Ready to fix up that fixer upper you bought for a song and plan to sell as soon as the market turns? Getting a property ready to rent or sell can run into serious time and money. According to a survey of investors last spring by Move, Inc., about a third expected the cost of repairs to exceed 20 percent of the property’s purchase price. That’s more than $33,000 at today’s median home price.
So before you start ripping out the bathrooms or building a new deck, wouldn’t it be a good idea to find out how much the improvements you are planning will pay you back when you sell?
Every year Remodeling Magazine and Realtor Magazine team up to conduct a national survey of Realtors to find out and compare the cost vs. value for popular remodeling and repair projects. The study looks at the various value added of mid-range and up-scale projects, with the typical costs and value added. Over the years, the study has become the bible for contractors and real estate professionals to compare cost and value in changing market places. When I was vice president of public affairs at the National Association of Realtors, I think that every year we received more phone calls from news media about the Remodeling Study than anything else we did.
This year the site calculated national average costs and estimates, and compared the average cost for 35 popular remodeling projects with the value those projects retain at resale. In addition, it list national cost and value estimates, but also localized estimates for nine regionals and 88 cities. Go here for national numbers and select your region and city to get localized numbers for each of the projects.
Over the past two years, the anemic housing economy has taken its toll on resale value. Popular projects like remodeling a bathroom have gone from $17,857 in resale value in 2008 to $10,668 today and their cost vs. value ratio is down from 74.6 percent to 57.2 percent. Kitchens have fared better; a major kitchen remodel returns $40,126 or 68.7 percent of cost today compared to $43,030 or 76 percent in 2008. The top 10 projects in the 2011-12 ranking show a cost-to-value ratio of between 69 percent and 78 percent, for an average of 71.6 percent; that’s down from the top 10 average of 75.8 percent in the 2010-11 rankings.
The projects in the lists below are ranked by current resale values. Since we’re at or close to the price bottom, hopefully resale values with soon improve and so will the financial viability of many of the projects in this year’s survey. If you’re investing for the long term, you might want to take that into consideration.
Five Best Projects Buck for Buck
Siding Replacement (fiber glass/cement).. One of only four upscale projects in the top 10, the Fiber-Cement Siding project has been in the No.1 spot for six of the seven years since it was added to the At a cost of $13,382 and a value of $10,707, siding comes in at 78 percent of the cost.
Entry Door Replacement. Remove existing 3-0/6-8 entry door and jambs and replace with new 20-gauge steel unit, including clear dual-pane half-glass panel. At $1218, the project makes back $903 for a 73 percent cost-value ratio.
Attic Bedroom. Among discretionary projects, the Attic Bedroom remodeling project is in the top 10 for the third year in a row, despite being the most expensive project in the top 10, at an average cost nationally of $50,148. One possible reason for the high value placed on this project, which is ranked third overall (72.5 percent), is that, of all of the projects covered in the report, it is the least expensive way to add a bathroom and bedroom, and it does so within the home’s existing footprint. Along with basement remodel, attic bedroom remodel represents good value to home owners looking for additional space. Both projects add living space and a bathroom within the existing footprint of the home, and both make good use of space that would otherwise be used only for storage.
Minor Kitchen Remodel is fourth overall (72.1 percent), two places better than last year. At a cost nationally of just under $20,000, this project is the least expensive way to give an existing kitchen a complete facelift. In fact, it is the interior version of a replacement project, and includes new cabinet door and drawer fronts and hardware, new countertops, and new appliances. Not surprisingly, since 2004, when Minor Kitchen Remodel was added to the project list, it has been the best-performing K&B project in every year but one.
Garage Door Replacement jumped from 13th to sixth, partly because the average cost of the project dropped more than 15 percent nationally; (71.6 percent).
Five Worst Bangs for the Buck
Home Office Remodel. Working from home has its advantages but fixing up a home office is a cost that doesn’t pay off. In fact, at 45.8 percent, remodeling a home office has the worst cost to value ratio of any project in the survey.
Backup Power Generator might be a must in tornado and hurricane areas, but it’s the second worst value in the survey. Installing a modular electrical backup system with capacity for providing 70 amps of emergency power in two 240-volt circuits and six 120-volt circuits costs $14,718 but recoups only $7136 for a 48.5 percent cost to value ratio.
Sunroom Addition. Constructing a 200-square-foot sunroom addition, including footings and slab-on-grade foundation, pays off poorly today. At a cost of $75,224, it recoups only $36,354 at sale, for a 48.6 percent value.
Master Suite Addition. You can lose more money by adding an upscale master suite than any other project on the list. A $232,062 investment turns into only $122,570 when you sell, a 52.7 percent cost to value ratio.
Bathroom Addition. Adding a bathroom used to be one of the best ways to add value to a house, but today, you’ll be lucking to realize half of your investment. At a cost of $78,407, an upscale addition will recoup $41562, a 53 percent cost to value ratio.
Photo: Dave Fischer