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Home Improvements that Pay Off – Part 2

It is important to keep in mind that the same home improvement project can affect the value of a home differently depending on not just the region but the neighborhood. For example, in some parts of the San Francisco Bay Area, installing a swimming pool can increase a home’s value more than in others. In places with a cooler climate, a pool may be installed by a person with special exercise or health needs. But it may not add in any significant manner to the value of the house as the utilization of the pool by the average homeowners may be little to nothing because of the low temperatures.

Conversion Vs. Addition

It is often assumed that additions to a home will result in a significant increase in value. This is not necessarily so. How the addition fits into the existing structure, the way it affects aesthetics and other factors work to determine the market value of the additional space that has be gained. Keep in mind that a buyer looking for a 3 bedroom house will not care about how much has invested in creating the third bedroom – he is looking at the total cost. That is why conversions are often a far better investment in terms of return. First of all it is usually a cheaper project so the change to the market value will not be so much as to scare away a buyer. As an example, the Cost Vs. Value report put converting an attic into a bedroom as the 3rd  best improvement in terms of payoff. On an average, it will pay back over 84% of the amount spent on it.

The thing about additions is that if done with architecture, beauty and utility in mind, they can pay off big time. A homeowner added a 500 square foot family room to a 1,200 square foot home, opening it up to the year. This had such a dramatic effect on the overall ambience of the home that what was valued at $750,000 before the additions sold of $850,000 after it. But such cases are few and far between.

The Numbers

According to the Cost Vs. value report, the following renovations offer the best returns on investment:
  • Entry door replacement: 96.6%
  • Deck addition (wood): 87.4%
  • Attic bedroom: 84.3%
  • Garage door replacement: 83.7%
  • Minor kitchen remodel: 82.7%

And these offer the worst pay offs:
  • Home office remodel: 48.9%
  • Sunroom addition: 51.7%
  • Bathroom addition: 60.1%
  • Backup power generation: 67.5%
  • Master suite addition: 67.5%

Different Kinds of Pay Offs

It is a mistake to look at a home remodel only in terms of how much it adds to the monetary value of the home. There are other values to be taken into account – the comfort, safety and happiness of the people who live there. In fact these should, in most cases, be the guiding factors in a defining home remodeling project. But keeping the financial pay off in mind will never hurt.

In conclusion, it needs to be said that the amount that home improvements add to the home’s value depend a great deal on the cost vs. value factor. We started by saying that a new front door can recover 96.6% of its value. But the door must suit the house. And often the same kind of return, in percentage terms, can be achieved by simply painting the door. Before making home remodeling decisions, talk to your designer and contractor about what kind of return you can expect on your investment. When it comes to home improvements that pay off, what looks like a sure shot can be a hole that will suck up all the money you put into it.

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