Home Improvement? Seeking ROI in a Down Market
Most homeowners have an idea in mind of their perfect home – whether they’re fully immersed in that utopia already, or – more likely – planning for the future. Lofty dreams might include a home theater with a 10-foot screen, full sound-proofing and built-in surround sound, or a walk-in steam shower made of marble and featuring a dozen heads. Or it might include increasing square footage with a great room add-on or installing an in-ground swimming pool. While it’s good to dream big, uncertain economic times suggest a pragmatic approach to home improvement may be a better investment…particularly if you’ve plans to sell your home in the coming years.
According to SmartMoney.com, your return on investment (ROI) for any enhancement projects will depend on many factors, including the direction of the broader housing market, the value of neighboring homes and at what point you plan to list your home for sale. And of course the type of project is critical. The site points out that the installation of a mid-range outdoor deck may return more than 100% of cost in a market like San Francisco but far less in Columbus, Ohio, for example.
COVER THE BASES FIRST
So we’ve all heard that bathrooms and kitchens sell homes, right? Experts do agree that these rooms are major drawing points, but they also point out that the structural integrity of the home is most important to prospective buyers. HGTV.com and Remodeling Magazine explain that fixing or replacing a leaking/outdated roof, putting new siding on your home, replacing old windows with energy-efficient options, updating outdated hot water heaters or HVAC units, or fixing foundation cracks to keep a basement or crawl space water-free will recoup more of your investment when it comes time to sell, pointing out that buyers want to trust a home has first been mechanically and structurally maintained before ornamentally upgraded.
NEXT UP, THE KITCHEN
Once you’ve undertaken the basics, kitchens and bathrooms may be just where to turn your attention. HGTV.com reports that minor kitchen remodels (i.e. those costing $15,000 or less) can return nearly 93% of one’s investment, depending on choices made and the regional housing market. It’s no surprise buyers like cosmetic updates (no more avocado green refrigerators!) like granite countertops and stainless steel appliances, but sanding and staining all-wood cabinets and adding fresh hardware will yield a better return than, say, a new Viking range in a mid-size home.
Like kitchens, bathrooms are a draw. Before jumping into a major demo, though, really consider where you’re spending your money. Older homes with 3-4 bedrooms may feature only 1 bathroom. Most experts agree that the addition of a second bathroom is a smart investment to attract buyers. And for that existing restroom, instead of a complete overhaul, new fixtures and tile may be all the sprucing up that’s needed with an almost full ROI.
Do you have unfinished space in your home? It’s not an inexpensive proposition, but the returns can be upward of 70%, and sometimes higher. BankRate.com offers that converting an attic or basement into additional living space or an extra bedroom might run a homeowner $35,000-$50,000 with an expected return of 76-83%. Similarly, adding a sunroom to an existing home fetches closer to 71% at time of sale. SmartMoney.com also points to the value of closet space. If any oversized rooms can be segmented to allow for the addition of an extra closet or storage space, you may have an opportunity to add an inexpensive, desired feature to your home.
As you’ve read before on this blog and elsewhere, curb appeal matters. You want buyers to be attracted enough to your home’s exterior to – hopefully – want to see more. But before you engage a landscape architect, consider how much groundwork is actually warranted. An expensive garden worth thousands and thousands is a beautiful retreat for sure, but in the minds of buyers it may u-p-k-e-e-p. In its article “8 Home Improvements That Pay Off,” SmartMoney.com advises smaller projects like planting and painting. Plant flowers and shrubs, and add a fresh coat of paint to the home’s front door and mailbox. Trim back overgrowth, and keep the lawn mowed to a healthy height.
Generally speaking, these practical home improvements are most likely to provide the best return on your investment. That’s not to say, however, that your Regal– or AMC-style home theater isn’t worth aspiring to, or your dream of an in-home spa should be totally shelved. Some improvements are simply intended for the sheer enjoyment of your space while you’re occupying it. Which home improvements are you tackling this summer?