Top 10 Home Updates That Pay Off

In a tough market, these projects are your best bet.

By Dona DeZube, FrontDoor.com

Wondering if you’ll be able to recoup the cost of your next home remodeling project? It’s tough to know in today’s market.

With uncertainty ruling real estate, it’s not surprising that seven of the top 10 projects in the 2009-2010 Remodeling Magazine Cost vs. Value Report are exterior upgrades. About 4,000 real estate agents and home appraisers were surveyed for the report.

It makes sense. With so many houses for sale, a fabulous exterior is exactly what a home seller needs to lure in potential buyers.

Find out what 10 projects have the best return based on their cost and the value they add to your home.

Value of Remodeling Projects Down

Overall, the average value of home improvement projects declined for the 33 projects in 80 cities that the magazine condenses into a single number for the Cost vs. Value report.

“That one cost-to-value ratio number has been dropping since 2005,” says Sal Alfano, editorial director of Remodeling Magazine. “The rate of decline has slowed, which is a good thing, but this is such an odd year that the data is hard to interpret. Take the results with a grain of salt because of the unusual market this year.”

Projects found at the bottom of the list include home offices (48 percent return) and sunroom additions (51 percent return). What do they have in common? Both are expensive and don’t have broad appeal.

Sunrooms aren’t used as much as kitchens or bedrooms. And, while a home office is great if you work from home, it won’t add value when you sell, especially if you took away a fourth bedroom to create your workspace.

Check Local Figures Too

Along with its national figures, Cost vs. Value also offers complete regional and city data, which can be downloaded for free at www.costvsvalue.com. However, even the local information should be used carefully.

The survey, Alfano says, provides a baseline estimate of value, not a guarantee that you’ll actually recoup any particular value for an individual remodeling project.

“None of it should be taken literally by a homeowner,” he warns. “The fact is that they’re averages and hypothetical and the areas we survey cover MSAs [Metropolitan Statistical Areas] that are huge and you have neighborhoods where prices fluctuate.”

The best way to use to data is as a measuring stick. Decide whether you’re in an upscale or mid-range neighborhood and then use the average local prices to make sure the price you expect to pay for your next project is reasonable.

#1: Steel Front Door
Return on investment: 128.9%

Installing a mid-priced steel door costs less than $1,200 and creates nearly $1,500 in value. “Real estate agents look at that and say it doesn’t cost anything, it’s the first thing the buyer sees, and it spruces up the whole house,” says Alfano.

#2: Fiber-Cement Siding
Return on investment: 83.6%

Adding new siding is like buying a new outfit for your house and fiber-cement siding is the upscale choice. It costs a little more than foam-backed vinyl siding, but it adds more value too, according to the Cost vs. Value report.

#3: Attic Bedroom
Return on investment: 83.1%

Can’t afford to move because your house is worth less than your mortgage but need more room? Spend about $49,000 to create a 15×15-foot bedroom and a bathroom in your attic and you’ll recoup an estimated $41,000 when you resell your home.

#4: Wood Deck
Return on investment: 80.6%

A 16×20-foot wood deck will give you a better return than the same deck built with a composite. The composite costs about 50 percent more, and the return with a composite desk drops to 71 percent. “Ninety percent of my buyers aren’t concerned with decking material,” says Susan Huerta, an agent with Long & Foster Real Estate in Clarksville, Md.

#5: Vinyl Siding (Mid-Range Neighborhoods)
Return on investment: 79.9%

When choosing replacement siding, follow the neighborhood. If everyone is using vinyl, there’s no gain for you in opting for more expensive, fiber-cement siding.

#6: Foam-Backed Vinyl Siding (Upscale Neighborhoods)
Return on investment: 79%

If you live in an upscale neighborhood, consider foam-backed vinyl siding to increase energy efficiency. Consider the bottom-line cost including window trim and do the math first to make sure you’ll see real savings on your utility bill.

#7: Minor Kitchen Remodel
Return on investment: 78.3%

Updating the kitchen by refacing the cabinets, adding a new laminate countertop, sink and faucet, then finishing up with a new resilient floor will bring your kitchen up to date for an average cost of about $21,000. Ripping it all out and starting new will run you $57,000 and returns only 72.1 percent, according to the Cost vs. Value report.

#8: Wood Windows
Return on investment: 71.5% to 77.3%

Since the return is about the same for vinyl and wood windows, consider what’s standard in your neighborhood. As with all remodeling projects, your safest bet is to match, but not exceed, what the Joneses have.

#9 Vinyl Windows
Return on investment: 76.5% to 76.6%

Be wary of any claims window companies make about how much new windows will save on your energy bills. “The payback on windows isn’t always quick, unless you’re living with a really old set of windows,” Alfano says.

#10: Basement Remodel
Return on investment: 75.4%

In the Cost vs. Value report, this is a big project — creating a 20×30-foot family getaway with a wet bar, recessed lighting and bathroom with shower. In essence, you are adding living space. Average national tab for all that is about $62,000, and you’ll get back an average of $46,825 at resale, the survey predicts.