Thursday, 24 April 2014

Home Improvements that Pay Off – Part 2

It is important to keep in mind that the same home improvement project can affect the value of a home differently depending on not just the region but the neighborhood. For example, in some parts of the San Francisco Bay Area, installing a swimming pool can increase a home’s value more than in others. In places with a cooler climate, a pool may be installed by a person with special exercise or health needs. But it may not add in any significant manner to the value of the house as the utilization of the pool by the average homeowners may be little to nothing because of the low temperatures.

Conversion Vs. Addition

It is often assumed that additions to a home will result in a significant increase in value. This is not necessarily so. How the addition fits into the existing structure, the way it affects aesthetics and other factors work to determine the market value of the additional space that has be gained. Keep in mind that a buyer looking for a 3 bedroom house will not care about how much has invested in creating the third bedroom – he is looking at the total cost. That is why conversions are often a far better investment in terms of return. First of all it is usually a cheaper project so the change to the market value will not be so much as to scare away a buyer. As an example, the Cost Vs. Value report put converting an attic into a bedroom as the 3rd  best improvement in terms of payoff. On an average, it will pay back over 84% of the amount spent on it.

The thing about additions is that if done with architecture, beauty and utility in mind, they can pay off big time. A homeowner added a 500 square foot family room to a 1,200 square foot home, opening it up to the year. This had such a dramatic effect on the overall ambience of the home that what was valued at $750,000 before the additions sold of $850,000 after it. But such cases are few and far between.

The Numbers

According to the Cost Vs. value report, the following renovations offer the best returns on investment:
  • Entry door replacement: 96.6%
  • Deck addition (wood): 87.4%
  • Attic bedroom: 84.3%
  • Garage door replacement: 83.7%
  • Minor kitchen remodel: 82.7%

And these offer the worst pay offs:
  • Home office remodel: 48.9%
  • Sunroom addition: 51.7%
  • Bathroom addition: 60.1%
  • Backup power generation: 67.5%
  • Master suite addition: 67.5%

Different Kinds of Pay Offs

It is a mistake to look at a home remodel only in terms of how much it adds to the monetary value of the home. There are other values to be taken into account – the comfort, safety and happiness of the people who live there. In fact these should, in most cases, be the guiding factors in a defining home remodeling project. But keeping the financial pay off in mind will never hurt.

In conclusion, it needs to be said that the amount that home improvements add to the home’s value depend a great deal on the cost vs. value factor. We started by saying that a new front door can recover 96.6% of its value. But the door must suit the house. And often the same kind of return, in percentage terms, can be achieved by simply painting the door. Before making home remodeling decisions, talk to your designer and contractor about what kind of return you can expect on your investment. When it comes to home improvements that pay off, what looks like a sure shot can be a hole that will suck up all the money you put into it.

Saturday, 12 April 2014

Home Improvements that Pay Off – Part 1

Bringing in a new front door will increase the value of a home by 96.6% of the cost of the door. So why is this important? A homeowner or family starts to think about home remodeling when the home begins to look stale and dated, when it no longer meets the occupants’ needs or when more space is needed to meet new demands. These are all valid reasons for remodeling a home but there is one aspect of this major project that is often overlooked. How much will the renovation add to the value of the home?  This may seem like a redundant question to those who are not considering selling their homes. But the house forms a huge part of their equity and anything that adds to its value works to their benefit. And suppose for some unforeseen reason there is a need to sell the house. Will the tens of thousands of dollars spent of remodeling it be translated into a higher market value?

Increasing the market value of a home is not the sole reason for home remodeling – a home is more than just wood, bricks and cement. It is a part of the family and their comfort and safety are the primary reasons for remodeling. But knowing what kind of remodeling projects and value to a home and which do not can help homeowners optimize the return to be had from the investment in remodeling

Remodeling – The Return on Investment

Among the best home remodeling investments, projects that increase energy efficiency are very important. With a growing concern about the environment and the continually rising energy costs, going Green is a great way to boost a home’s market value. The cost of upkeep, which includes heating and cooling costs, is a major consideration among buyers and a home that is a proven energy and money saver will attract a greater amount of attention than one that requires a major project to be done to make it Green. An invest in updating and improving the ‘envelope’ of the house – new sidings, windows and insulation – will always pay off. So will money spent on more energy efficient heating and cooling systems and appliances.

Next comes the heart of the home – the kitchen. This is a multipurpose room that is used by all of the family. From cooking to homework to eating to family meetings to odd jobs to entertaining neighbors, it is all done here. Real estate agents say that remodeling a kitchen offers the best return on investment as compared to any other part of the house. Even a minor remodel can add up to almost 83% of the money spent on it to the home’s value. One of the reasons for this is the way that prospective buyers look at kitchen that they find dull and dated in a house they otherwise like. The general assumption is that to remodel a normal size kitchen will require an expenditure of around $40,000.

But, according to Remodeling Magazine’s latest Cost vs. Value Report new cabinet doors, appliances, counter tops, a sink, faucets and hardware will typically cost around $19,000. This is a perfect example of how perception affects home values and how remodeling can really pay off. However, this does not mean that an investment of $19,000 will fetch a return of $40,000. It doesn’t work that way. But getting back 80% of the investment is possible.

Keep in mind that the kitchen must blend seamlessly with the rest of the home of it the remodeling to really pay off. Putting an ultra-modern kitchen into a 100 year old home will not. It will just look out of place.