When Does It Pay to Remodel Your House?

Projects and Trends for a Higher Return on Your Investment

When you consider which home remodeling projects to tackle and which ones to shelve, it is wise to think about the payback potential. Which projects will increase the value of your home enough to recoup your investment potentially? Remodeling Magazine may be able to help you decide. They recently completed their 2015 lists of remodeling values, broken down by the type of project and geographic market. Thirty-six projects were compared in over one hundred markets, making this the most comprehensive remodeling payback guide available.

People tend to associate remodeling with kitchen or bath makeovers, but neither project provides the greatest return on investment. Upscale kitchen and bathroom remodeling recouped in the 59-60% range of costs, rising to 67-70% for midrange projects.

In general, to recover your costs on a project, smaller is better. Four of the thirty-six projects were estimated at less than $5,000 (for professionals), and three of those were in the top five for return on investment. Those were entry door replacement with a steel door (101.8% return), and midrange and upscale garage door replacements at 88.4% and 82.5% return, respectively.

The other two high-return projects were in the next tier of expense ($5,000-$25,000). The addition of a manufactured stone veneer returned 92.2% on a $7,150 cost while an upscale fiber-cement siding replacement returned 84.3% on a $14,014 investment.

Conversely, the poorest returns came from the addition of a sunroom with a 48.5% return on a $75,726 investment and a home-office remodeling with a 48.7% return on a project cost of $29,066. No project that cost more than $25,000 finished in the top ten, with the attic bedroom coming in twelfth with a 77.2% return on a $51,696 investment.

Higher-return projects had another common thread -- most were exterior projects. Curb appeal is incredibly important to a home sale, and many exterior projects cost less than interior ones, thus providing a double benefit in value.

Replacement projects (doors, windows, siding, etc.) tend to have a better payoff than full remodeling projects, and this report reinforced the trend. The gap extended to a 12.4% higher payoff for replacements compared to remodeling (73.2% compared to 60.8%).

Where you live also plays a large factor. If you live in the San Francisco Bay area, you cannot go wrong with remodeling. San Francisco tops the list with a 103% expected return on any project and a 147% expected return on the addition of a wood deck.

How do you maximize the value with your geographic location and housing needs? First, there is no reason to embark on any of these projects just because you are trying to increase the value of your property. Replace as you need to, and remodel as you want to. Renovations should fit your vision and needs.

Assuming you have identified a project, try to time it to when local contractors are in a slow period, typically early spring or the late fall/early winter depending on the climate you live in. You can gain a bit more leverage that way. Avoid trendy picks -- backup home generators skyrocketed after Superstorm Sandy, but plummeted to one of the lowest return investments in 2015. Of course, if you do live in a storm-prone area, a backup generator might be a good idea regardless of resale value.

Details and general trends may be found at the Remodeling website. Look them over for advice on the types of remodeling that give you the best return on investment -- and then go ahead and do what you want. It is your house, and you should enjoy it and modify it in your own way.

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