Tuesday, July 22, 2014

ROI on home improvements?

How much do you recoup from home improvements?

When home improvements offer the most bang for your buck.

Remodeling is at its highest level since the spring of 2004, according to the National Association of Home Builders' Remodeling Market Index. One of the reasons is that it has been so difficult to move up or move down: once you sell your property, you are not sure you will be able to buy a replacement very soon.  As a consequence, people remodel their house instead.  How much will you get back from these expenses, when you sell?

In general, home sellers cannot expect to recoup all their remodeling costs when they sell their house. From the upgrades, one can expect the average portion of costs being recouped at 66.1%

This is a question that clients ask me all the time, and one of the best sources of information on the subject is the web site showing the “Cost Vs. Value” report study.  It shows, depending on the area in the US, how much each project statistically gives back at the time of sale.

Those projects that pay off the most are, according to the article from Kelli B. Grant of CNBC:
-       Entry door replacement (steel):  96.6% recouped
-       Minor kitchen remodel:  82.7%  recouped.
-       Window replacement (wood):  79.3%

Why would contractors who “flip” houses make money then, you might ask?  I believe it is because they start from a house that does not show well, and therefore is going to sell at a discount, and they have the cost-efficient means to improve on the house, emphasizing those projects that show off the most for the best value.  Examples of such improvements would be, as I indicate to my clients when preparing for a sale:
-       Light fixtures,
-       Painting,
-       Retiling a shower enclosure,
-       Changing counter tops (but not necessarily all the cabinets, where there is a lot more involved),
-       Floor refinishing,
-       Deep cleaning,
-       Staging.

All these projects have a fairly small, finite cost, while improving immensely the look of the property to be sold.

Moreover, I believe that there are some areas like the Bay Area where buyers are willing to pay top dollars for a remodel that has been done already.  Is it because people here are too busy to undergo or direct a home remodel? Or they do not have the patience?  In any case, it has been my experience that remodeling jobs in this area of the San Francisco Bay returns more money than shown on the statistics of the cost vs value report.

Do you have an input on the subject?  Please let me know.!
Thanks for reading.

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF

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