Bloom's Blog

Is remodeling worth the investment?

Rarely will you ever get a dollar for dollar return on remodeling or home improvements. However, some projects are worth more than others so thinking both in terms of lifestyle and investment are important. In general terms, the smallest or least attractive house in the neighborhood can always justify more than the largest. Every neighborhood is different so talking to a real estate professional or contractor can help create both maximum return and functionality.

If home values just finished a major growth spurt, enjoying more living space or nicer amenities may only be possible by staying put. The cost to move up to a nicer house may, very well be beyond your means. I frequently hear, “I could never afford to buy my house today.”

So, where do you put those remodeling dollars to work? Well, the people at Remodeling Online received 2188 email responses from members of the National Association of Realtors to prepare their 2006 Cost vs. Value Report. Following are excerpts from this report for the Pacific region. The costs are an average for projects reported. The final column (Value %) is the increase in home value as a percentage of improvement cost.

So, by the looks of it we like to our kitchens, bathrooms and energy efficient windows. If you had a budget of say, $50,000 and split it between the bathroom, kitchen and windows you’d come close to a 100% increase in value of dollars spent. For those of you thinking about buying an investment property or spec house, think in these terms. Oh, ….and the swimming pool? Numbers vary widely but 50% is probably a pretty good increase of home value to cost with a nicely installed, in-ground, well maintained pool.

Financing home improvements is possible in a wide variety of ways, the most common of which is a Home Equity Line of Credit (HELOC). If your project is a partial tear down or significant addition, you may be a good candidate for construction lending. The benefit with this is a loan to value ratio based on the completed value after improvements are made (where a HELOC only considers value before improvements). This means potentially more money to work with. Your circumstances are unique, so ping me if you would like to discuss options.