Every year, Remodeling Magazine publishes a cost vs. value report in which they empirically compare how homeowners are investing in their properties and how these investments ultimately pay off in the resale of their house. While there are many reasons to invest in home repairs or remodeling jobs, there are ultimately projects that will be worth the investment in terms of resale value, and those that won’t be. Here we will dissect the data for the Cincinnati area and help you make good investments for 2012.
Make Wise Investments in Your Cincinnati Home
Home Improvements: Proceed With Caution
The return on investment for home construction projects reached a high nationally in 2005 at 85%. Now, obviously these projects vary, but essentially in 2005 if you invested money into fixing up your home, then you could reasonably expect 85% of that money back on average when it came time to sell the home. That number has dropped every year since 2005 and has now reached a 10 year low such that in 2011-2012, a home repair or remodeling project will likely only see a 57.7% return on investment. Grim to be sure, but do not be discouraged. Certain projects are still well worth the investment but are dragged down by grossly under-performing projects. So first, the projects to avoid in Cincinnati this year.
The Black List – Repair and Remodeling Projects to Avoid in Cincinnati
Project to Avoid #1
Home Office Remodeling = 36%* Return on Investment
Remodeling your home office is not worth it. Do you think realtors often hear this comment from prospective buyers: “I know it didn’t have enough bedrooms for us and that the kitchen was in bad shape, but did you see that office? I could spend so much time in there!” The answer, simply, is no. Offices are functional and convenient for the stay-at-home worker but are a luxury compared to an extra bedroom or a lightly remodeled kitchen. This will certainly vary depending on your neighborhood and situation, but as long as people are commuting to work in Cincinnati, a home office will not be worth it to a prospective buyer and thus not worth it for you as a remodeling project.
Project to Avoid #2
Complete Bath/Kitchen/Basement Remodels = 55.7% Return
While a home office remodeling job will be the biggest offender in terms of poor return on investment; remodeling your kitchen, bathroom, or basement will not pay either. We all want a beautiful kitchen space, but in Cincinnati a complete kitchen remodeling job will cost upwards of $109,000 and will only return $59,251 or 54%. Bathrooms and basements fare slightly better at 55.8% and 57.3%, respectively. With such a high initial capital investment, it is hard to conceive that these steep costs will translate into an equally higher home price when it comes time to sell.
Project to Avoid #3
Home Additions = 50% Return
When the going was good with the housing market, adding on to your house was a no-brainer. Increasing the overall square foot size of your home as well as adding on the utility of another bedroom, bathroom, or other more discretionary expenditures would have likely paid off. But in these more difficult times, that sale is not so easy. Home buyers now are much more conscious of the increased energy and maintenance costs that a home addition requires as well as the near $100,000 that the average home addition will cost in Cincinnati. Additions on the low end in Cincinnati will cost $87,491 and see a 51% return while on the high end will cost $121,696 and will see a 48% return which makes these projects real financial losers in the end.
The Good List – Projects Most Worth their Initial Investment in Cincinnati
Worthwhile Project #1
Attic Remodeling = 72.6% Return
Turning your attic space into a bedroom (and even then adding a bathroom) makes a lot of sense. You are adding utility to your home with an added bedroom and you aren’t expanding the footprint of your existing house which will cost more to maintain and supply utilities for. These projects do have a high initial cost and should be done with care (IE don’t ignore other maintenance items or neglect the rest of your house, this is all cumulative). At an initial cost of $50,205 (down from $51,029 last year) and with an expected resale value of $36,473; a 72.6% return makes remodeling your attic one of the best financial investments that you can make in a Cincinnati-area home.
Worthwhile Project #2
Exterior Repairs = 62.88% Return
Repairing your doors, windows, and siding will almost always be a better investment than any large remodeling project. Not only do these repairs improve the curbside appeal of your home, but they can also add to the integrity of your home against water damage and increase energy efficiencies which will pay dividends for you and any prospective buyers. This high return rate is due in large part to the fact that these projects require relatively low initial investments (less than $20,000) and so are not quite as difficult to recover in the end.
Roof maintenance is immensely important and under-valued; however, be careful with entire roof replacements in this context because such projects have a high initial cost ($40,000+) and are unfortunately not valued very highly as a selling point for home buyers based on this data (50% return). We suggest looking instead at roof repairs and regular maintenance.
Worthwhile Project #3
Kitchen Repairs = 65.7% Return
Repair projects have long outpaced remodeling projects in terms of return on investment, but this is especially true in the kitchen. With complete remodeling projects costing upwards of $50,000 in Cincinnati (and getting only a 54% return), smaller kitchen projects under $20,000 are expected to get more than a 65% return and are a much better investment. Such small repairs would include new counter tops, a tile backsplash, cabinet doors, minor plumbing work, and improving your hardware/appliances as opposed to a complete remodel or structural change.
Get Your Project Started
We’ve tried to outline what projects are worth taking from a financial perspective and which projects you should avoid as best you can. And while this information is true for the Cincinnati area; conditions will certainly vary by neighborhood, home, budget, and of course family. The best thing that you can do is contact a home repair professional that you trust to see what projects you can do and for how much and then compare (individually or with a real estate agent) this information against home sale data in your area to see if that type of investment is worth it in the long run.
*Percentage return is based on estimates for how much such projects will cost, and how much they will increase the sale value of the home as a result. So if you spend $100,000 on fixing your house, and this results in a $75,000 increase in the sale price of your home, that is a 75% return. All values are for Cincinnati, OH in 2011-2012, Remodeling Magazine Cost vs. Value Report 2011-2012.
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