What home projects make financial sense?
Dear Angie: — We’re thinking of improving our home. Which projects make the most financial sense? — Sander Z., Wyoming, Pennsylvania
Dear Sander: Congratulations! If you're like most of us, your home is your biggest asset, so this is a big step. It can also be enjoyable, but will require homework. And while I can’t provide specifics for your case, I can pose questions that will help you and other would-be remodelers make wise use of your resources.
First: Have you kept up with maintenance and repairs? If not, that’s probably the best place to spend your home improvement dollars. Better to invest in things you need — like roof work or updating a worn or outdated electrical system — than to add a sunroom or outdoor kitchen. If you need help prioritizing maintenance work, consider the services of a reputable local handyman, contractor or home inspector.
But let's hope your home’s in good shape and you can afford a fun project. Still there are questions: What’s your motivation? Do you want more room? Do you plan to move and need to prepare the house for sale? Are you hoping to age in place and need related modifications?
If you're concerned about resale value, be aware that not every home improvement is a great investment. Adding a pool or a third garage bay in a neighborhood where you’d be the first to do so, for example, likely won’t pay off. A reputable real estate agent can help guide you if you're looking strictly for resale value.
But if you're staying at least a few years and really want that pool, go for it. Just know that you probably won’t recoup a significant part of your investment unless you're simply keeping up with what’s typical for your neighborhood.
Top-rated contractors tell us that kitchen and bath upgrades generally land near the top of the list of projects that earn the best return on investment. After all, highly rated real estate agents say potential buyers spend more time in the kitchen of a home being shown than any other room.
The most you’re likely to recoup from any project is 85 percent of what you spent. From surveying top remodelers and real estate pros, our team found that these are typical returns on investment for common projects:
- Kitchen — 85 percent. Tip: Limit spending to 20 percent of your home’s value.
- Bathroom — 80 percent. Tip: Current trends favor larger showers over tubs.
- Deck — 80 percent. Tip: Before building, study what other homes in your area have done.
- Siding, 80 percent, and replacement windows, 70 percent.
Once you know what you want to do — assuming your budget’s in order and financing is arranged — the next big step is making sure to hire the right contractor. Plan to get several estimates from businesses that have good online reviews from local consumers and are appropriately licensed, insured and bonded. Ask for and contact references, and make sure all details — including payment terms and schedule — are in writing.
Good luck with your project. Let us know how it turns out!