Home Improvement Projects : How Much Equity Will You Build?

Home improvement projects are booming, expected to cross $110 billion in total volume this quarter. Unlike in recent years, however, the projects aren't helping to create much new home equity.

According to Remodeling Magazine's Cost vs Value Report 2011-2012, for each home improvement dollar spent in 2012, homeowners can expect to recoup just 58 cents in home equity. 

This figure is down sharply from 2005, when the cost-to-value ratio was 87 percent. 

Today's homeowners get a much smaller payoff on their home improvement projects. If you're planning to remodel/update in preparation for sale, therefore, consider the following projects, each of which carries a high cost-to-value ratio.

From Remodeling Magazine's "Mid-Range Project" list :

• Steel Entry Door Replacement : Cost, $1,238; Recoup, 73.0%
• Attic Bedroom : Cost, $50,184; Recoup, 72.5%
• Minor Kitchen Remodel : Cost, $19,588; Recoup, 72.1%
• Garage Door Replacement : Cost, $1,512; Recoup, 71.9%
• Wood Deck Addition : Cost, $10,350; Recoup 70.1%

By contrast, other projects carry a low cost-to-value ratio, and should only be undertaken if the project's utility exceeds its cost. These projects don't do much to raise a home's resale value.

• Home Office Remodel : Cost, $27,963; Recoup, 42.9%
• Sunroom Addition : Cost, $34,133; Recoup, 45.9%
• Backup Power Generator : Cost, $14,760; Recoup, 47.5%
• Bathroom Addition : Cost, $140,096512; Recoup, 51.0%
• Fiberglass Entry Door Replacement : Cost, $3,536; Recoup 56.3%

In the "Upscale Projects" category, projects including the replacement of doors, siding and windows occupy the list's first 6 slots in terms of cost-to-value. 

If you're planning a home improvement project over the next few months, the timing is right -- both contractor costs and material costs are low nationwide, and improving a home can extend its useful life.

See the complete Cost vs Value report online.

Home Remodeling Projects That You Should Skip

Home remodeling is back in vogue.

With contractors dropping prices in most U.S. markets, and a resurgence in confidence among homeowners, home remodeling projects are expected to top $125 billion this quarter.

Not all renovations will be "worth it", according to Remodeling Magazine's 2011 Cost vs Value report, but some projects should never be started -- especially when said projects render a home somewhat un-sellable.

For example, if installing a new toilet requires that the discharge pipes run along the living room ceiling, the project should be re-engineered, or skipped entirely.

A recent renovation article on CNNMoney.com listed several others "never do" projects.

• Don't add a 4th/5th bedroom to a home with just one bathroom.
• Don't build a bedroom with no closet space.
• Don't make common rooms disproportionately large or small to one another.

And, for all projects, no matter what the details, try to keep the home's traffic flow intact. Nobody likes to walk through bedrooms to get from the kitchen to the living room.

Home remodeling can be a less expensive alternative to moving, and can improve a property's resale value. But keep in mind -- just because a project is featured on HGTV, for example, that doesn't make it a Do-It-Yourself. Some projects can be handled on your own, but most should not.

With the help of a professional, you'll be sure the job is done properly.

If you need the name of a local contractor or specialist, please reach out anytime. I am happy to help you with a referral.