Home renovations: How much is that renovation really worth.

I am often asked by homeowners if it is a good idea to renovate and would they see a return on their investment. This can be a tricky question. I sold a house a few years ago to a couple who replaced windows, wiring, plumbing, roof and furnace to the tune of $28,000. They then asked me to come around to see there new home. I have to admit that it really didn't look much different from what I sold them 2 years ealier. Then they asked me the question I was dreading but knew was coming "how much is our house worth now?" I had the unfortunate task of explaining to them that their house was worth around $10,000  more than they paid. In another situation I worked with a gentleman who brought a house from me the same year. I sold him a house that had been owned by a little old lady for 60 years. She had maintained it well with some updating but not decorating. He went in and painted, replaced the flooring and did some nice outdoor yard work. He had spent about $3,500 altogether. We put his house on the market 2 years later and he realized a profit of $37,000. How does this happen? Well I'll try to explain it.  The first house with the couple, already had a roof, windows, furnace, plumbing and wiring although they were dated. These are all the expensive  renovations. They had to be done but if you are doing them to try to increase the value of the home it's not going to work out short term. They had made their home "more saleble" not worth more. Obviously, the home needs these reonovations and should be done. But if you plan on selling in the next few years then you are not going to realize any profit  for a while. The second house had the good bones, good area and only needed what you might call THE ASTHETICS value. How the house felt, smelt and looked now that it was clean, freshly painted, light and bright compared to when I sold it to him. He purchased the home and it was priced accordingly because it needed these simple renovations. So, my advice to people who are looking at buying a home to increase their investments look carefully at the house. What does it need? can I do the work myself? Is it time and effort on my part or do I have to pay others to do the jobs it needed? How long am I going to be in the home? Real estate can be a very profitable business venture but you have to be smart at it. Below is a chart of what renovations cost and the actual return one might expect on their investments.

2010-11 Averages

Project Job Cost Resale Value Cost Recouped Change vs. 2009-10

RENOVATION:                                                           RETURN ON INVESTMENT

Entry Door Replacement (steel) $1,218 $1,243          102.1%

Garage Door Replacement $1,291 $1,083                   83.9%

Deck Addition (wood) $10,973 $7,986                            72.8%

Minor Kitchen Remodel $21,695 $15,790                      72.8%

Siding Replacement (vinyl) $11,357 $8,223                  72.4%

Window Replacement (wood) $12,027 $8,707             72.4%

Attic Bedroom $51,428 $37,142                                       72.2%

Window Replacement (vinyl) $11,066 $7,920               71.6%

Basement Remodel $64,519 $45,186                           70.0%

Major Kitchen Remodel $58,367 $40,126                     68.7%

Deck Addition (composite) $15,620 $10,337                66.2%

Two-Story Addition $165,243 $107,338                          65.0%

Bathroom Remodel $16,634 $10,668                            64.1%

Master Suite Addition $108,090 $68,146                       63.0%

Family Room Addition $85,740 $53,624                        62.5%

Entry Door Replacement (fiberglass) $3,576 $2,147  60.0%

Roofing Replacement $21,488 $12,780                        59.5%

Garage Addition $60,608 $35,876                                   59.2%

Bathroom Addition $40,710 $21,695                              53.3%

Sunroom Addition $75,224 $36,540                               48.6%

Backup Power Generator $14,718 $7,136                    48.5%

Home Office Remodel $28,888 $13,235                       45.8%

Upscale Projects

Project Job Cost Resale Value Cost Recouped Change vs. 2009-10

Siding Replacement (fiber-cement) $13,382 $10,707 80.0%

Window Replacement (vinyl) $14,284 $10,368             72.6%

Siding Replacement (vinyl) $13,973 $10,119                72.4%

Garage Door Replacement $3,545 $2,476                    69.8%

Window Replacement (wood) $18,226 $12,303           67.5%

Grand Entrance (fiberglass) $7,700 $4,979                   64.7%

Major Kitchen Remodel $113,464 $67,746                    59.7%

Deck Addition (composite) $38,382 $22,154                 57.7%

Bathroom Remodel $53,759 $30,738                             57.2%

Roofing Replacement $38,022 $21,120                         55.5%

Garage Addition $90,053 $48,278                                   53.6%

Bathroom Addition $78,409 $41,562                               53.0%

Master Suite Addition $232,062 $122,370                      52.7%

Source: National Association of REALTORS. Along with REALTOR Magazine

Robert Ainsworth

Robert Ainsworth

Sales Representative
CENTURY 21 United Realty Inc., Brokerage*
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