By Don Petrasek of InvestWell
January 31, 2015
As you work through your home remodeling projects, I’m sure you’re always wondering whether you’re spending your budget in the right places…especially if you bought the property to fix up and then immediately resell.
Remodeling magazine just published their 2014 Cost vs Value Report. They also created an outstanding online tool that will really help you understand which home renovation projects are going to payback the best in your area of the country.
Some Budget Drainers:
- Home Office Remodel projects returned less than 50 cents on the dollar. It appears as though a significant portion of the cost for this item is in cabinets and other fixtures that buyers just aren’t willing to pay anywhere near full price for.
- Sunroom additions returned only slightly more than 50 cents on the dollar. Certainly a nice to have, but usually not a lot of square footage and buyers are apparently recognizing that.
- Master Suite Additions returned only 56% of the cost which initially was a surprise to me. But when you consider the average cost of this project in the United States (around $100,000 for a mid range addition) it starts to make more sense….in many areas this project could represent 25% or more of the house’s total value. Premium master suites are nice and sell houses for sure, but there’s a limit to the premium that buyers will pay for this feature. And in most cases, the seller’s choices and taste aren’t going to exactly match the buyer’s.
Some Great Places to Invest Your Dollars:
- Entry Door Replacement. Steel entry doors returned almost 100% of the amount invested. Fiberglass doors returned about 70 cents on the dollar. Not surprising – you can make a big change in curb appeal for a relatively small investment by replacing entry doors.
- Kitchen Remodels returned between 75 cents to 83 cents on the dollar. No surprise here – kitchens and bathrooms sell houses right? Bathroom remodels were in about the same range, but bathroom additions returned only about 60% of the cost – probably due to all the dollars you have to sink into mechanicals to create a bathroom.
- Garage Door and Siding replacements returned from 78% to 87% of the cost. Again the curb appeal factor is at work. I also think that buyers tend to overestimate the cost of exterior repairs (probably because most won’t attempt these jobs themselves) and when they see brand new siding and doors they are willing to pay a premium.
- Wood Decks added a significant amount of value, returning up to 87% of the cost. However, using composite materials shrunk the return on investment to as little as 65%.
As you set up your fixer upper house projects, make sure to refer back to current Cost vs Value reports. They are valuable aids in terms of helping you make decisions on what projects to tackle and which not to as well as what material.
Which Remodeling Projects Result in the Highest Payback for 2015
Don Petrasek of InvestWell
January 21, 2016
The Remodeling Magazine 2016 Cost vs Value report is here and once again is a great resource for real estate investors who purchase and renovate fixer upper houses. The report includes both costs and expected returns for a number of common home remodeling projects and you can even download a report for your city that includes job costs, resale value, costs recouped and comparisons.
As you put together your renovation plan, you’re almost always faced with the dilemma of choosing from countless ways to improve your property with a limited budget. The Cost vs Value report can help guide you toward investing your project dollars wisely.
The Remodeling Magazine has a video overview provides some great overall direction on where to put your money. Take a few minutes and to watch it now: Some highlights:
Attic Insulation, a project that wasn’t measured last year, debuted at #1 on the list of best returns with a 116% return on investment. It also was the only project that returned more than invested. The key – low investment ($1268) on a high perceived value item.
All but one of the top ten best returns were exterior projects. As I mentioned in my review of last year’s report, you can’t overestimate the value of curb appeal. High return projects included manufactured stone veneer (93% return), exterior doors (both entry and garage doors 91% return), siding (78%), decks (75%) and roof replacement (71%). The lone interior project in the top ten was minor kitchen remodel (83% return) – which isn’t a surprise to anyone who has ever sold a house.
The lowest returners were largely major additions. Master suite addition (64%), bathroom addition (56%) Back up power generator (59%). Be very careful about getting into major renovations on a property you plan to sell right away. In some cases, it might make sense to add another bedroom or bathroom, but keep in mind when you add these projects you’re going to dramatically increase your timeline and the overall complexity of getting the house market ready.
Some projects showed up in both the best returns and worst returns categories – it all depends on what type of materials you use. Engineered siding returned 78 cents on the dollar, vinyl only 67 cents. Wood decks returned 75 cents on the dollar, composite decks only 57.