Which Home Improvements Pay Back

Nearly one in five U.S. homeowners tackles home improvement projects during three day weekends according to a survey released by Opinion Research Corporation. Their survey of 726 homeowners showed that the most popular projects planned include:

  • Painting a room – 61%
  • Landscaping – 58%
  • Kitchen upgrade – 32%
  • Bathroom upgrade – 30%
  • Adding attic insulation – 14%

But, which ones pay back? Recouping your remodeling investment may be your goal when you sell your house.  But when it comes to resale value, all home improvements are not created equal.  As a rule, kitchen remodeling projects and bathroom additions, almost always, payback 90 percent or more of their cost.  Finishing a basement, however, usually pays back less than 50 percent.  Other improvements fall somewhere in between.

Consider these payback estimates for most typical home improvement projects:

Project                     Cost           Average Payback

Add a new heating or air   $2,000 to $4,500 100% for heating; 75% conditioning system                         for air conditioning

Minor kitchen remodeling    $2,000 to $8,500    94% to 102%

Major kitchen remodeling    $9,000 to $25,000         90%

Add a bathroom          $5,000 to $12,000         92%

Add a family room          $30,000                86%

Remodel bathroom           $8,500                 77%

Add a fireplace          $1,500 to $3,000            75%

Build a deck               $6,000                 73%

Remodel home office         $8,000                 69%

Replace windows            $6,000              68% to 74%

Build a pool            $10,000 and up              44%

Install or upgrade         $1,500 to $15,000        30% to 60%

Finish basement          $3,000 to $7,000            15%

UNDERSTANDING PAYBACK VALUE

Payback value depends heavily on the real estate market and prevailing property values.  If the market is slow, expect to see less payback than you would in a hot market.  Also consider the neighborhood: if you remodel your house to twice the size of the other homes on the block, it is unlikely that you will be able to sell at double the price.  Issues that can influence payback value include:

·       Type of improvement

Kitchen and bathroom remodeling projects consistently return the most in resale value and almost always help sell a house.  Converting a basement into a family room yields the smallest return on investment.

·       Scope of improvement

Projects can be large or small. Sometimes, the cumulative effect of small projects can pay back more in resale value than that of larger projects.  Small projects tend to be cosmetic in nature:  fresh paint, new doors, garden windows, and ceiling fans.  Large improvements involve adding or upgrading living space.

·       Desirability

Today’s fad may be tomorrow’s standard.  Backyard decks, for example, were difficult to find 30 years ago; now they are common.  Decks may not have paid back very much in resale value decades ago, but as decks have become more desirable, their resale value has increased.

·       Cost

The price of home improvements fluctuates depending on economic conditions and region.  If remodeling costs are particularly high in your area--or home sale prices are particularly low--you may not recoup as much on your investment as you would if costs were in sync with sales prices.

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