SPRING IS HERE AND ONCE AGAIN the annual pilgrimage to the local home improvement center begins. On the mind of almost every homeowner: If I make this or that improvement to my home, what will it get me in increased equity? Will that $20,000 bathroom remodel return $20,000 when I decide to sell? Will I be able to recoup the money spent landscaping? What about upgrading my windows or installing solar?
The answer to these questions, like most in real estate, is that it depends. A website, www.costvsvalue.com, studies this issue and reports annually on the cost versus value of many home improvements. The nice thing about this site is that they study the data by region. If you happen to live in an area with a hot real estate market, you will see that your home improvement bucks usually pay bigger dividends than in markets with less demand.
Generally speaking, improvements to visually impacted items, like entry doors, tend to have the highest returns. A minor or mostly cosmetic kitchen remodel will return 102.3 percent of your investment, while a full kitchen remodel including appliances will return just 81.1 percent. Not too surprisingly, adding square footage generally has a pretty low return. In the Pacific region, adding a second story returns just 74.3 percent and only 64.1 percent nationwide. Sunrooms are worse, returning 56.7 percent in the Pacific and less than half the investment nationally (48.5 percent).
If you are considering a remodel, it is best to know your intentions. If you intend to sell in just a few years, then it is much more important to get the biggest equity bang for your buck. You will want to stay with neutral colors and not go for the top of the line in your selections.
If, on the other hand, this is your forever home, remodeling for return on investment doesn’t necessarily make sense, for a couple of reasons. First, that beautiful modern kitchen will not be quite as beautiful or modern in 20 years. And if you plan to stay in your home then you shouldn’t necessarily mind paying a little extra for that top-of-the-line range or that built-in coffee maker, because you will get many years of use and enjoyment out of them.
Be careful of leasing schemes for items like solar. While it may appear beneficial in the short term to have solar installed with little up-front cost, you may be saddling yourself with huge buyout expenses if you decide to sell or face difficulty finding a buyer who wants to take on the additional burden of a solar lease. I have not seen this personally yet, but have heard stories of folks getting stuck with leases that create obstacles to a smooth sale when it’s time to sell their home.
If you are just thinking about sprucing up the place a little in order to sell it, you may be surprised how much you can improve your home’s value with simple upgrades like painting dark-colored walls a lighter color to make a room feel bigger. Removing clutter will also enhance the likelihood of finding a buyer quickly and getting top value. I always advise people who are planning to sell that they should consult with a Realtor about preparing their home: A good Realtor can guide you in making the right decisions and even recommend professionals who can assist you with the process.
Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.
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