Does The Payback Worth To Do The Remodeling? – 6 Factors To Consider Before You Start

People do home remodeling for different purposes. Some remodel their homes in order for a better living space because they want to stay in their homes for a long time, and some do it as an investment for a good return or any other reasons.

But, when you consider doing remodeling your home in hope of selling your home for a better return, what is the first question you should ask?

The single most important one is that “Does the home remodeling payback worth the investment?” Or “Is this a good investment?” In the other words, what the return and cost ratio is, good or bad?

How well a remodeling project  pays back on its initial costs is dependant on many factors. You need to weigh at least some of the most important ones before you make your decision to go forward.

Here are some important factors you must consider before you start your home remodeling project in hope to sell it for a better return.

1. The market conditions

The payback on remodeling in general is better in a hot real estate market than in a slow market. You could bring very good return in a very hot market. For example, just few years ago in Los Angeles, the home price per square foot was so high. The cost of the construction per square foot was relatively very low. The costs of adding a room was about $40,000. But it added the value for at least $60,000 dollars.

2. The condition of the home

Does your home have a potential to add tremendous value if certain remodeling is done?

Adding a bath room to a home with 3 bedroom and one bath will definitely get a better return than without adding it if you can get it done within a reasonable construction costs.

Replacing ugly old kitchen cabinets and appliances could cost you $4000 to $8000. But, it could add your home value up to at least $10,000 dollars.

3. The conditions of your neighborhoods

If you upscale your home with adding a room and make your house 2,400 square feet in a neighborhood of 1,700-square-foot homes, chances are that the percentage of payback versus investment will be pretty low. So don’t overbuild it.

4. Type of remodeling project

According to different nationwide surveys, different type of remodeling gets different returns. But, majority of home remodeling projects couldn’t recoup the construction costs. Here are some samples of the average costs recouped from the different remodeling projects.

Minor kitchen remodeling: 94 - 104 %
Major kitchen remodeling:  90 - 94%
Deck addition: 63 - 78%
Remodel a basement: 62 – 78%

Those numbers are based on the costs of hiring contractors to do the job. But, if you can do it yourself with the same quality, then the numbers here don’t apply to you.

You can get a detailed report on remodeling cost /value from remodelingmagazine.com.

5. The time 

Some of the projects may not have a good return or even lose money if you do the remodeling today and want to sell your home in a few months. But, time will bring you value since the costs of labor and materials are always getting higher a few years later than today. If you do the remodeling right now and sell your home 5 years later, you will recoup your costs or may be getting a good return.

6. The costs

Last, but the most important one. If you can cut down the construction and material costs tremendously and still get the same good quality, you should be able to get a good return regardless what type of projects you are going to do.

Warnings to the doers of do it yourself:

1. If you have a high end home, don’t put cheap materials in your remodeling project. You can only decrease the property value if you do so.

2. If your remodeling project is poorly done or break the code of constructions, you can only decrease your home value.

Best wishes to your home remodeling!

Related article on home selling tips:

http://besthomesellingtips.com/2007/07/11/ten-cheap-ways-to-upgrade-your-home-for-a-very-good-return/

 

Share This