Value of Home Improvements? Getting the Most Home Improvement Remodeling Bang For Your Buck

So, you’re considering a significant home remodeling and you want to know how much value this adds to your home?  My first recommendation is to disregard a lot of what you see or hear on home improvement shows.  

Why?  First the obvious – many of those wildly popular shows were filmed from 2005 to about 2008 during the hey-day of one of the craziest real estate bubbles we’ve ever experienced.   Those days are over.  While I don’t think the long-term picture is as bleak as many think – the days of making a fortune “flipping a house”  or two or three are probably long gone.

Secondly (but very important) -

Don’t take on a major home improvement remodeling strictly for the possible resale value of the improvement.

Generally speaking, the bigger the remodel, the less it adds to your home value on a dollar for dollar basis.  However, on the flip side, the more a remodel adds a basic necessity to your home – the more value it adds.

Let’s look at two examples with a costly home remodel – the bathroom addition.

First – be aware that bathroom remodels are expensive.  Due to the needed design, plumbing and permitting (from your City, County or Parish offices), the bathroom addition – that is – adding a new bathroom as additional square footage to your home – is probably the most expensive home remodeling job on a per square foot cost basis one can undertake. 

How expensive is the bathroom addition?  It could easily be upwards of twice as expensive as new home construction per square foot.  Thus, if a new home costs approximately $125 per square foot in your area, the bathroom addition could easily run $200 – $250 per square foot.  Ouch. 

Ok, the two examples…

Example 1:

John and Jane have a cozy, older 1,300 square foot home with three bedrooms, but only one full bathroom, and a second half bathroom in the master bedroom.  With a second child on the way they really feel they need for a second full bathroom.  Due to the configuration of their home they feel they might be able to extend a back wall of the home out a few feet and add a tub/shower combo. and larger sink to their existing half bath, and also possibly add a small closet or needed linen storage area.  

With strong real estate prices in the area, families with two or more kids are often looking for homes with two full bathrooms.  Realtors tend to find that homes with two full baths bring a strong premium to homes with only one or 1.5 baths.  

Example 2:

Bob and Betty have a spacious 2,200 square foot home with four bedrooms and two full bathrooms.  With two kids, they like the spare bedroom when their parents or friends visit once every two months or so.  However, they’d really like to add a third bathroom into this fourth bedroom and make it a true “mother-in-law” or guest quarters.

Homes in their area rarely have three bathrooms, and realtors suggest the third bath is rarely a critical selling point as larger families are often looking for more than 2,200 square feet. 

So….which bath addition gives you the most bang for your buck in terms of added value?  The first example, for two key reasons: 1) The future sales price will almost always be directly impacted by two full baths; and, 2) Smaller homes can have more dramatic per square foot swings in value on significant additions. 

Here’s one thing to consider if you’re in the market to buy a home.  Seek out homes with recent additions or expensive remodels that you feel may not add dollar for dollar to the owners’ total value.  Look for homes like example No. 2 above and don’t hesitate to make an offer that might be disappointing to the seller, but would still give them a little money for their addition.  What it would give you – the home buyer – is a third bathroom at a bargain price.

Whether it’s a bathroom remodel, new hardwood floors, granite counter tops, kitchen remodeling, or a major addition — For every home remodel, there’s a pretty clear method to determine just how much value that model adds to your home value. 



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