Recoup More of Your Investment: 8 Home Improvements That Add the Most Value

by Aaron Crowe on 25 February 2014 0 comments

When it comes to budgeting for a remodeling project for your home, it's difficult to know if the expense will be worth it.

Yes, you'll enjoy the home office or bathroom once the remodeling work is done, or a new sunroom may be worth the money as far as your family's enjoyment goes. But if you resell the house, will you recoup most of that expense? (See also: Home Renovations That Almost Pay for Themselves)

According to a recent comparison of the average costs in 2014 for 35 remodeling projects in 101 U.S. cities conducted by the website Remodeling, the national average value they retain at resale is 66%. In other words, 66% of a project's cost is recouped if a home is sold this year, on average.

That may make you think twice before spending $28,000 for a home office remodel — the national average cost for such a project, and the worst return at 48.9% of the job cost at resale. The best return? A stunning 96.6% for a $1,162 steel entry door replacement.

Here are eight home improvement projects that beat the 66% national average for return on investment:

1. Kitchen Remodel

The amount of costs recouped depends on the type of remodel — midrange or upscale. For the average midrange major kitchen remodel of $54,909, the average return is 74.2%. But for a luxury remodel of $109,935, the return drops to 63.6%. (See also: Get Help Renovating With an FHA 203(k) Mortgage)

Doing the luxury upgrades with top-of-the-line appliances and countertops, for example, doesn't help increase a home's resale value.

The Zillow Digs Home Design Trend Report for 2014 lists kitchens as the top space homeowners plan to remodel this year. The kitchen is one of the best areas to renovate because it's a common area that can give a strong first impression, says Cannon Christian, president of Renovation Realty in San Diego.

"Your kitchen is the most utilized room in your home, a place where families and friends gather for daily meals and holiday celebrations," Christian says. "The kitchen space, now more than ever, serves as a central gathering point and an extension of living and family rooms, the so-called great rooms."

2. Bathroom Remodel

Like the kitchen, the costs recouped at sale decrease with a luxury remodel. A midrange bathroom remodel of $16,128 will give a national average return of 72.5%, while an upscale remodel at $51,374 will give a 63.6% return.

"By completing the upgrades prior to selling, you allow the buyer to finance those improvements, and the buyer will pay a premium with the current interest rates," Christian says.

Kitchens and bathrooms are the best rooms to "splurge" on and put the most attention to detail on, says Nick Jabbour, a real estate agent with Nest Seekers International in New York City. The breadth of fixtures and finishes "tend to appeal to the more emotional side of the buyer in addition to the functional and practical matters," Jabbour says.

3. Wood Deck Addition

Among midrange projects, adding a wood deck is second only to a new steel entry door for getting the most money out at resale. A new wood deck costs an average of $9,593 and recoups 87.4%.

4. Siding Replacement

Among the upscale projects that Remodeling looked at, a fiber-cement siding replacement costs $13,378 and had the highest return at 87%. A foam-backed vinyl siding replacement was almost as good, with a 78.1% return.

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5. Garage Door Replacement

Whether you go with a midrange or upscale model, a new garage door is an inexpensive item that almost pays for itself in resale value. The average midrange model costs $1,534 and has a return of 83.7%. If you want to go upscale and spend an average of $2,791, the return is almost as good at 82.9%. (See also: How to Organize Your Garage)

6. New Windows

These also have high returns, at 78.7% for midrange vinyl windows for $9,978 per home; or 76.6% return for upscale vinyl windows costing $13,385.

7. Attic Bedroom

At an average cost of $49,438, adding an attic bedroom is an expensive job, but with a high return — 84.3%.

8. Two-Story Addition

If you've really got money to spend, then adding a second story to the house can be a good investment. At $155,365, this is the most expensive item on the list, and it returns 71.8%.

The value of certain home improvements is subjective. A remodeled bathroom may be worthwhile to a home seller, but the buyer may not care as much. Improving a bathroom mainly because you think it will add value to your house isn't a good enough reason in the long run, says Dean Bennett, president of Dean Bennett Design and Construction in Castle Rock, Colo. (See also: How to Sell Your House in 24 Hours)

"Homeowners need to determine if a house is worth more to a potential buyer because the bathroom is more convenient and nicer, because the aesthetics are better, versus just the raw return on investment for a given project," Bennett says.

Whether you do a home improvement project to make your home more livable for yourself or to entice buyers, you want to make sure it's done right, especially if you're doing the work yourself, says Bob Gordon, a real estate agent with Re/Max Alliance in Boulder, Colo. When showing properties, the MLS data he has will show if recent improvements have been made. (See also: Is DIY Home Renovating for You?)

"You get inside the house and discover it was likely improved by the owner," Gordon says. "Owners may love their work — their accomplishment — but when it isn't done right, or to code, or permitted, it is not really helping. Code, permits, and quality are incredibly important on any improvement, big or small."

Have you done any remodeling or renovation of your home? Was return at resale one of your considerations while planning the job?

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