Which Home Improvements Have the Highest Return?
A few weeks ago, some friends pinged me about projects they were considering for their homes after seeing the Cost vs. Value survey that is published annually by Remodeling Magazine. This is a great tool for homeowners, home buyers, and especially for prospective home sellers. However, it’s important to have some context for the numbers the report cites.
For example, a homeowner who is considering adding something as pricey as a master suite (projected to cost more than $100,000) should seriously consider how long they will be in the home. With an estimated return of only 81%, that’s a project you should be doing for your own use and enjoyment — not for the increased resale value.
Owners and prospective home buyers can use the data in the report as a (very) rough estimate of what their “ideal” remodel might cost. Many times the conclusion is the same; it would be better to move on than it would be to sink six figures into a home that doesn’t work well for you. Another common problem we see with the “ideal” remodel, is that the result leaves the home overbuilt for the neighborhood.
Some of the returns also have a neighborhood specific element. For example, if you live in the Proctor District, and you’re considering adding a bathroom upstairs in your craftsman home, you can be reassured that the market will almost certainly reimburse you. (This assumes that you keep your choices for finishes current and that the work is completed by a professional — but I will save those suggestions for another post!)
On the other hand, if you build a new two-car garage in the same neighborhood, it WILL make the home more desirable, but won’t likely get you anywhere near a 100% return. The survey gives an estimate of just a 71% return on a garage, with a cost of almost $54,000. Still not convinced? Consider that an appraiser will typically give a credit of about $10,000 for each garage bay, so a home with a two-car garage will have an “adjusted” value that is just $20,000 higher than a similar home in the same neighborhood with no garage at all.
If all of these projects sound out of your price range, consider some of these less expensive improvements, which pack a lot of bang for the buck (and are frequently recommended to potential sellers):
- Empty it out, scrub it clean and fix any non-working items (aka, deferred maintenance like leaky sinks or broken window seals).
- Tone down brightly colored walls by painting them in current, soothing, neutral colors. In homes with imperfect plaster, try to use flat paint so the blemishes are less obvious.
- Refinish wood floors (hardwood or soft). They are one of the Top 3 items that nearly every buyer asks for!
- New carpet (in a very neutral color) can really bring a space together quickly (just like paint on the walls!)
- Yard cleanup & exterior repairs. Pretty sure I don’t have to tell you about the importance of curb appeal!
All of these items will yield a near dollar-for-dollar return when it’s time to sell, and none of them cost more than $5,000.
If you have questions about what improvements would give you the highest return, please ask a professional Realtor BEFORE you’ve spent the money.
To read all of the results for the South Sound survey click here: Remodeling Magazine’s Cost Vs. Value Survey