Remodeling For Dollars

Each year, Remodeling magazine publishes a “Cost vs. Value Report” comparing the cost of certain remodel projects with Realtors’ perceptions of how those upgrades translate into resale value. The recent 2015 report reveals that if you’re in need of a new front door, replacing it with a new steel entry door offers the No. 1 financial recoup on your investment.

Click here to read “2015 Cost vs Value Report: National Data”.

The report measures cost vs. value ratios based on how construction costs affect resale value, with some consideration as to realtors’ opinions of value in regional markets. In other words, investing $113,097 in a major kitchen remodel will not increase your home’s value by an additional $113,097. According to this year’s report, it will provide an average 59 percent recoup of the construction cost, which translates into an extra $66,747 toward resale price.

Interestingly, small renovation jobs, in the $5,000 range or less, tend to yield a higher cost recovery ratio. For example, replacing a garage door may cost you $1,595 and add $1,410 to your resale value for an 88.4 percent cost recoup. Most of the projects in the report that cost less than $10,000 recouped up to 80 percent of costs.

Click here to read “2015 Cost vs Value Report: Trends”.

Some of the higher cost-to-value ratio projects are those that contribute to curb appeal, such as new siding, a front door or a garage door. Inside the home, updating the kitchen and bathrooms continues to be popular in terms of both buyer appeal and return on investment. However, small kitchen renovations tend to have a better cost to value ratio. For example, a minor kitchen remodel that costs $19,226 has a 79.3 percent ratio, adding $15,255 to resale value. In contrast, a major kitchen remodel to the tune of $56,768 has a lower ratio of 67.8 percent and will increase the sale price by only $38,485.

Another interesting fact is that the cost to value ratio can change each year based on buyer trends. For example, in the 2014 summary there was growing interest in finished attic bedrooms and basements. Those cost to value ratios had risen to 85.6 percent and 79 percent, respectively. This year, however, the value of those upgrades has dropped by more than 8 percent (attic bedroom) and 6 percent (basement). For 2015, one of the most popular trends is to replace house siding with manufactured stone veneer. It ranks second on the 2015 cost-value report for value, with a cost-value ratio of 92.2 percent.

Even weather can have an impact from year to year. In 2014, given the impact of Superstorm Sandy and other extreme conditions, installing a backup power generator was the number one highest cost-value project. This year, it posted the biggest drop in cost-value (11.3 percent).

The cost-value report also covers regional variations in renovation ratios. For example, in San Francisco the average payback for all projects is more than 100 percent. Other high-ticket areas where renovations offer a strong return on investment include Honolulu (94.6 percent), San Jose, California (87.1), Riverside, California (84.1), Sarasota, Florida (80.7), Austin, Texas (78.6) and New Orleans (77.6).

While updating for better curb and indoor appeal can pique the interest of buyers, sellers can lose them just as fast once an inspection is conducted. No amount of stainless steel appliances and granite countertops can make up for a leaking roof or crumbling foundation. In every report since 2003, basic home maintenance replacement jobs, such as doors, windows and siding, have yielded a higher cost-value return than remodeling projects.10 It may help to look at your home from a buyer’s perspective. If he or she has to put money into the house after buying it, he or she would probably rather do the cosmetic upgrades in order to tailor them to a specific taste.

Keep in mind, nonetheless, that existing homes often compete with new builds and newer homes, so today’s buyers tend to prefer the open-concept layout for kitchen/dining/living areas and upgraded kitchen and baths. If you have only a small budget for cosmetic items, consider simple upgrades with widespread appeal. For example, paint your walls and cabinets neutral colors. No one wants to walk into a girl’s bedroom painted with interchanging pink and purple walls and try to picture a son living there; the reaction could be much worse if the son is there to see it in person.

Other simple enhancements may include updated drawer and cabinet pulls, a rain shower head, and throw rugs in areas where hardwood floors are scratched or stained. Of course, make sure the home is uncluttered and thoroughly cleaned. Even an outdated bathroom may get a pass if the potential home buyer can say, “Well, at least it’s clean.”

If we can be of any assistance to you in any of your “financial remodeling” please contact us at 801-990-5055.

Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, a Registered Investment Advisory firm, and offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor. Insurance products and services offered through B.O.S.S. Retirement Solutions.

This content is provided for informational purposes only. It is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.