where Home Prices are Plummeting (Read)

(4) Santa Barbara, CA made the list //Top 10 Equity-Rich ZIPs in Q1 2024 (Read)

SURVEYING

Last week, I asked, “What are your thoughts on Adjustable Rate Mortgages?”

56% of you think you should avoid them at all costs.

Here’s today’s question…

Reply to this email with the BIGGEST real estate investing mistake you’ve ever made. I’ll share some of the best answers next week (anonymously, of course).

If you’re enjoying the Pocket List, make sure to share it with your friends and fellow investors. You can send them here to sign up.

One last thing…