Only you can decide what to spend on and how much to spend to improve or enhance your quality of life. For example, if you spend $5,000 for a home theater sound system because you enjoy listening to music, that is your decision. This article will simply try to help by guiding you to the estimated potential of payback, noting that adding a built-in sound system may fit your lifestyle, but not the payback profile.
Also consider the improvements you make may put your home out of reach in your neighborhood. When undertaking large remodeling projects, it is smart to research your local real estate market to find out if your project will return your investment when it is time to sell. Depending on where you live, the right project may return 100 percent of your investment. That is why research is the smartest way to begin any remodeling project. If a remodeled kitchen raises your home value by 10 to 15 percent, it pays. The more "sweat equity" you put in, the lower your costs and the higher the rate of return.
Remodeling projects should be done when you are planning on staying in the house for several years rather than starting major work for the sake of trying to increase resale value. Since you can't guarantee that you will get a decent return, it makes the most sense to remodel when you will be able to enjoy the benefits in the long run; make minor, more cosmetic changes if selling is your primary goal. Remember, removing debris and clutter from your home is the single most effective way of increasing curb appeal and resale value. A clean, orderly home and yard together with space in your closets is vital. It may mean either a quick trip to Good Will, The Salvation Army or just throwing stuff out you no longer need. A garage sale or yard sale may work, if you are so inclined. You may sell your accumulated non-heirloom treasures at auction or online, but remember to include photos, research them well and describe them fully. They may otherwise look like junk to many potential buyers.
Over a third of all homeowners we surveyed expect to spend more than $10,000 on home improvements during the next 12 months. With the resale real estate market strong in most of the U.S., the question of payback continues. We are often asked in our DoItYourself.com Community Forums about improvements that constitute a good investment and those that do not. In other words, what should one not improve or renovate from an investment or payback consideration? The table below includes some recently compiled results.
Note: We are discussing renovations and improvements, not repairs. Items that are broken or working below par should be repaired or replaced. Our do-it-yourself articles and forums can help you plan how.
There are three thoughts to consider in determining the benefits of an improvement:
- Personal benefits, which can include lifestyle, health, family and recreational changes.
- The savings you will derive during the period you remain in your house.
- The estimated potential payback at resale.
| Home Improvement Project | Cost | Payback |
Notes |
| Finish a Basement | $8,000 | 15% | |
| Build a Safe Room | $12,000 | 20% | Room should double as a useable living area to increase value |
| Build a Swimming Pool | $10,000 | 25% | May reduce the number of buyers in most areas |
| Landscaping (Major) | $12,000 | 25% | Note adding a brick, concrete or stone patio may raise this to 50% |
| Add a Garage | $15,000 | 40% | Payback varies by area. In some areas a larger carport is better. |
| Landscaping (Minor) | $3,000 | 50% | In urban and suburban areas increased privacy is a concern |
| Replace Roof | $6,000 | 50% | This value disappears quickly |
| Replace Siding | $10,000 | 60% | |
| Sunroom | $25,000 | 60% | |
| Home Office | $6,000 | 60% | Wireless networking growth will reduce this value |
| Bathroom Remodel | $7,000 | 70% | |
| Replace Windows | $6,000 | 70% | Energy Efficient may also reduce your home operating cost |
| Add a Fireplace | $3,000 | 75% | |
| Add a Deck | $6,000 | 80% | |
| Kitchen Remodel (Major) | $30,000 | 80% | |
| Kitchen Remodel (Minor) | $8,000 | 90% | |
| Attic Bedroom | $10,000 | 90% | |
| Add 2nd Full Bathroom | $12,000 | 100% | For 1 and 1-1/2 bath homes this is the best payback |
Naturally the value of improvements should be appropriate for the type of house being sold. Spending $100,000 on a kitchen in an average home will not bring back a return. Keep the original design of your home in mind. Stick with either the same materials or complementing ones. Aim for a flowing congruency so that your home remains tastefully appealing on the inside and out. Think through color scheme and decor in much the same way. Bold, eccentric color schemes that will stay with the house after you sell can deter potential buyers who lean on the conservative side. Overly personalized options like a cute toilet and bidet from France are not cost justified. Times change, as do tastes, technology and fads. Five years ago wiring every room with multiple phone lines and Ethernet cables for computer networking seemed logical. Then along came wireless networks and lots of that wall cable is unneeded.
Being flamboyant with your remodel is a fine idea for those homeowners who plan to stay in their home for years to come. For those of you looking to move in two to three years, choosing neutral colors for floors and walls will benefit you when it's time to sell.
In 1987, the author of this article offered to buy a house that in 1955 was featured by Life Magazine as "The House of The Future." It had many unique features. The Sunken Ceramic Tile Whirlpool Tub was too small for use as a spa. The in-ground gas tanks with pumps were an environmental nightmare. The heated sloped driveway with underground hot water pipes was great, until oil prices rose and the earth settled. The wiring to be able to turn almost any light off from anywhere was so extreme it required multiple 4 inch conduit pipes in the walls and a relay control room loaded with mechanical timers in the basement. The sound system was state of the art, for 1955. Modern speakers would not fit the enclosures. The owners decided not to sell and therefore my remodeling projects never took place. Living on the leading edge is one thing, but nobody can predict every trend with certainty.
When trying to decide whether or not you should take the plunge and remodel, think of your own needs. If you absolutely want to add on a deck, go for it. If you have a spacious basement and could use a children's play area, don't hesitate. By concentrating completely on the return you might get from a home improvement project, you are limiting your options and basing your decision on a factor that is constantly changing. Depending on the economy, the real estate market in your area, and other factors, your return could be more or less than you expect when it is time to sell. As discussed earlier, the two that consistently offer significant return on investment are kitchens and bathrooms. Just remember that for the immediate future, you will determine the value of a luxurious bathroom remodel or sunroom addition. The enjoyment of improving your home for the rest of your time living in it might far outweigh what money you get back when it is time to sell.
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