Mortgage California Blog

Which Remodels Are the Best For Your Money?

October 22nd, 2015

Luxury kitchen with graniteWhich Remodels Are the Best For Your Money?

You’ve researched and calculated and added up and subtracted, and it’s time to remodel something in the house. Maybe you got a tax refund or a great bonus, and want to invest it in back into your home. You’re probably thinking “What’s the best bang for my buck if I sell this house down the road?” And that’s a great question to ask.

But First…

While it’s good to think about the monetary return on investment, you should also spend some time thinking about the emotional one as well. If you spend most of the time in your kitchen area, perhaps that’s going to bring about the best return rather then remodeling bathrooms that look clean and function well.

Or perhaps you want a swimming pool.  Rarely does a pool pay off in resale value, but maybe it’s your dream to have pool parties, or spend the summer with a cold drink on a floatie.  Your enjoyment of the upgrade should be taken into account otherwise you might resent the remodeled room.

What Doesn’t Usually Pay Off

  1. Swimming Pools, Spas, Lap Pools, Tennis courts – most buyers are not interested in taking on what will be an additional cost for maintenance.  Additionally, this is something that will increase insurance as it’s a liability (attractive nuisance)
  2. Home Office – A limited number of buyers work out of their home, and won’t be as interested.  This Old House likened it to buying a convertible if you never put the top down.
  3. Over-remodeling – When you put in warmed, Italian bathroom tiles, or the most expensive kitchen appliances, you are the only one who is going to appreciate it.
  4. Family room
  5. Window and Roofing – But keep in mind this could impact your gas and electric bill in a good way.
  6. Custom additions (wine cellars, home theaters)

What Does Usually Pay Off

  1. Bathrooms – a midrange bathroom remodel often gets the best return
  2. Kitchens – again, midrange is going to pay off faster
  3. High-end siding replacement
  4. Add-Ons – If you have 1.5 bathrooms in a neighborhood that averages 2-3, adding in a bathroom will be a huge return on investment.  However, if you already have 4, and add a 5th, you won’t get a return.
  5. Attics – if big enough, you can put a small office or bedroom up there
  6. Basement

Things To Keep In Mind

Just because a project is expensive does not mean it will yield a bigger pay back.  Painting the entire house isn’t very costly, but can have a huge return because the place looks fresh new.

If your remodel is adding on a room, keep it in the same architectural style as the rest of the house.  The flow will feel consistent, and future buyers may not even know it was an add-on.

Consider your neighborhood.  If you spend $100,000 to upgrade to a gourmet kitchen with sub-zero refrigerators, and the average home in the neighborhood sells for less than $500,000, you are not going to get your money back.  You will have your happy factor from the years when you used it, but no one else will pay the extra for it.

You can do a partial upgrade instead of the whole enchilada.

Avoid the unusual unless you plan on staying in your home for the rest of your life.  Stick to neutral tones and porcelain tile floors, showers and backspashes for bathrooms and kitchens.

Don’t pull equity out of your home if you plan to sell in the next three years.

Resources

There are five types of remodel projects per About.com.  You can read about them in more depth here.

1. Home Maintenance and Repair Projects
2. Curb Appeal Projects
3. Neighborhood Norm Projects
4. Appraisal Booster Projects
5. Lifestyle Projects

Conclusion

So, to conclude, the longer you stay in your home, the more you will recoup your investment.  Balance the project with what is going to bring you the greatest joy.  If you plan on staying in your house for a long time, you can invest more in areas that may not pay off as quickly as if you were planning on selling within two to three years.

Also, talk to a Realtor who specializes in your neighborhood about what they have seen as the best investments for remodeling.

What do you want to remodel in your home?

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