After blogging weekly here at BREN for three years, Sam Schneiderman, Broker-owner of Greater Boston Home Team, now posts here on the first Monday of each month. Today, Sam discusses the return on the investment in home renovations.
There are lots of ways that home and condo owners can spend money improving their property. Some will be smart investments and others will never return the investment.
Many owners think that when the time comes to sell they will recoup all of the money that they put into renovations and upgrades, but that is not often the case.
I categorize renovations and upgrades as follows:
- Energy efficiency upgrades and/or replacements that will reduce utility bills (i.e.boiler/furnace replacements) or enhance comfort (i.e. insulation). Replacement windows enhance comfort in addition to conserving energy. These improvements make a home’s resale more appealing and begin to pay back their cost almost immediately. There are also rebates, tax credits and incentives available from time to time.
- Cosmetic upgrades (i.e. paint, siding or hardwood floors) that are often done when ongoing home maintenance is required, but just as often done to personalize the property to the owner’s taste. When done as part of the maintenance cycle, some of these projects don’t cost as much out of pocket and some of them (i.e. paint or siding) prevent potential damage.
- Lifestyle and convenience modifications and additions (i.e. adding bathrooms, closets or living space) often done to better suit the lifestyle or needs of homeowners. These are often big ticket items that might not pay back all of their cost unless they are done to correct a deficiency in the property (i.e. adding a first floor lavatory in certain markets).
When I work with buyers, we often discuss what they would most likely do to a property and if the investment would increase the property’s value. I do that to illustrate that not all improvements return their investment and some projects are done simply to personalize a home. It helps my buyer-clients set priorities.
When working with sellers, I suggest ways to increase value and marketability by investing in upgrades that allow prospective buyers to view the home more favorably. Simple updates like painting kitchen cabinets or replacing bathroom vanities and re-glazing outdated bathroom tiles make a dramatic difference in the way buyers perceive a home and its value.
Over the years I've seen all kinds of claims about how much various improvements add to property values. It goes without saying that the improvement company’s claims should never be relied on. I suggest that homeowners consult with an appraiser or experienced real estate broker to determine how much, if any, return on their renovation investment they will recoup when they sell.
Remodeling magazine’s sister web site lists common improvements with estimated cost and resale value. I am often skeptical about some of their numbers. Take a look and let us know what you think.
What improvements do you think add the most value to a home or condo?
Would those be your highest priority while you were living in the property?
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