Advice for Home Owners: Don't Over-Remodel (And Some Realistic Remodeling Numbers)

Consumer Reports has some advice for home owners: don't over-remodel your new place. Why? Because you're unlikely to get your money back from the investment. Their thoughts:

Homeowners can expect to get back less of the money they invest in renovations than they would have just a few years ago, according to a survey by Remodeling magazine. In 2005, 10 of 22 projects the magazine listed returned more than 90 cents on the dollar. In the past two years, no project did that well.

A few thoughts:

1. If you're planning on living in the home a long time, then I'd say go ahead with the remodels you want. As long as they aren't over-the-top and don't hurt resale value, you'll get some of your money back in simple enjoyment of the new features. The rest you'll get back when you sell the place.

2. If you can do part of the work yourself, help the guys you hire to do the work, plan your repairs in the off-season or somehow can get discounted rates on the work, you can save a good amount of money and make a better-than-average return on your investment.

In addition to the above, Consumer Reports lists several home improvements, what they should cost, and the value the homeowner can expect to recover. Since almost everyone didn't believe the numbers in my eight home improvements that pay off, you may want to check them out.

Comments

[MoneyGrubbingLawyer]

Interesting... those national average costs seem outrageously high to me. If you're paying that kind of money, there's no question that you're not going to get it back! Then again, if you're paying $21,000 for a minor kitchen remodel, I've got a beautiful bridge to sell you... :)

The best way to save money on renovations is to do them yourself. Obviously, some big jobs require professional assistance, but the majority of small- to medium-sized remodels and upgrades can be completed by just about anyone who can swing a hammer and follow directions.

Then again, maybe I'm just cheap :)

[Uncommonadvice]

I'm rapidly coming to the opinion that no house works should be carried out other than essentials for the time being. Money down the drain.

[MoneyGrubbingLawyer]

@Uncommonadvice - you're probably right if your goal in renovating is to increase your property value and you live in an area with a tanking real estate market. But for many people (myself included), the goal in home improvement is to make their house more comfortable and enjoyable for their family. If you have no plans to sell and you're not motivated by seeing immediate returns in value, this might actually be a great time to remodel, as you should have easier access to contractors and better pricing on materials and everyone else runs away from renovations. I guess it's kind of like contrarian investing for homeowners!

[Kevin]

I agree with FMF & MGL here - if you're going to be in the house for awhile - resale value should be low on the priority list. You need to be happy in the house, so maybe the renovations make more sense than someone who will move in 1-2 years.

BTW, I was watching Dave Ramsey last night (yes I'm a loser) and someone called in asking about this very thing. Apparently their realtor said they could spend up to 25-33% of their total home value on a kitchen renovation (this number was supposedly the "standard") and would expect to get most of that value back when they sell. These people had a $100k home, spending $25k on a kitchen sounded REALLY high to me, and Dave said the same.

[cory]

Side note on the post: the Consumer Reports article does not corroberate the over-infalted numbers from the initial Remodeling article, they simply used the same source and Consumer Reports did their own survey to determine the payback percentage.

@Kevin: These "standards" for how much to spend on what seem to magically go up all the time. For a long stretch, the suggestion for a new kitchen was not to exceed 20% of the home's value. I've recently seen puff-peices quote that an engagement ring should now cost 3 months salary.