Thinking of a gourmet kitchen? How about an upgrade to your bathroom? Possibly a master bedroom addition? As with any remodeling project, be prepared for plenty of hard decisions. Tile or carpeting? Tray or vaulted ceiling? Single or double bowl sink? Each question represents a battle of preferences and costs, but what about the project as a whole? Will those thousands you invest in your next big project actually produce real dollars down the road when you sell your home? Any what should you expect out of your remodeling investment?
Now more than ever, your investment in your home needs to be considered prior to any remodeling project. And with home values leveling, the dollars you invest may also impact your finances as a whole. But does that mean you shouldn’t remodel? Not quite. Sometimes, remodeling investments made during economic declines can often be fantastic opportunities as well. Just as a recession softens price points and increases unemployment, these same factors can deliver excellent value in terms of lumber, drywall, doors, windows and cabinetry pricing. Best of all, most contractors will even offer special discounts on normal retail pricing to keep their crews working. Sometimes these discounts can range from 3% to 7%, thus making your return on value even more attractive.
So what should you expect from your remodeling project? As a rule of thumb, a 60% return on investment is considered to be worthwhile. Unquestioningly, any remodel will offer the homeowner certain comfort and updates that he or she will appreciate, but if you plan on selling your home within 10-15 years, you might also want to keep remodeling costs above the 60% threshold.
So what remodeling projects return the best investment? Clearly, in this case, money spent on remodeling a kitchen brings the best increase in value. Often regarded as the core of the home, a kitchen remodel featuring new cabinets, countertops and appliances typically ranks in the top five of all home remodeling options. Beyond that, remodeling projects focused on window, door, siding or insulation addition or replacement will always deliver a solid 60% return on investment – and often that’s before any utility savings or potential tax breaks! Following closely behind would be additional bathrooms, bedrooms or offices – anything that improves the comparatives of your home to others in your neighborhood. Still, any remodeling project with a 60% or more return on investment, even if it is a deck or a bedroom update, can be attractive. For this reason, focus more on costs and value than on the type of project you chose.
Another key to remodeling is to think creatively and not necessarily big. Kitchen remodeling projects up to $20,000 offer the best return on value, decreasing by up to 6% as the project grows to upwards of $60,000. So by focusing only on the countertop, appliance and flooring, you may have your best investment. Still, is a $3,600 increase in your return on investment 10-15 years out at sale worth the comfort offered by a completely redesigned kitchen now?
To get the best value, know what you want. Often by simply staying on budget and not adding on items throughout the project, you’ll experience the perfect blend of comfort and value. Find a contractor that offers itemized pricing and encourages your participation with the selection of materials, even offering you credit when you beat the budget. Lastly, know both the retail cost of your improvement as well as your potential return on value by visiting sites such as www.costvsvalue.com, an independent site maintained by Remodeling Magazine and the National Board of Realtors offering geographic and current data. That way, you not only know what to expect, but also know where to start.
Keith Desserich is the President of RestorAid Remodeling based in Cincinnati, Ohio. A 12-year-old company, RestorAid has consistently been recognized as one of the Top 500 contractors in the country and profiled as a Big 50 Remodeler by Remodeling Magazine in 2010. He and his company can be reached at 1-877-378-6724 and www.restoraid.com.