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What Brings The Most Return

Best Remodeling Investments

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A Guide To Remodels That Raise Value

From time to time I’ll open my email and find a question such as, “we are thinking about putting in a pool or patio, making this energy efficiency update etc.. How do you think that will affect our resale value?”  These are always really good questions and I’m happy to give my opinion because there is no reason to throw hard earned money away on something that doesn’t make sense.

That being said, I typically group home improvements into 2 categories: lifestyle improvements and practical upgrades.  For instance, I would consider things like putting in a pool to be lifestyle improvements.  They are enhancements that you are making to the property based on your own personal lifestyle preference and often come with added maintenance and upkeep responsibilities.  That doesn’t necessarily mean that its wrong for you to make those improvements, you just need to know up front that you’ll likely limit the appeal of your house to future buyers sharing your ‘lifestyle.” As a result, you probably will not see an overwhelming return on your dollar invested.

On the flip side, things such as adding a stone patio extension, a sprinkler system, additional air conditioned square footage (not building out a garage), repainting the exterior of your home, re-sodding, installing wood floors instead of carpet are safer ways to increase the resale value of your home because of their broad appeal.

Each year, Remodeling Magazine in conjunction with the National Association of Realtors puts out a Cost vs. Value Report based on each region of the US.  This report compares construction costs to resale values for 35 of the most common household projects – broken down between mid range and up scale improvements.  In essence this report helps answer the question, where is my time and money best directed?

Nationally, these were the Top 5 Projects for 2011 Based on Overall Return on Investment.  To provide a broad basis for comparison, the typical average return across the 35 projects studied was 57%.

#1 – Replacement of Exterior Siding (including trim and soffits)
Average Project Cost: $13,461
Average Investment Returned: 78%

#2 – Replacement of Front Entry Door
Average Project Cost: $1,238
Average Investment Returned: 73%

#3 – Addition of an Attic Bedroom & Bathroom
Average Project Cost: $50,148
Average Investment Returned: 72.5%

#4 – Minor Kitchen Remodel (facelift)
Average Project Cost: $19,588
Average Investment Returned: 72.1%

#5 – Garage Door Replacement
Average Project Cost: $1,512
Average Investment Returned: 71.9%

The main report summarizes the information from a nationwide perspective and then the data is broken down into subsets based on 9  regions of the United States.  Inside of each region, it is further segmented to compare some of the major cities.  Austin just happens to be one of the cities included in the report.  You can download or view a copy of the Austin area Cost vs. Value Report at the Remodeling Website.

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Top 10 Most Profitable Replacement/Remodel Projects in Austin
(based on the 2011 Cost vs. Value Report)

1.  Basement Remodel – 83.4% ROI compared to 66.8% nationwide.

2. Attic Bedroom Addition/Remodel – 82.9% ROI compared to 72.5% nationwide.

3. Exterior Entry Door Replacement – 82.7% ROI compared to 73% nationwide

4. Exterior Siding Replacement – 80.6% ROI compared to 78% nationwide

5. Minor Kitchen Remodel – 75.9% ROI compared to 72.1% nationwide

6. Deck Addition – 75.6% ROI – compared to 70.1% nationwide

7. Garage Door Replacement – 75.5% ROI compared to 71.9% nationwide

8. Midrange Bathroom Remodel – 73.2% ROI compared to 62.2% nationwide

9. Major Kitchen Remodel – 73% ROI compared to 65.7% nationwide

10. Family Room Addition – 71.7% ROI compared to 60.2% nationwide

Not surprisingly the top ten list is comprised of projects that do one of three things: enhance curb appeal, add interior square footage or remodel areas of high importance (typically) for buyers – bathrooms and kitchens.  Those projects historically bring the highest return on every dollar invested.  Again, if you would like to download the National, Regional or Local Cost vs. Value Report, you can do so for free at Cost vs. Value dot com.

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