A Guide to Remodeling Your Home: Home Renovations That Pay Off

If you’re already a homeowner, or plan to be you may at some point consider improving your home. Most homeowners have a mile long list of small improvements like painting rooms, fixing squeaky doors, or replacing worn-out flooring. The big projects, like remodeling the kitchen, and adding another room are the ones we dream about. When does it pay to do the big projects, and how long will it take you to recoup your investment?

kitchen remodeling

Photo mlitty via Flickr

The answer lies in part with this amazing resource put together by realtors and remodeling pros from around the country. The Costs vs. Values survey offers the 2008 numbers for Cost of home improvements Vs. Resale Value. The survey is split down by state, and city for an accurate view of your local market.

The question you need to ask yourself when considering home improvement projects is how long do you plan to stay in your home? If you plan to stay in your home for less than 5 years, most larger improvements won’t be cost effective. You will likely get more bang for your buck by improving your curb appeal.

From Realtor.org:

Once again, exterior remodeling projects lead the way for recovery on dollars spent in this year’s Cost vs. Value survey. When you compare the national averages, replacement projects that boost curb appeal— siding, windows, and decks — give you the greatest chance of recouping your money.

If you have a longer timeline, or your home needs major improvements to be in shape to sell, you should consider running the numbers.

Let’s take a closer look to see the real dollar value of making both a small improvement (upgrading a bathroom), and a large improvement (remodeling a kitchen). For the sake of ease we are assuming that the 2008 numbers will be similar to the next 5 years with small fluctuations.

Mid-Range Home Remodel

Remodeling a bathroom can be a big project, but in our analysis a bathroom remodel includes the basics. No heated towel bars, or top of the line cabinetry here. Using the national average, we see that a typical bathroom remodel averages just over $16,000. In resale you can expect to see just under $12,000 in return for your investment. A typical bathroom remodel will likely last approximately 20 years.

  • $16,000  – $12,000 = $4,000
  • $16,000 / 20 = $800 per year of use
  • $4,000 / $800 = 5 years

To recoup the difference would take an estimate of 5 years.

Recommendations: Proceed with this renovation only if it is absolutely necessary, or you know you are going to stay in your home for longer than 5 years. To freshen up a bathroom for less, you could consider painting cabinetry, painting walls, changing lighting and faucets, and adding a more efficient toilet.

Large/Upscale Home Remodel

A kitchen can be done on a budget, but in this case we’ll look at a total overhaul of the kitchen replacing the cabinets, countertops, flooring, and appliances with high-end or commercial grade products.  We will use an average of 25 years for this project when it is typical to replace appliances and perform a minor remodel.

The national average in this instance is just under $111,000. In resale you could expect to see a return of approx. $78,000.

  • $111,000 – $78,000 = $33,000
  • $111,000 / 25 = $4,440 per year of use
  • $33,000 / $4,440 = 7.43 years

To recoup the difference would take an estimate of 7.5 years.

Recommendations: Proceed with a high end renovation if you plan to stay in your home longer than 7.5 years. Consider a smaller remodel if an upscale remodel doesn’t fit with your home or neighbor’s homes (you don’t want a $100,000 kitchen in a $200,000 house or the only $100,000 kitchen on the block). For most people they will consider what is important to them, and shave thousands off the price by doing so. You could for instance go with a painted cabinet versus a wood cabinet and save thousands.

Using the survey numbers, and your own budget you can get an idea of how long it will take to make your renovations pay. For more specific information on your local neighborhood, or area contact a realtor in your area.

Remember that while home improvement doesn’t always pay when you sell your home, in most cases if your home needs improvement it is better to do it now, and enjoy the remodel whether than wait. After all a home is not just an investment, but a place you live.

About the Author

By , on Oct 1, 2009
Kelly Whalen
Kelly Whalen is a stay at home mom of 4 kids, who is on a mission to pay off all her consumer debt, and keep her home from falling into chaos. You can find her at The Centsible Life. You can also find her on twitter.

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Leave Your Comment (9 Comments)

  1. Kelly Whalen says:

    Jeff, it’s true I didn’t take into account the emotional/psychological impact. I don’t know how I could quantify it!

    John, I agree! Our house has zero curb appeal, so we’re constantly working on little things to improve it (new mailbox, etc.) but we also have some bigger projects planned. (new front walkway, landscaping, and removing the paint from the bricks on the front of our house)

    Lucy, I love BBC home shows. My favorite by far was Ground Force. We sadly don’t have cable anymore.

    Samurai, those sound like things that will pay off.

    kenyantykoon, it is stressful and expensive for sure! Renting is cheaper, but you have to rely on someone else to make repairs, and there is no guarantee that it will be done in a timely fashion.

  2. kenyantykoon says:

    i still rent out and i think that i will continue doing so. this seems to be such a stressful thing to do; not forgetting expensive

  3. I built a brand new Waterworks bathroom, extended a deck out 10 feet, and added double pane windows throughout the house.

    Other than this, I don’t think I will bother with anything else.

  4. Lucy says:

    Here in the UK remodelling is an absolute must if you are to have a home you feel comfortable living in. It has developed into a sub economy spawning endless TV shows and guru celebrities who have become household names. It is a bit sad really, because it often mean many people can’t have a home they enjoy living in because of rapidly inflating prices. But I agree, it is worth considering whatever your situation.

  5. Exterior remodeling will attract prospective home buyers and make you feel good about your house!

  6. Jeff says:

    While difficult to pinpoint an exact monetary value on it, one’s increased happiness in having nice, new bathrooms is something to squeeze into the equation. We had both our bathrooms gutted and remodeled at a total cost of around 32k and the joy of seeing and using clean new spaces remains even after a few years (the old rooms were rather nasty).

  7. Kelly Whalen says:

    Laura,
    Green remodeling would make a great post. I’ll have to do some research. :)
    So jealous of your solar panels!

    I would think more buyers would like green improvements, but I bet it would vary area by area, and it would be useful to know which green projects are worth it, and which may assuage your inner environmentalist but not your wallet.

    Kyle, great point! In some cases it can be cheaper, but it depends on how handy you are.

  8. Kyle says:

    Another thing to take into consideration is how much of the work you can do yourself. If you can take on a good portion of the remodeling it is going to cost you less and shorten that break even point.

  9. Laura says:

    It’s not exactly a renovation, but I am about to put on solar panels. With the rebates available, I should break even within 2 years, and that doesn’t include the value it adds to the house.

    I’m curious about how financially practical different green improvements are.

    Thanks for the info; we’re looking at redoing the kitchen in the next few years. :-)

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