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Home remodeling: Pick renovations that pay off

If your remote control is stuck on Home and Garden Television and you're on a first-name basis with the clerks at Home Depot, chances are you've caught the home-improvement bug.

You're not alone. Interest rates on home equity loans are favorable, and the cost, availability and selection of materials have never been better.

But when it comes time to sell, will you recoup the cost of that new master suite, state-of-the-art kitchen or dormered attic loft? The time to find out is before you pull out the power saw, not after.

Should you stay or should you go
Both remodeling and relocating can be expensive. The difference, of course, is that the money spent on remodeling is reinvested into your house, and if you finance correctly, the interest on your payments can be tax deductible.

There are four occasions when remodeling your home makes sense, says Susan Luxenberg, author of Fearless Remodeling! A Planning Guide for the Homeowner:

  • You want more space and can't find a home that meets your needs.

  • It would cost less to improve your home than buy another with the amenities you want.

  • It would make the home more functional.

  • It doesn't price your home out of the market.

Luxenberg says if you have a $150,000 home and you want to do $40,000 of remodeling, ask yourself if you can buy the same end product for $190,000 or less? If not, remodeling makes sense.

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If you have little choice but to move (to a new job, for example), rule of thumb suggests you put the money into your new house, not your old.

Equity options
Fortunately, several financing options for home renovations are readily available today.

If you have the equity to match your total project cost, a traditional home equity loan may be your best bet. Bankrate.com's home equity basics can help.

If your improvements include energy-efficient upgrades (insulation, thermal windows, new HVAC system), you may qualify for energy-saving loans through local utilities or related businesses.

Remodels that pay off
Making capital improvements -- perhaps replacing the roof or the heating or cooling system -- not only adds value, it makes the house more sellable.

"It's a very big selling point. It's a big-ticket item," says Katie Hamilton, of St. Michaels, Md., co-author of the syndicated column "Do It Yourself ... Or Not?" for the Los Angeles Times.

But Hamilton says fixing what you have can be more important than making improvements.

"I think what most people don't realize is the maintenance and repair is where you really get the most payback.

"They're not nearly as glamorous, but I think that sometimes people forget that if you go to sell your house, those are some of the things buyers are going to be looking at."

Proper maintenance includes updating mechanical systems like plumbing and electrical systems and getting them in good running order, Luxenberg adds.

"The first thing you do inside is [upgrade] the mechanical systems," she says. "Once you've got that in shape, then you work on design pieces, such as kitchens and bathrooms. And from there I would start adding other amenities."

What's hot
Here's what's hot in remodels, room by room:

  • Kitchens commonly suffer the most wear and tear. And because kitchens tend to follow style and color trends, they often seem dated sooner than other rooms in the home. The most popular minor improvements include adding functionality with dual sinks and cooking stations, and cosmetic improvements such as under-cabinet lighting and ceramic tile back-splashes on the countertops. To add space, consider a walk-in pantry or breakfast alcove.

    "The younger buyers, especially the baby boomers, want a modern kitchen with the cook-top stove and nice cabinets, not to mention wine coolers and subzero refrigerators," says Mary Johnson, residential specialist with Premier Properties of Naples, Fla. "I think it does make a difference. Even if it's just a cook-top stove, they walk in and say, 'Oh, it's a remodeled kitchen!'"

  • Bathrooms have changed the most during the past century. Your grandparents may remember when they were outside. Your parents probably made do with just one. Today, homes that have more than one sell faster and fetch a higher price. Popular remodels include skylights, glass block windows or vaulted ceilings. Also, ceramic tile on the floors and surrounding the tub walls, decorative wall hooks, roll-out shelves or new fans. Finding space to add a bathroom can prove tricky. For best results, consider a contractor.

    "You can't lose by adding a bath," says Johnson. "If you're remodeling, his-and-her dressing rooms, even his-and-her bathrooms, are big. Then the husband can shave and the wife can fix her hair without the shower steam. If money's tight, just replacing the water fixtures helps."

  • Family rooms came into vogue after many American homes were built. Hence, you may face sacrificing other spaces (rooms, closets) to create one. To enlarge the space, try lowering the floor, opening the ceiling or expanding out with box-bay windows.

  • Bedrooms are always listed first in real estate descriptions for good reason: we spend nearly half our lives there. If you can put one in your attic or add a second floor, consider stacking your bathrooms to cut costs. Properly placed, dormers and roof windows help offset the add-on appearance.

  • Master suites have become a hot real estate feature. If you are converting a bedroom into a master suite, try to locate the closet as a buffer between bedroom and bath, and enhance the suite effect with recessed lighting, sconces and built-in adjustable reading lights.

  • Home offices are a growing trend, especially in predominately professional neighborhoods. But beware: If you convert a bedroom and knock out the closet, it will no longer be considered a bedroom in a real estate listing, which could adversely affect your asking price.

And while you're at it, consider making the office Internet-friendly.

"Everybody wants multiple phone lines and high-speed Internet access," Johnson says.

Getting it right
Try as they might, the hardware superstores have thus far failed to teach what architects and designers have to offer: taste.

Your return on your remodel will likely depend as much on how well it fits the period and scale of your house as how much it adds to its functionality.

"Anything that is sensitive to the character of the house should have the same sense of proportion and materials," says Kay Miller Boehr, an architect in Kansas City, Mo. "If the house originally had molding, it should be there. If it didn't, it won't help to go out and do it at Home Depot."

Boehr says the things that most grate on her are faux replacement windows, kitchens where "miles and miles" of cabinetry have run amok and rooms that "scream '70s or '80s."

Her advice: Refinish all hardwood floors, don't skimp on the details that define the house's style, and hire a designer if you don't know a Cape Cod from an English Tudor.

"I believe in doing a house for yourself, not just for resale. But then I like those things that are consistent with the character of the house," she says. "Older houses where the owners have done a good job remodeling them sell quickly, even in neighborhoods where there's still a lot of rehab to be done."

Johnson agrees. "People can see past the decorating a lot of times, but if they see that a house hasn't been taken care of, they wonder what else is wrong that they can't see."

Don't go crazy
To properly recoup all that sweat equity, keep one eye to your neighborhood. No matter how spectacular your results, don't plan on pushing your home's value beyond 125 percent of its current selling price. Even in the best market, you probably won't get it.

If the market is lukewarm or you reside in a neighborhood with widely varied property values, set your sights just under the most expensive home on the block. That way, the showcase homes will tend to reinforce your potential asking price.

If you absolutely have to have a pool, gazebo or exotic animal enclosure, go ahead. But don't expect to recoup the cost. If your renovations are too personalized, such as building tennis courts or musical fountains, a potential buyer may not find them as appealing as you do.

-- Posted: April 7, 2003

 

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