by Don Vandervort, © HomeTips
When we moved into our present home 24 years ago, instead of choosing the largest of the three bedrooms for the master bedroom, we picked the smallest. Despite its diminutive size, it had a corner fireplace and a small bathroom and was a few steps from our 3-year-old son’s room.
But now that little guy has become a big guy. And, after yearning for a private retreat—a quiet master suite where we could relax, read, or luxuriate in a hot bath—we took the plunge. One of the most important things we asked ourselves before adding on our new master suite was whether we would get a return on our investment if we decided to sell the house someday. It’s an important question, one worth asking before launching into any remodel, particularly if the work is being done with a higher selling price in mind.
Since nearly every new house that pops up in our community is built with an elegant master suite, we figured that the builders know what buyers want, and a beautiful master suite is near the top of the list.
Real estate professionals and trade magazine publishers offer up statistics each year that help sort out which are the best home improvements. One of my favorite analyses is a “Cost vs. Value” study published by Remodeling magazine, a trade publication targeted primarily toward professional remodeling contractors. This study compiles and analyzes data gathered from real estate agents throughout the country to determine both national and regional average returns on investment for various home improvements.
In looking at the results each year, I’m surprised to see that, on average, most improvements will not recoup your full investment if you sell your house within a year. Of course, exceptions abound, depending upon the region, the vibrancy of the real estate market, and the type and cost of the improvement.
In hot real estate markets filled with aging houses, returns on investment are higher than returns in slower areas—generally exceeding the costs of improvements. The hot markets include Honolulu, San Francisco, San Diego, Seattle, Minneapolis, Boston, Philadelphia, Birmingham, and Garden City.
Certain kinds of additions do much better in particular places. Building a deck in San Diego or Hawaii is a solid bet. Adding a family room in San Francisco or Garden City will typically return upwards of 140 percent of the cost. Then again, almost any major improvement in Garden City returns more than 125 percent of the cost.
But which improvements return more than others? Minor kitchen remodels are always a standout, but the national average for cost recouped is only 88 percent. In other words, in higher-end real estate areas, if you revamp cabinets, change out appliances, and re-cover your floors, you’re likely to get your money back—and then some. But in slow-moving areas, you won’t. Bath remodels and major kitchen remodels run a close second.
Improvements such as adding a home office or replacing windows or siding are chancier. Your results will depend heavily upon where you live. The average cost recouped in Cleveland for replacing windows is under 30 percent whereas it’s closer to 110 percent in New Haven.
Of course, certain improvements give a house more curb appeal, helping it to sell more quickly. Replacing shoddy siding on a house in Boston or Chicago, for example, will not only boost the price by more than 120 percent of the job’s cost but will also make the house more appealing to more buyers.
Then again, if you intend to live in your home for years, short-term return-on-investment figures don’t really matter. The longer you stay in your home, the longer you enjoy a higher quality of life because of the improvements you make. And you can’t put a price on that.
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