Highest Return on Home Improvements
After years of decline, the amount of money you’re likely to recoup on home improvement projects is finally on the rise. That doesn’t mean you’ll boost your property’s resale price by as much as those project costs.
The average return on home improvements is just 60.6%, but that’s up from an average cost-value ratio of 57.7% in 2011-12. Every project on our ranking of the 10 most valuable home improvements recoups more than it did last year.
We credit the turnaround to a decrease in construction costs as well as the recovery in home prices, which improves the return on renovations.
The latest S&P/Case Shiller composite index, which measures the U.S. housing market in 20 metro regions, showed that home prices ended 2012 with the strongest gains since 2006.
Your home equity may be improving for the first time in years, which has you thinking about those long-stalled projects. You’re not alone.
The National Association of the Remodeling Industry says it saw an increase in requests for bids, conversion of bids to jobs and value of jobs in the final three months of 2012.
“We’re encouraged that people are seeing their homes as an asset that’s going to grow as opposed to shrink,” says Kevin Anundson, a partner at Milwaukee-based Renovations Group. “It’s hard to get over the emotional hurdle of pouring money into an asset that’s declining.”
To determine which home improvement projects provide the best return, we consulted the Remodeling 2013 Cost vs. Value Report.
We used that data to create a list of the 10 best home improvements, based strictly on the percentage of the cost recouped at resale.
The Top Projects for 2019
1 – Replacing your entry door. The Remodeling Magazine survey found a midrange steel door costs $1,137 and adds $974 to your home’s value, or 85.6% of the cost.
2 – Siding replacement. The best return, according to the NAR study, is on projects that use fiber-cement siding. This will cost on average $13,083 and add $10,379 to your home’s value, 79.3% of the cost.
3 – Adding a wooden deck. This project assumes a 16- by 20-foot addition; you’ll pay $9,327 and add $7,213 in value, 77.3% of the cost.
4 – Replacing your garage door. The typical charge: $1,496, which will add $1,132 to your home’s value, 75.7% of the cost.
5 – Minor kitchen remodeling. Remodeling Magazine considers a minor kitchen remodel to include replacing cabinet fronts, counter tops and appliances. The estimated price tag: $18,527. It will add $13,977 in value, 75.4% of the cost.
6 – Replacing windows. This will set you back about $10,708 and add $7,852 in value, 73.3% of the cost.
7 – Renovating an attic into a bedroom. This will cost $47,941 and add $34,916 in value, 72.9% of the cost.
8 – Finishing a basement. You’ll spend about $61,303 and add $43,095 in value, 70.3% of the cost.
9 – Adding a two-story addition. This major renovation will cost $152,470 and add $99,674 in value, 65.4% of the cost.
10 – Midrange bathroom remodeling. The study says this type of renovation includes replacing all fixtures and counter tops. The project price tag will hit $15,782, and this will add $10,295 in value, 65.2% of the cost.
A midrange addition involves building a new bathroom with moderately priced fixtures, such as $165 for a solid-surface counter top with built-in sink as opposed to $500 for a custom-ordered sink that you would expect in a luxury addition.
Prices may seem higher than you expected for several reasons:
Averaging can skew costs higher than taking the mean of all costs. For example, three people remodeled their kitchens at a cost of $10,000, $15,000 and $100,000. The median price would be $15,000, because half of the projects cost more and half cost less. But the average price would be $41,666.
Prices include professional labor, which is about 30% of the cost. There are also substantial regional variations in home values, materials and labor costs.
Where to Begin
Deciding which project to do and how much to spend really depends on your situation.
If your goal is to increase the value of your home for resale, your project should reflect the neighborhood. A six-figure kitchen renovation isn’t logical unless you live in a neighborhood of million-dollar houses.
You’ll want to scale things down.
On the other hand, if your neighborhood is mostly three-bedroom, two-bath houses and your house has only one bathroom, you’re at a serious disadvantage on the resale market. Adding on a bathroom might make a big difference.
You also have to consider all of the costs involved with a renovation. A swimming pool is the perfect example, since building the pool is just the beginning of the expense.
The same is true of adding on a family room or remodeling a basement or an attic. You have structural costs plus the expense of furnishing, heating and cooling those spaces. Add those costs into your budget.
Finally, some decisions are made with the heart as much as the head. Maybe you’ve always wanted a gourmet kitchen, a tri-level deck or a master suite.
You have every intention of living in this house for the rest of your life, you know you’ll never recoup the money you put into it and you don’t care.
If you can afford it, knock yourself out. It’s your money and your house, and you should have it exactly as you’d like.