10 remodeling projects that pay back most
Remodeling costs are plummeting, but so is the return on every dollar spent. Remodeling Magazine says these 10 projects have the highest return on investment, and they all focus on maintenance, replacements and enhancing curb appeal.
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The cost of remodeling is dropping, to the delight of homeowners who can afford to make improvements to their homes.
Remodeling costs have dropped 10% to 15% in the past five years even while the cost of materials rose about 17%, says Sal Alfano, editorial director of Remodeling Magazine, which released the 2011-2012 edition of its annual Cost vs. Value Report in late 2011.
That sounds like great news for consumers, but with homes selling for less and less, the amount you recoup from a project when you sell the home is falling, too. Here’s what the overall remodeling spending versus payback trends look like, followed by the 10 best projects to invest in. (Bing: Find a contractor)
In the past six years, the return on a remodeling investment has steadily eroded, Alfano says. Payback peaked in 2005, when home sellers earned back more than 86.7% of money they spent on remodeling projects, on average, the survey finds. That return has been eroding steadily ever since, hitting a low of 57.7% this year.
|Return on an average remodeling investment|
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Despite the generally low payback, there are a few star performers.
"Replacement projects are really strong because they're cheap and they make the house look good immediately. If you get new windows, new siding and replace the front door, the house looks great. It sells faster and for more money," Alfano says.
And, from the Remodeling Magazine report: "The use of durable, low-maintenance materials in replacement products appeals to homebuyers who increasingly are looking to reduce both the operational cost and maintenance cost in their homes."
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One key to the popularity of replacement projects today: Not only do they cost less – except for a new roof – but homeowners are inclined to see them as necessary home maintenance rather than as a discretionary splurge.
Top 10 projects
Here are Remodeling's top 10 projects. You'll notice that these are not ambitious, vanity jobs. All are projects that replace worn or aged home components, bring parts of the home up-to-date or add living space without expanding the home's footprint:
- Replacing exterior siding with upscale fiber cement. Siding pays back a whopping 78%, on average, of the $13,461 average cost. The most cost-effective thing you can do to your home this year is to replace old siding with new, higher-end fiber cement.
- Replacing an entry door with a midlevel 20-gauge steel door is an inexpensive upgrade at $1,238 on average, but it pays back 73% and greatly improves curb appeal.
- A midrange attic bedroom remodel involves popping out a dormer for a 5-by-7-foot bathroom with shower, insulating and finishing the walls and ceiling, adding four windows, extending the heating and air conditioning and improving wiring and lighting. The payback is 72.5% on the $50,148 expenditure. More living space is being sought as adult children are driven back to their parents' homes by the shaky economy and as older parents join the households of their adult children. (The Census Bureau says 18% of American households are doubled up now, up from 17% in 2008.) An attic remodel is the cheapest way to add space and a bathroom within the house. A basement remodel is the next most cost-efficient way to add living space, although code requirements for headroom and exterior doors make that project more complicated and more expensive, Alfano says.
- A midrange minor kitchen remodel paid back 72.1% of the $19,588 investment. Included are new laminate countertops and new sink, faucets and appliances. The floor is untouched and cabinets are kept in place but refaced with new hardware added. "You're taking what's there and giving it a face lift," Alfano says. "The kitchen really looks good and the average cost for this is under $20,000 – less than what a lot of people would pay for a car." In today's austere climate, kitchen and bath remodels are pale imitations of the lavish vanity projects from the housing boom. Most consumers are shunning the expensive spa baths and chef's kitchens that involve moving electrical services, plumbing and walls.
- A midrange garage door replacement may not be high on many wish lists; it's one of those jobs that you do because it's needed. But it adds curb appeal and function, and it pays back 71.9%, on average, of the $1,512 average cost.
- A high-end garage door replacement recoups almost as much: 71.1% of the $2,994 average cost.
- A new wood deck earns back 70.1%, on average, of its $10,350 cost at resale this year.
- New foam-backed vinyl siding replacement keeps the house warm and pays back 69.6% of its $14,274 average cost. The average project involves 1,250 square feet of siding, including trim.
- New midrange replacement vinyl siding upgrades the look of the home and pays back 69.5% of the $11,729 average price.
- Upscale vinyl replacement windows have a 69.1% payback on the $14,328 cost. The project involves replacing 10 double-hung 3-by-5 windows. The new windows are low-emissivity glass and are insulated with simulated wood-grain trim.
Remodeling Magazine gets its price estimates from HomeTech Remodeling & Renovation Cost Estimator's database of construction costs. For estimates of resale values, about 3,000 members of the National Association of Realtors were surveyed after they reviewed hypothetical project descriptions, 3-D illustrations, construction costs and city home-price data.
The report predicts that costs will keep falling next year, but less steeply. Alfano expects the free fall in remodeling prices to stop soon and even foresees a slight rebound.
Desperate subcontractors already have cut their prices. Contractors have axed staff, shaved overhead and discounted their labor just to stay in business.
"They're working longer days, pushing people on staff harder. That's where the savings are coming from," Alfano says. "Fixtures, faucets, lighting – none of that has really come down much."
The pool of unlicensed and uninsured workers has grown to compete for remodeling work, too. "There's 25% to 30% unemployment in new construction," Alfano says. "That's a lot of carpenters walking around looking for work."
Some are qualified, others less so and some not at all. To bargain-hunting homeowners, these hungry carpenters, subcontractors, teachers, firefighters and other folks who are handy with a hammer represent both an opportunity and a risk: A marginal worker may not perform well or may reach the limits of his skills on your job although he did just fine at your neighbor's place, Alfano says.
Remodeling continues, scaled back
Despite the recession, remodeling does go on. Homes need roof replacements, new windows, doors and bathrooms.
Today, however, money spent on remodeling is focused on the small and the necessary: maintenance, replacements and projects that enhance curb appeal to promote a sale.
"The really big-ticket, highly discretionary projects like 'I'm going to knock down the back wall of the house and do a complete remodel of my kitchen and spend a quarter of a million dollars,' those are less likely to happen in today's environment," says Frederick Miller, managing director of the Home Improvement Research Institute, an industry research organization based in Tampa, Fla.
A survey (PDF file) of homeowners and renters by Hanley Wood, a real-estate analytics company, recently examined the attitudes of 1,954 homeowners and 1,051 renters about remodeling. Six in 10 said they had done some remodeling in the past two years.
Most (65%) said the work was maintenance and repair, and 42% (several reasons could be selected) said remodeling was done to improve energy efficiency. Thirty percent did work to reduce future maintenance, 30% were trying to improve the resale value of the home and just 24% said projects were undertaken "to add more amenities to the home."
"As the nation’s housing stock ages (more than half of the nation’s 76 million owner-occupied homes were built prior to 1970), major replacements and maintenance are likely to grab a bigger share of the overall remodeling market," the Hanley Wood report says.
Miller agrees: "The less discretionary and less expensive projects are the ones getting done."
According to his research, the median amount spent on home improvements – including do-it-yourself projects – is falling, from $3,500 in 2009 to $3,000 in 2011. But more recent monthly surveys show that spending may be starting to pick up a bit, after years of declines.
Much of the work is being done by homeowners, not by professionals. When Hanley Wood surveyors asked, "Who will do the remodeling work in the future?":
- 42% said they'd do the work themselves.
- 34% said they'd hire a professional contractor.
- 24% said they'd split the work with a contractor.
Cash and savings are (80%) by far the biggest source of money for remodeling projects. Only 7% of Hanley Wood's survey respondents said they'd used a home-equity line of credit to pay for remodeling work; 9% said they would use a line of credit in the future.
Costs, payback vary by region
The Remodeling Magazine Cost vs. Value Report also compares costs among nine U.S. regions. The payback on a remodeling dollar is highest in the Pacific region: Washington, Oregon, California, Hawaii and Alaska. There, projects recoup, on average, 71.3%, even though costs on the West Coast are higher than in the rest of the country.
The next-highest payback – 67.6% – is in the West South Central region: Texas, Oklahoma, Arkansas and Louisiana. There, construction costs are low and resale values are relatively high.
Similar conditions apply in the South Atlantic – Florida, Georgia, the Carolinas, the Virginias, Delaware and Maryland – with payback at 67.3%.
In the rest of the country, though, depressed home prices limit the payback on a remodeling job:
- New England: Maine, New Hampshire, Vermont, Massachusetts and Rhode Island; 60.5%.
- East South Central: Kentucky, Tennessee, Mississippi and Alabama; 59.8%.
- Mountain: Montana, Wyoming, Idaho, Colorado, Utah, Nevada, Arizona and New Mexico; 58.5%.
Regions where remodeling pays back the least (below the national average of 57.7%) are:
- Middle Atlantic: New York, Pennsylvania, New Jersey and Connecticut; 56.8%.
- East North Central: Michigan, Wisconsin, Illinois, Indiana and Ohio; 55.3%.
- West North Central: the Dakotas, Nebraska, Kansas, Minnesota, Iowa and Missouri; 49.5%.
I'm a realtor and my advice to those who are thinking of selling within a year is to call a realtor who is familiar with your market long before you are planning on listing your home. Realtors will give you individual advice. They know the condition and the prices of the homes in your market that have sold. Ask them what they would spend money on if it were their home to get it sold. In our local market buyers want bargains. They often would rather buy a fixer for a lower price and do the work themselves, than buy an upgraded home for more, although, cleanliness does seem to help even if it's a fixer.
Once you find a realtor who gives you good advice, and you feel comfortable with, let him/her know that they have the business. Then check in with him/her often, as you complete any work to make sure you're on track and to stay on top of the local market.
Over the years I've bought and sold enough houses that the one I live in now is paid for from those previous sales. Here's some real tips that are low cost and easy to do yourself.
1. If you have carpeting that isn't thread bare - clean it, either use a rented machine or have it professionally done. If it is thread bare take it out, the bare floor under it is much better than a worn out tired and dirty look.
2. Paint all the walls and closets. Paint it a neutral color but NOT stark white. Stark white is uninviting and sterile. Use an off white or a very very pale tan especially if you have a like for bold colors. Nothing will send buyers running like a bright orange or dark dark blue. Create as blank a canvas as you can. Buyers want to "see" their own belonging in a space. Plus a light color makes the rooms appear bigger and more open.
3. Clean your kitchen!!! Even if it is old, a clean kitchen is cozy - kitchen grim is very repulsive. Hang a cinnamon scented air freshener somewhere unnoticeable. The scent will cause a natural reaction of hunger and men find it appealing. While most women do the actual home choosing if you can get the men interested in the place it's almost a done deal.
4. Remove all the clutter - yes you treasure all the little doodads in your house but no one but you know that the collection of crazy clowns all over the house are from places you've been with all your past loves. Box them for moving, you will be doing it anyway so get a head start. Keep it simple and keep it clean. No one wants to move into someone else's dirt.
5. Mow your lawn or pull the weeds, and at least paint the front of your house. Make it look tidy and easy to care for. Same for the back yard. No man wants to buy a house he's going to have to spend his Sunday Football time working in the yard on, even if he loves gardening. A couple of potted flowering plants by the front door (if weather permits) is cheerful and inviting. Makes the impression of happiness - people want to be happy at home.
6. Bathrooms are the same as kitchens - clean them!! make the mirrors shine, make the sinks shine. Clean the water grunge off the shower doors, make them clear. And paint it a nice refreshing color, stay away from bold colors, remember you are probably the only person on the planet that thinks lime green is lovely. Leave the color changing to the new owners. Toss some cheery throw rugs on the floor and hang the towels nicely. Use fluffy new towels when showing the place. Ladies put away your cosmetics, open up the counter tops and again make sure they smell nice with a light scent of vanilla.
The important thing when selling a house - you are selling a blank canvas that someone else will customize to their life, their color choices, their style. You need to make it appear easy to do that, and that it will be a happy experience.
this is encouraging, as I did the siding, windows suggestions, foremost, along w/ regular upkeep. Always understood that u never expect to recoup the cost of improvements, it's for your enjoyment and/or comfort? Things change and I would like to relocate.....it's a mobile but I also have a newer one w/ that cement siding and it's smaller , reach me on Facebook , if interested in any.
So come on someone....I will help finance too.
Quality workmanship takes time, therefore money. If you can't afford to have a project done right, it's best to not bother. Taking the cheapest bid will often get you an inferior result. If your project looks like it was done by the kids down the street, or the Three Stooges, it will actually hurt your resale value. If you're going to do it yourself, make sure you either know how to do the project or study as much as possible what you need to know so you won't be embarrassed to say you did it yourself.
I do think that valuation specialists rather than home builders would be a better source of information for remodel paybacks. Speaking as an appraiser the payback will be at most half of what you spent on average and if the other half does not come to you in your own pleasure then you are wasting your money. What does pay in the Northwest - windows and roofs - may not be the best investments in other parts of the country.
Energy efficient projects with a payback period of 10 years or less are probably the best overall direction for home improvements that will pay for themselves and curb appeal projects would be the second best.
I call BullS__T! Your ad for service magic is a blatant lie! I know people that use service magic because just like you, they can't get job leads based on their reputation and must pay for them. (that's what service magic does, bad builders pay them to find jobs for them) That company does NOT check out anything about their 'client contractors' except whether you can pay their fee or not! I state that bluntly. Disagree? Feel free to file against me.
Morbid curiosity: Why do you do 'remodels'? To make money? So you are the contractor?
Why not just do the things YOU want to do to YOUR house and screw what kind of 'return' someone else says it brings.
I read a post by Southern Home Builder that basically said 'ignore everything except what you want in your home. If you like it, it was money well spent. Quit worrying about getting your money back and just enjoy what you built.' I can't say it exactly like he did, but it was perfect.
My husband is a carpenter/contractor/licensed roofer for over 30 years....this depression has hit us hard...the first time he had to go on benefits (for a couple of months) was in July 2006. I wonder if you even know that this thing has been going on that long---at least in the midwest. Here in west suburban Chicago, homes were going up during the early 2000's like crazy...my husband's company framed 30 custom homes during 2007...by 2008 the had only framed 2. TWO. Nobody specs out homes anymore, as not many people can get financing and there is a glut in homes already on the market.
Consequently, many guys have had to reinvent themselves as remodlers. Such it is in our home...we now run our own local company, and so far have been doing enough work to try to stave off the bank from taking our home. BTW we pay our liability insurance so our license stays current...and because of this we cannot afford health insurance for our family, and pay out of pocket for everything.
I wonder why you would think people would rather not work, and would prefer to collect unemployment benefits? Perhaps you watch too much FOX or listen to too much Rush.
I suggest to you that it is YOUR attitude that precludes you from getting skilled tradesmen in to do your work....and the fact that you probably want every upgrade for a penny or something equally unreasonable. Something to think about.
And as far as my "slug" husband goes, when he isn't working, he is online trying to find cheaper material prices so he can compete with the younger, inexperienced carpenters (read cheap) to be competitve. Between them, and the so-called undocumented "jack-of-all-tradesmen", skilled and experienced professionals are being dirven out of business.
I just find it amazing that peoplewith trust their largest and most-valued investment to the hands of an unskilled contractor based solely on saving a few bucks. YOU GET WHAT YOU PAY FOR IN THIS LIFE.
I bought my home in 04' just before the market started to take off. I have it almost paid off from the original price of 268,000, which later these same homes got up to 515,00..The builders put in cheap carpets throughout the whole house which is worthless, and nice but basic tile countertops in the kitchens and bathrooms. As time has gone by looking at a big house with nothing but white walls sure makes it look huge which it is but excessive white is an overload.
We took a job transfer to Kauai Hi, to test run a different place to live and possibly retire. Rented the house out. It was all great but after a year and 1/2 of living here in Hi, we found our hearts split in two places as our older kids have all stayed in the area. So us flying to see then at certain times, or one or two to fly out to visit in between work, or college has left us always away from each other during the holidays. So come Jan we will be moving back and fixing up as to our liking.
I have raised 7 children in that home 4 of which are grown..with three to go.
When I get back I will be removing the old carpets and tiling the downstairs, wood flooring the upstairs or maybe upgrading the carpet upstairs.. But changing out all the tiled kitchen and bath counters for some recycled glass or granite is a must also. Adding a little splash of color to my endlessly white house...Maybe even removing one of the bathtubs to make a walk in shower with awesome tile as well. Maybe even a pool in the back yard...The three younger kids are so used to swimming now don't think they could be w/o after living on the island.
I am going to be doing this not for resale value, but to make my home nicer for when friends and family do come to visit.. I am doing it for cleaning purposes as it is easier to keep a tiled and wood floor house cleaner than a carpeted one. With my daughter being handicapped it may be easier for her to walk into a shower than a bath later as her illness progresses perhaps..
I am doing it for myself because we plan to now live there and enjoy the holidays with all of our adult/young children. Raise grandkids there..etc..and truly get to enjoy our golden years taking our much needed vacations that couples/families need..
I am also going to have a house to my liking that suits all our needs!
I didn't view this article as helpful because most of the homes bought in 04 already have great windows and siding ,upgraded exterior doors, and stonework on the outside..My house has more than enough space at 5 bds and 3 baths,2 living rooms etc...So no need to remove walls and expand..
What the article should have added was look at the flooring and tile countertops and bathroom tat you hate sooo much and need to be changed because the builder had to skimp somewhere..Can you really live with that?
I think the top ten missed one obvious and very affordable home improvement that greatly adds value at a minimum cost. New floor coverings throughout your home can improve the value of your home at a minimum cost when compared to doing siding, windows or other more involved projects. Replacing that living room carpet with hardwood flooring or replacing that vinyl flooring in the bathrooms, laundry or utility rooms with ceramic tile adds a look of elegance and warmth while gaining durability for years to come. Your floors are a huge focal point in the home. New floors can be installed usually in less than a weeks time and the difference between carpet and new hardwood flooring is night and day. Step up, for just a few thousand dollars you can add tenfold the value. A perfect example are pre-finished hardwood or bamboo floorings that can be installed in just one or two days. When completed the look and feel of your home is new again and you gain the piece of mind knowing not only have you added value but these floors need never be replaced again with a minimum of maintenance.
Upgrade that pays - not mentioned in the article.
If you have a one bath home moving to a 2 bath will do more for value than anything else you can do. it will bring more than the cost of the bath, well over a 100% return. That is:
if you have a home over 1,400 SF, smaller homes generally dont get a return on the additional bath. If the home is over well 1,400 the benefits increase sigfificantly.
when measuring the home only the heated and cooled area counts. not the basement or garage. anything below grade, below ground level is basement, part of the home is below grade - stll its basement, no exceptions. dont ask realtors, most dont know basements rules. they are not taught that.
also a one bedroom is murder on value, need at least 2.
I purchased an 1800 sq ft home in Kansas three years ago for $31K. It had a bad roof that I have replaced and horrible smelly carpet that I removed the day I bought the home. Luckily there was beautiful Oak flooring underneath the carpet but in dire need of sanding and polyurethane.
I am replacing the linoleum in my kitchen and bathrooms with tile. The major concerns in old homes are plumbing and electrical. So, if you are purchasing an old house, it is a good idea to find out if you are going to have to replace the old rusting copper pipe, or out dated electrical components. This will definitely be the most expensive upgrade but well worth it once you have accomplished the project. More importantly tho is making sure the roof does not leak due to compounded repairs caused by water.
These sort of articles always drive me crazy. As a real estate appraiser with 25 years of experience I would like to offer that the author fails to relay to the reader that there are many influences that impact the contributory value of a remodel project other than the type of project. Take siding for example. If you have a very young home and the existing siding has several years or remaining economic life than it is rarely ever prudent to replace the siding. As the siding ages and experiences physical deterioration than the percentage of cost versus value is enhanced. If the siding on a home is in poor condition and a prospective buyer would factor into their offer the cost of new siding, as well as an additional discount to reflect entrepreneurial profit for having to manage this project themselves, than installing new siding in advance may recoup 100% of the cost and result in a quicker marketing period. It is also never discussed in these sort of articles whether or not the improvement is appropriate for the home which influences the return on value for the investment. For example, in my market area vinyl siding is considered to be architecturally tacky in the higher price segments. So, if you were to put vinyl siding on a $1M plus home it might actually result in a decline in value as a prospective buyer will factor in the cost of replacement in their offers. Or, if you are in an area or low end rental units where vinyl siding is perfectly acceptable then putting a high cost cement fiber siding would be an over improvement.
Spend your money to ensure that your home is well maintained. Beyond that, enhance or upgrade your property as you wish for personal enjoyment and utility. Investments in kitchen and bathroom updates tend to bring the greatest return. With any improvement, try not to exceed the upper threshold for what is common of your neighborhood.