Even in our somewhat uncertain economy, people are still making investments in their homes. In fact, 'Remodeling Magazine's' annual cost versus value report (2008-2009) says since last year, the amount of money spent on remodeling has dropped less than 4%. So if it still makes economic sense to remodel your home, how should you choose which improvements make the most sense for you and are there any home improvement you shouldn't make?
Consider the changes your want to make
Common consensus used to be that the cost of a kitchen or bathroom improvement more than paid for itself when it came to resell. However, recent studies now show that isn't the case and neither actually pays for itself today. For example, an upscale bathroom remodel ($35,000) returned just over 60% of its cost while a more modest bathroom improvement ($15,000) returned about 75% of its cost. Kitchens did a little better with a major remodel ($50,000) returning just over 70% on resale while a more mid priced remodel ($25,000) returned just under 80%.
According to the survey improvements that came closest to providing a positive pay back were those that improved the appearance and energy efficiency of the home. Improvements such as mid range vinyl or wooden windows, fiber cement siding and vinyl siding all provide in the range of a 75% payback.
So how should you determine which home improvement to do
First keep it within budget. Home improvements don't need to be expensive to be worthwhile and more expensive doesn't always mean better (particularly to potential buyers). Professional type kitchens and top end appliances will certainly add to the cost of your improvement, but not necessarily a great deal to the value of your home to a buyer. Mid range improvements are the ones that return the highest percentage of their original cost.
If you want to go “first class' and top of the line on your improvement, be sure you're doing it for extra space and functionality for you and your family. In this market it's unlikely you'll recoup a high percentage of your expenditure.
Be sure you don't price yourself out of the market. Undertaking a $100,000 renovation on a $300,000 house will likely end up hurting you at resale since it will take the asking price of your home well above the price range for your area. Experts suggest home improvements in the range of 10% to 15% of the current resale price of your home are a good investment range.
Ensure your home improvements don't change the character of your home. For example, if your present home is a Colonial, don't invest money creating a slick modern look for your home- it will just look out-of-place.
Also avoid being 'trendy' or cute. For example, counter tops and cabinets in your school's colors might seem like great idea now, but what will a buyer think of your color scheme a few years down the road?
Finally, remember the home improvement that will have the highest payback is probably the least expensive thing your can do. Decluttering your home and painting your walls will cost about $100 a room and the payback for that modest investment will be dramatically over 100%.