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How to Use Cost vs. Value Data to Your Advantage When RemodelingSeptember 26th, 2014 by
While we still haven’t fully recovered from the Great Recession, the past couple of years have seen a steady uptick in the housing market. Real estate and construction experts have been compiling data for years now in order to determine which remodeling projects give homeowners the most bang for their buck when it comes time to sell. (Note that the data assumes the projects are undertaken by professional contractors.) Starting in 2013 and continuing into 2014, the value of remodeling has increased significantly, leading many homeowners to undertake projects they may have been putting off. In this article, we’re going to look at things you as a homeowner should consider when using cost versus value data to determine which remodeling projects to pursue.
Numbers don’t have preferences. Assuming you plan to eventually sell your house, analyzing cost vs. value data can be very useful because it’s a relatively objective means of prioritizing. We all have widely varying tastes and styles, so it can be tempting to first turn our attention and money toward those areas we’re most personally eager to upgrade. If you’re interested in improving your own living experience within the house, this is perfectly reasonable. But from a cost vs. value perspective, this doesn’t always make a lot of sense. Let’s say you have always loathed those kitchen cabinets, and now that the economy’s on the upswing, you’re anxious to replace them with something more contemporary and stylish. There’s nothing wrong with that, but try to put yourself in potential buyers’ shoes. What if your upgrades don’t mesh with their tastes? You’ve now poured hard-earned money into a project that might very well be a turnoff. You can bet a buyer is going to take into account the cost of “undoing” your remodel when they make an offer on your house.
Location, location, location. Another thing to keep in mind is that the cost vs. value data varies greatly depending on geographical location, so homes in certain areas of the country benefit more from remodeling than those in others. The nature of the project also plays a hand. Pool construction, for example, is going to be more valuable in hot climates like the Southeast than it would be in the Upper Midwest. High-efficiency windows are likely more desirable in harsher conditions than in mild, temperate areas. Likewise, you should always consider the neighborhood. Homes in lower- or mid-value markets won’t see as much of a return on investment from certain remodels as those in high-value markets. The fact is, the values of your neighbors’ properties play an enormous role in how much you’ll be able to ask for, so before you drop a year’s salary on top-of-the-line siding, consider whether you’ll be pricing yourself out of the neighborhood.
When numbers don’t really matter. Realize that some projects are going to be worth the investment regardless of their financial return. Anything dealing with the foundation or structural integrity of your house is too important not to address. Similarly, a sound roof is a vital component to a house, regardless of neighborhood. These projects might lack the flashiness of a master suite addition, but they benefit from the fact that they’re not at risk of turning a buyer off or becoming obsolete in a matter of months or years. Bear in mind that anything related to technology (think home automation and sophisticated HVAC equipment) might seem prehistoric to a buyer several years from now.
Not all value is monetary. Just because a particular remodeling project doesn’t add as much financial value to your property as another, that doesn’t mean it’s not worth pursuing. If you plan to stay in your home for the foreseeable future, you should consider how much enjoyment an upgrade or renovation will bring to your family. The true value of a home, after all, lies within how much it affects the quality of life of its residents. Converting an unused attic into a bedroom might be an expensive undertaking that doesn’t recoup its cost to the same extent as window replacement, for example, but to that teenage son who finally gets his own living space, the value is immeasurable.
Sources: Bankrate; Investopedia; Remodeling; U.S. News & World Report.
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