Last Monday I reported that, according to Remodeling Magazines’ Annual Cost to Value Report, you could only achieve about 50% – 75% return on most remodeling projects. So why remodel?
For me the answer is simple – when you live in a place you love, that fits you and your family to a tee, and that embodies your sense of beauty – you’re both happier and healthier. Only you can put the proper value on how much a given remodeling project will enhance your well being.
Using one of my clients as a case study, here are 4 concepts to keep in mind as you embark on making your existing home your dream home.
1. Home Maintenance and Repair. My client replaced dented, stained aluminum siding with fiber cement siding. They also took the opportunity to blow insulation into wall cavities and add rigid foam insulation between the sheathing and the new siding. The windows had been replaced some years before. These improvements – according to the report – are good investments since they will reduce heating and cooling costs, make the home more comfortable and return more than 80% of their value.
2. Curb Appeal and Neighborhood Interaction. My client added a full-length front porch that both dramatically changed the relationship of the home to the neighborhood but also improved the curb appeal by integrating and replacing diverse roof lines from previous additions. Front landscaping and a new safer front stairs complete the front curb appeal. Now, instead of being separated from the neighborhood, the homeowners have frequent impromptu coffee-klatches on the front porch with neighbors and friends.
Curb appeal projects are more typically low cost projects that can dramatically improve the appearance and appeal of your home. Such projects might include painting, landscape improvements, or refreshing the kitchen or bath without major remodeling. I try to help clients understand that doing these projects even if you aren’t planning to sell, can make a huge difference in the way you, your family and friends feel about your home.
3. Lifestyle Improvements. My clients, who regularly entertain both large and small groups, wanted a home that matched their lifestyle. They also wanted to enlarge their home not with an addition but with a livable garden room. A kitchen remodel combined with changes that created an open floor plan dramatically changed the way they live – dramatically improving their interaction as a couple and in their entertaining. Now meal preparation is a group activity even if only one person is in the kitchen. Even relaxing is a joint activity instead of retreating to different parts of the house. While it’s hard to put a value on the benefits, it’s easier to understand the high price of finding a new house to meet their needs and the disruption to their lives to move to a new neighborhood. On this measure, the remodel pays for itself.
4. Neighborhood Norms and Expectations. Neighborhoods are dramatically different as you travel through a city or across the country. In some neighborhood, all the houses were built at the same time and from just a few different models. In these neighborhoods, you’re not likely to recover remodeling costs that don’t stay within the neighborhood norms. But if you stay within norms, you can often recover remodeling costs. For example, maybe homes in your neighborhood typically have 2 full baths or a powder room on the first floor and your home does not. In this case, bringing your home up to the established level of the neighborhood will usually pay off. Similarly, if you’re selling – or hoping to sell – your home at the top of the market in your neighborhood, the buyer is going to expect the home to be in move-in condition with no addition work. So if your basement is unfinished, finishing your basement will help your re-sale potential. Such improvement will not only be important to your buyer but also to achieving an appropriately high appraisal.
However, I usually work in very mixed urban neighborhoods where prices might vary by more than 100% from one house to another. On my own street, for example, one house sold recently for $900,000 while the one 3 houses down door went for $425,000. If you own a home near the bottom of the range, you have a broad range of improvements you can make without pricing youself out of the market. Of course, if you own a home near the top of the market, you might not be able to recoup any improvement costs.
With his remodeled interior and exterior, my client has probably priced his home at the top of the neighborhood values. So when he sells, his market sales price probably won’t recover the full cost of the remodel. On the other hand, the money not recovered will likely be less than the transaction costs (commission, closing fees, and moving costs) of moving to another home. And we didn’t go completely overboard. The husband wanted a fire-pit. Rather than build an expensive stone fire-pit, we found a place for a modestly priced commercial model.