speaker-0: If you are working on a renovation and new builds, maybe you're investing in your first ⁓ short-term rental. The evaluation process should not stop at the back door. We really believe in aligning with these design trends as well. And people want to be outside. There's there's something to be said about this wave, this craze of people wanting to experience the outdoors. And not just for short seasons, but to be able to integrate something that people can use the majority of the year, I think is a valuable tool to have in your tool belt. Welcome to Return on Design, the podcast where beauty meets strategy and interiors become assets that perform. I'm your host, Rachel Niederhofer, designer, investor, and builder of high-impact spaces that deliver real results. Alongside my husband, I run both a design firm And a real estate investment company, where I live at the intersection of creativity and ROI every day. Each week, I'll be unpacking what most people overlook, how strategic design decisions can grow your investment, elevate your lifestyle, and unlock the full potential of your property. You'll get real tools, proven strategies, and unfiltered conversations with industry experts who are doing it right. So if you're ready to invest with purpose and leverage design as a powerful tool, This podcast is for you. For decades, the narrative around real estate is bigger, is better. And it's, you know, more bedrooms, more square footage automatically equates to higher valuation and property. But interestingly, statistics are showing that ninety percent of people are spending time outside every week, and sixty percent of those people are actually. entertaining more outside than they are inside. With people prioritizing lifestyle, wellness, and experience, we are seeing a shift in exterior design and the demand on it.

speaker-1: Yeah, and as an investor, it's been interesting to watch this because as you said, you know, people are putting placing premiums now on an experience within the home, not just bigger square footage and more bedrooms. It's what how does this fit my lifestyle and what experiences are we going to create?

speaker-0: So today we are going to spend some time talking about outdoor design, specifically through the lens of return on design, what we are seeing in the market, what we're seeing that investors are sometimes missing, and how to specifically determine whether or not you should be putting resources into the design of the exterior of the home. So welcome back to the show. Let's jump right in, shall we? So let me just kick it off with you. Why do you think outdoor living and experiences are growing in demand?

speaker-1: I think people are viewing the home differently than they used to. ⁓ it used to be that you know, home was more where you came home, you ate, you went to bed. But now we're hybrid working from home. We're creating more inner entertainment spaces. We're we're doing more life inside the home now. And so it's changed the way people are looking at it.

speaker-0: Yeah, I think there's definitely truth to that. We're definitely seeing a shift in experiences. And it's one of our return on design, you know, focal points of experiential design, getting in a a return that is specific to how you're experiencing the space. Exactly. And yes, hybrid, agree. I mean, the work from home component. ⁓ has really shaped how people experience the house in a different way than they did before. And also this huge trend of wellness, you know, the at-home wellness integrated aspect, whether it's cold plunging or time in the sauna, ⁓ but the whole wellness experience at home has has really skyrocketed over the last, you know, 18 months or so.

speaker-1: Yeah, it's been a it's been a total shift in a lot of lifestyle which extends into your house and how you experience and what you do and what you what you're looking for in your home.

speaker-0: I mean, and if you think about, you know, what are the moments that people really remember? And as a designer, one thing I'm c continually evaluating, ⁓ as we even outline in our return on design blueprint, is what do you really want to do here? What do you want to do? What are you currently doing? And where's where's that gap? There's not a different formula for the exterior. You know, it's the same pattern of thought and question like. You know, let's take the backyard as an example. If a client has a huge backyard with tons of space and it's seemingly not adding any value, it would be the same thought process. Well, what do you want to do here? What is pulling you to to long to be outside? And what could what could we do from a design perspective to enhance that experience or draw that you're actually wanting to do? You know, like like I said, sixty percent of people are actually entertaining more outside than they are inside now. And there is this this real community aspect that the outdoors offers in a different way.

speaker-1: Yeah, so now how are you taking, just like you have talked about for the inside, how are you taking what experiences are you are you creating and how are you setting up the area to to accommodate those experiences? You know, we're remembering things like you know, conversations around intimate settings around a fire pit conversation or, you know, dinners on the back patio or even that morning coffee.

speaker-0: Mm-hmm. Yeah, as an example, we recently took a trip where we stayed off the lake at a a rental property. And from an experiential standpoint, you know, having that built in fire pit where you're thinking, ⁓ yeah, people could, you know, enjoy the the view off the water or roast marshmallows or cozy up, you know, if it's cooler outside. So that is one aspect of an investment that you can make in an outdoor setting that truly does enhance the total experience. I love fireputs. I'm a f I'm a huge fan of

speaker-1: And also from that is like one of the things I enjoyed too is that that morning coffee sitting there on the back porch and overlooking the water and having just my kind of quiet time to re think and reflect and, you know, get ready for the day. It's those are things that people are prioritizing these days.

speaker-0: Let's kind of shift into where do we typically see ⁓ people missing this? I mean, of course you can think of it from a design perspective as we're serving clients of really wanting who are already thinking like, I want to spend more time outside, but let's shift gears from the investment lens or if you're investing, allocating into a property, like where do we see people miss more than ever?

speaker-1: I think kind of like we talked about early on in this is that, you know, one of the oldest assumptions is more square footage the better. Mm-hmm. You know, and and that's not always the case because when you close in that patio, you take you may be taking away from some of that ability to have that intimate outdoor setting and it, you know, really extend

speaker-0: Yeah. So let's focus on that. Let's I want to just give the listeners some insight on a project we did not long ago where that's exactly what happened. It's it was an older home, we'll say from the sixties ish, somewhere in there. And at one point, somebody had enclosed the exterior patio and created somewhat of a sunroom, multiple things. come from this. Okay. I want to walk through this in a very practical way. So I would say we the this specific edition added probably between, I don't know, eight hundred to a thousand square feet. So that's a substantial amount of space, but it didn't add any bedrooms, bathrooms, or what I would say more functional workstation, you know, like actual usable that adds value from a square footage standpoint, in my opinion. It did provide maybe an extra living space. You could add a game room or I don't know, it was just open. There wasn't a whole lot of wall structure to it. However, it probably cost a decent amount of money for whoever did that because you had to add on to the actual roof line in some capacity.

speaker-1: Yeah, they did.

speaker-0: And enclose portions that were windows that were not windows. So you had plumbing or electrical, really. There was no plumbing in this specific edition, but you know, you had to take off an exterior wall and take the electrical and HVAC and everything beyond the footprint. ⁓ that that's not a cheap thing to do.

speaker-1: No, it's not. And I think that that got into the thought process again of more square footage in the home automatically adds more more value. And the one thing that it did kind of do to that space, in my opinion, was it took away some of the intimate setting of being able to be outdoors. ⁓ it had a spot where you could have made a fire pit. Now you've got to kind of now it's right up against the house, so I really wouldn't do that. And you didn't have much of a yard there anyway.

speaker-0: And you didn't have much of a and I want to note too, this was fully enclosed. Yeah. You know, it wasn't like we screened in a porch where you still kind of have this exterior feel and experience, but more safeguarded from bugs or whatever ⁓ other environmental aspects might come. Like this was literally just taking Exterior space to create more interior square footage that you could argue whether it really added substantial value. Cause if I'm adding a thousand square feet, I can't just blanket the same price per square foot over it from a value add, in my opinion, because you don't have more bedrooms. We see that a lot when we're evaluating properties. It's like, well, this house sold for, you know, 500 in in the same neighborhood down the street. It's like, yes, but this house has Four bedrooms and this house has six bedrooms. Yeah. So there is a different value when you can actually create more bedrooms, pe places for people to sleep. Bathrooms, I think, fall in the same category versus just a whole nother living room or, you know, an indoor basketball court or something that is not

speaker-1: Very specific to one buyer.

speaker-0: Yeah, I would think so. As investors, one thing we look at and I know I look at a lot is undoing spaces like that. They usually cause more problems than they do good when people try to convert the exterior into the interior. I can tell from a design perspective, they skipped quarters to try to make it more economical, most likely. In this case, there was an exterior bay window that was never fully integrated into the new addition. So here you had all this, you know, new square footage and you had a bay window from

speaker-1: Actually part of that un square footage wasn't usable because of the way that that wall had not been modified or, you know, integrated the same way.

speaker-0: Yeah, and it architecturally it was horrendous. I mean, that was one of the first things we had to fix. Yeah. And it also was too open, you know, in that space specifically, where again, people assume bigger is better. ⁓ I just added all this space. But the reality is when somebody gets in the space, they often don't know what to do with it because it's it's too big, it's too open, it's too undefined that it can actually deter people from even buying a property like that.

speaker-1: But this particular case, part of that too was it w just what it took away from the outdoor space that was there. Because you're right, the yard was not huge. So there's not a whole lot of extra room to go and add some of that now intentional space for gathering and making those those spaces for creating memories.

speaker-0: So it it would have been better off to, you know, maybe put a gazebo or incorporate some exterior structure where you could add the electrical, maybe the ambiance of some task lighting outside or, you know, a ceiling fan on a gazebo structure that would allow or pergola even that would allow, you know, airflow, and you could have the influence of Interior gathering, but really in an exterior setting. Exactly. Which is what people are are desiring.

speaker-1: Yeah, and this is where, you know, your return on design completely changes the narrative because we're not just talking about measuring square footage, we're talking about measuring the experience and what we can create and bring it all together in the total aspect of design for the entire property. You know, and and you know, outdoor design is not just pretty flowers or ⁓ nice bushes in the flower beds, but it's it's how again, how does that space function? How does it get used and what memories and experiences can we create and last.

speaker-0: Is exactly what we pointed on on our short-term rental episode of, you know, getting that higher bookings and really how buyers are willing and renters are willing to pay for experience. So I want to ask you, how do you suggest investors really evaluate outdoor spaces? Because you know, we're coming in. And we're focused on what's the ARV of the property? What kind of work do I need to do? What needs to be repaired? And all the rehab and repair is highly concentrated on the interior of the home, rightfully so. But what would be your tip or suggestion for how do you kind of evaluate that from more than just a curbapill standpoint?

speaker-1: Front yards are a little harder for me on that one because it is more about the curb of pill. ⁓ but the backyard, I believe, is where you can look at it and say, how does this make my property a differentiator? Because, you know, buyers, renters, they can always find another bedroom, but they can't always recreate the experience. People are walking into that backyard now, especially new home buyers, and saying, What memories can I create here? And that is becoming a deciding factor in many aspects of the real estate market. You know, and I and not just from a flipping aspect or but also from the rental market as well. I s I see that as something that is really, really becoming a bigger prioritization.

speaker-0: I would agree, even in the new construction space and like development, you know, you're seeing it on the commercial side and residential, where big intentional developments are incorporating very intentional experiences. We looked at a property not long ago, and the backyard had all sorts of strange elevation changes. This property actually had enclosed. ⁓ somebody at some point had also enclosed the original patio and tried to make an interior structure, did it all wrong, and it limited what now was the backyard, which had these very awkward elevation changes. And for those two reasons alone, we passed on that property because the it was too risky. You had it was too much to invest to incorporate something that people really desired to your point that would differentiate in the market and be able to move the needle faster. They also left interior windows. I mean exterior windows.

speaker-1: And I would say that, you know, too with this when you're evaluating this, when we talk about creating usable spaces and entertaining spaces, it doesn't mean that it has to be the most expensive space either. You can create these in a in a very economical way, but it you you've got to have a flow and allow people to see the use, just like we've talked about inside of like how am I going to use this space? Outside is the same way. How am I going to use this? ⁓ we have a defined really, you know, covered patio for gathering and having a an outdoor dinner or we have the fire pit out here. ⁓ there's a perfect spot out here in the yard for the kids to be running around playing, throwing a baseball or football or, you know, kicking the soccer ball, whatever. You know, you can see the the spaces and how they're to be used and and people can envision that. And when people can envision that, they they oftentimes look at it and it's like, what do I foresee with my family here? And that is What I what I'm calling the differentiator.

speaker-0: I I really think the biggest takeaway today is investing in the exterior from an experience standpoint is really becoming a non-negotiable. You can't just overlook, pass it by, and expect the premium returns and it really be competing in the space. But it still has to make sense from a functional use standpoint. Don't just assume, okay, we've spent a ton of money in the backyard and we're gonna get all this money back. Because landscaping is one of the biggest pitfalls when it comes on actually getting a return on your investment. Therefore, makes it easy to be like, you know what, we're just not gonna invest a whole lot in this because we know we're probably not gonna get our money back. Versus if you're investing more strategically in, you know, retaining wall system that serves some specific purpose, or to your point, maybe a extended patio section that becomes very multifunctional.

speaker-1: I we're seeing we're seeing buyers and it's buyers will typically make an emotional decision about a place. How does it make me feel? What do I really like? And then they will justify it logically. Well, here are the here are the added pieces in there that really justify for me why I like this so much. It's not always just the most expensive details.

speaker-0: Mm-hmm. And I would say as an investor, even if you're it's your home, your personal home, one of the biggest pitfalls we see when it comes to pools is when they don't include a spa, a fully integrated spa or hot tub. That in and of itself, you're in already investing such a significant amount of money. Why are you not encompassing the full package of what's available? Because that can be a deterrent also.

speaker-1: It can be. And honestly, to have one integrated is in most markets, I'm not gonna say for every market, they're relatively comparable to a freestanding, but it just looks nicer and it's and it integrates better and yeah flows. But with that too, I would also say like I know we have looked at properties with pools and as we were talking about how does this spe space make me feel, what can I envision? When I walk when I walked into the backyard and we looked at one here.

speaker-0: Yeah.

speaker-1: Not too long ago, you know, had a it had a nice pool and it a very good sized lot, but when you walk out from the back patio or onto the back patio, the space between the patio and the pool was so tight it was like God, if if we were to have people over, we'd all be standing on top of each other if you're not in the pool. You know, and it was like that ⁓

speaker-0: Don't force it. Sometimes your people are trying to force something that doesn't functionally fit how you would use the space, which is actually a huge highlight takeaway of yes, it's not just about putting in all of the check boxes of ⁓ we've got to have a pool and a fire pit, blah, blah, blah. But it is very much the function. How or how are you going to experience this space and what is the allotted lot? Actually support. Don't force it. That's a great touching point. So, any, let's just reiterate here. If you are working on a renovation and new builds, maybe you're investing in your first ⁓ short-term rental. The evaluation process should not stop at the back door. We really believe in aligning with these design trends as well. And people want to be outside. There's there's something to be said about this. this wave, this craze of people wanting to experience the outdoors. And not just for short seasons, but to be able to integrate something that people can use the majority of the year, I think is a valuable tool to have in your tool belt.

speaker-1: And I'm gonna say too, again, for as an investor, looking at these properties and stuff, just because the backyard or that air space needs some attention doesn't mean you still have to do everything all at once. Because, you know, it also again leads to what's your market? What is that area requiring for your buyer? But if you can intentionally put the allocate your funds where they need to be and you can create that vision. for people that as they walk in, they can see, ⁓ this is how this can work and this, you know, that emotional connection, that's what drives demand and, you know, moves the needle for you on your property. Not that, you know, yeah, if you can do everything and you it's all gonna work right, then great, do it. But

speaker-0: Right. I think that's great advice. So if you like what you've heard today, make sure you are subscribed at Return on Design and follow us on our socials at Real Return on Design because we love to share knowledge and equip you to succeed. Thanks for listening today.

speaker-1: Appreciate it and we will see you guys next time.