The herky-jerky real estate market — recovering here, lagging there and nearly reaching a bubble in some cities – has buyers, sellers and homeowners all scratching their heads. Uncertainty is the word.
It’s risky to delve into lavish home improvement projects that are unlikely to earn back what you put into them. Even if you’re in one of the markets where CNN Money expects the greatest increases this year – Oakland, Calif.; Tampa, Fla.; Fort Worth, Texas; New Orleans; Richmond, Va.; Hartford, Conn.; Baltimore; Birmingham, Ala.; New York; and Memphis, Tenn. – don’t go hog wild.
The payback on remodeling is up, says Remodeling magazine, which each year publishes a report on the resale value of 35 home improvement projects. But that’s “up” from years of decline. “This trend signals an end to the long slide in the cost-value ratio, which began to fall in 2006 and didn’t begin to rebound until last year,” the magazine says.
Some improvements can raise your home’s value quite a bit, but getting your entire investment back is rare.
The best city for return on your remodeling dollar is Honolulu, Remodeling says. The top 10 cities, in order, are:
- San Francisco
- San Jose, Calif.
- San Diego
- Bridgeport, Conn.
- Fort Myers, Fla.
- Charleston, S.C.
- Oklahoma City
- Washington, D.C.
- Austin, Texas
You can easily end up pouring money down the drain by launching into a home remodeling job without learning what the payback might be. Ask several local real estate agents what a particular project might do to your home’s value. You might go ahead anyway. But you’ll do it with your eyes open.
Here are Remodeling’s five biggest money wasters, along with the return on investment for each and cheaper alternatives. Estimated costs are national averages. Click a project’s name to see the magazine’s detailed description.
1. Home office remodel: 49 percent
Remodeling says a home office remodel is the worst investment of the 35 it analyzed. But maybe that’s because it envisioned spending $28,000 on the job. At that cost, you’d better get a lot of pleasure out of it because you won’t recoup even half when you sell the home.
This project involves remodeling a 12-by-12-foot existing room, not adding space to the home. Included: new drywall, floor-to-ceiling custom built-in cabinets, 20 feet of laminate desktop, industrial carpeting and rewiring.
A cheaper version
Storage and a desk are your potentially most expensive items, so scout out used bookshelves and storage cabinets. Paint them all the same color for a seamless look. Make a desk from any flat surface. Use a door (remove the knob or buy a new one without it) or a length of inexpensive laminate countertop from a big-box or hardware store. For the base: an old desk (painted) or two file cabinets.
For a calm, uncluttered look, use cable covers to hide exposed cords. Include three kinds of lighting: task lighting at your desk, and overhead lighting and lamps for ambient light.
A comfortable chair matters. Try out as many as you can before buying, even if that means taking a laptop to the store and typing there for a half hour. I found a $400 or $500 ergonomic chair used for $99 at a store that carries both used and new office equipment.
Purchasing a printer? Get a smaller-sized all-in-one printer/fax/scanner.
One last thought: If you’ll be spending a sizeable chunk of time in your office, consider renting office space away from home. Here are pros and cons, costs and where to search.
2. Sunroom addition: 52 percent
The next worst investment in your home is a sunroom. Remodeling magazine bases its calculations on a 200-square-foot addition costing, on average, $73,546 to build.
A cheaper version
Use an existing door. ”Knock as much as $8,000 off the cost of the project by using an existing exterior door (or even window opening) to access the new space, since it means almost no changes need to be made to the exterior wall,” advises HouseLogic.
Rethink the HVAC. ”Instead of expanding your house’s ducts or pipes into the sunroom, which could require replacing the old furnace and compressor with a larger-capacity equipment, you could add independent heating and cooling to the room, using electric baseboard heat, for example, and a ductless air conditioner,” HouseLogic says.
Forgo insulation. Eliminating the heat or cooling system, insulated glass and insulation lets you enjoy a three-season sunroom for less. “You wouldn’t want to sit out there when it’s snowing, but it’s great on spring or fall days when it’s too cool to be outside,” says LandscapingNetwork.
3. High-end master suite addition: 56 percent
Expanding the footprint of your home is an expensive proposition. Consult a local Realtor to learn what effect adding a bedroom or bath would have on your home’s value.
This job, at a cost of $224,989, is lavish. It involves a 32-by-20-foot addition built over an existing crawl space. It includes a spacious sleeping and lounging area, custom storage and bookcases, a gas fireplace, walk-in closet and high-end walk-in shower tiled in stone, a whirlpool tub, twin sinks and plenty of granite.
There are more luxury touches, like a 5-foot-long bar and mini kitchen and in-floor heating.
Go high end for your own pleasure but not to get the money back when you sell.
A cheaper version
Remodeling Magazine offers a more-modest alternative that costs, on average, $103,844 — less than half of the price of the luxury suite. This version pays back better, about 67.5 percent of the cost. It’s smaller, at 24 by 16 feet. It has a walk-in closet and a bath with shower, whirlpool tub and double sinks. Missing are the expensive luxury finishes, fireplace and custom cabinets and storage.
Another thought: Instead of adding space, remodel or simply redecorate an existing room. Use imagination in place of money. For inspiration, see HGTV’s “24 Bedrooms on a Budget” done by readers. Each has a stunning headboard. You’ll find instructions and ideas for 24 DIY headboards here, from Sunset magazine.
4. High-end garage addition: 58 percent
You know the new garage you’ve been dreaming about (the one many people fill up with overflow stuff from the house)? Remodeling magazine says the deluxe version – a 26-by-26-foot freestanding space with moisture-resistant drywall, modular storage, task lighting, window and door trim, paint and an epoxy finish on the cement floor, costs $82,311.
It pays back just over 58 percent, making it the fourth worst remodeling investment.
A cheaper version
Remodeling Magazine also designed a modest ($49,911) 26-square-foot, two-car garage addition that earns a more reasonable 69 percent on average at resale. This garage, a structure of the same size, saves money by using less expensive doors and windows and it is unfinished.
But here’s another idea: If you are determined to do the high-end job and then find that you can’t repay the construction loan, just turn it into an apartment (SFGate explains how), rent it and use the income to pay off your loan.
5. Bathroom addition: 60 percent
The price for adding a 6-by-8-foot bathroom over a crawl space is $38,186. For this you get a cultured marble vanity top and molded sink and fairly ordinary hardware, toilet, fiberglass tub-shower and a ceramic tile floor.
Interestingly, this is the cheaper option. The magazine’s bigger, luxe version of the same project recoups a wee bit more – nearly 61 percent in all – of its $72,538 cost.
A cheaper version
Remodeling a bathroom, instead of adding a new one, saves considerable money. The magazine priced an upscale bathroom remodel ($51,374, 64 percent return) that involves expanding a 35-square-foot room to 100 square feet. A much cheaper plan is a similar project in the mid-range ($16,128) that keeps the room at 35 square feet and pays back 72.5 percent.
Even cheaper: Bankrate rounded up ideas for a $500 bathroom remodel. These include:
- Install new hardware, vanity lighting, towel bars, shower head, toilet seat and toilet paper holder.
- Repaint for as little as $15 a gallon (to cover 350 square feet) and your own sweat equity.
- Replace the vanity. You probably won’t find a new vanity-countertop combination over 40 inches wide for less than $500, Bankrate says. But you don’t have to go new. Search your city for salvage stores and secondhand hardware shops.
Some of the best return on investment, the magazine found, comes from relatively inexpensive improvements, for example:
- Backup power generator – $11,742, a 67.5 percent return.
- Wood deck addition – $9,539, an 87 percent return.
- Steel entry door replacement – $1,162, a 97 percent return.
- Roofing replacement – $18,913, a 68 percent return.
- Garage door replacement – $1,534, an 84 percent return.
What do you think? Is it worth spending the money on remodeling jobs that don’t earn much back because you so enjoy the new space?
Brought to you by: Money Talks News, written by Marilyn Lewis