Just a couple of years ago you could rely on getting the bulk of your money back for almost any home-improvement project you took on. Today simply repairing a toilet seat can feel like you are throwing caution, and cash, to the wind. According to a study from Remodeling magazine, the normal return on value for an improvement decreased from 87 % in 2005 to 64 % in 2009. But these 5 new rules will help you maximize your return on your remodeling investment.
Rule No. 1: Repairs get the greatest rewards
The smartest money now goes into “un-deferring” needed maintenance. That’s simply because while buyers might value improvements like Jacuzzis and Sub-Zeros, they will not put up with a house with a leaky roof or old-fashioned plumbing system. And trying to keep problems a secret can cost you big-time.
Rule No. 2: Remodeling beats adding on
Having a huge, formal living-room plus an everyday family room is less desirable than owning one multi-use common area, also known as a great room. So instead of adding on, you’re better off repurposing already existing square footage by reconfiguring the layout or utilizing unused cellar or attic space. Consider tearing down walls that segregates rooms to open up the space. Just be careful they are not load bearing walls needed for the structure.
Rule No. 3: Environmentally friendly upgrades can save cash
Some green improvements pay you back long prior to you sell your house. Install energy-saving features, like Energy Star appliances and additional wall insulation, and you’ll see lower energy bills monthly. You may even qualify for government subsidies to help pay for new windows and energy saving appliances or air conditioning/heating systems.
Rule No. 4: Let the Joneses be your guide
At the time of the boom, you can be the first on your block to have a high-end kitchen area, spa bathroom, or in-ground pool and count on others following suit. Even if the nearby residents never took your lead, there was plenty of equity accumulation through appreciation to cover your expenses. Nowadays that fudge factor is gone. Today be careful not to over develop for the neighborhood. If other homes on the block have real marble kitchen counters, by all means consider adding one to your house, but if everybody still has faux blue-marble Formica from the ’70s, you my not get your money back.
Keep your projects design-neutral so they’ll appeal to the greatest number of individuals. Select neutral colors and standard electrical and plumbing equipment unless your house has a modern architectural style.
Rule No. 5: The new payback time is 5 years
As with any unstable investment, the longer your retention time-frame, the lower the risk. Don’t take on a big project if you’re most likely to live in it for no more than three to five years. There’s just too much of a chance that any funds you invest– apart from needed repairs or superficial cosmetic work– could be lost while the housing market lacks appreciation.