remodeling paybacks

Recouping your remodeling investment may be your goal when you sell your house. But when it comes to resale value, all home improvements are not created equal. As a rule, kitchen remodeling projects and bathroom additions almost always pay back 90 percent or more of their costs. However, finishing a basement usually pays back less than 50 percent. Other improvements fall somewhere in between.

Consider these payback estimates* for the most typical home improvement projects:

Project Cost Average Payback
Add a new heating or air conditioning system $2,000 to $4,500 100% for heating; 75% for air conditioning
Minor kitchen remodeling $2,000 to $8,500 94% to 102%
Major kitchen remodeling $9,000 to $25,000 90%
Add bathroom $5,000 to $12,000 92%
Add a family room $30,000 86%
Remodel bathroom $8,500 77%
Add a fireplace $1,500 to $3,000 75%
Build a deck $6,000 73%
Remodel home office $8,000 69%
Replace windows $6,000 68% to 74%
Build a pool $10,000 and up 44%
Install or upgrade landscaping $1,500 to $15,000 30% to 60%
Finish basement $3,000 to $7,000 15%

*Compiled from several published surveys

Understanding payback value
Payback value depends heavily on the real estate market and prevailing property values. If the market is slow, expect to see less payback than you would in a fast market. Also, consider the neighborhood: If you remodel your house to twice the size of the other homes on the block, it is unlikely that you will be able to sell at double the price. Issues that can influence payback value include:

Type of improvement
Kitchen and bathroom remodeling projects consistently return the most in resale value and almost always help sell a house. Converting a basement into a family room yields the smallest return on the investment.

Scope of improvement
Projects can be large or small. Sometimes, the cumulative effect of small projects can pay back more in resale value than that of larger projects. Small projects tend to be cosmetic in nature: fresh paint, new doors, garden windows, and ceiling fans. Large improvements involve adding or upgrading living space.

Desirability
Today’s fad may be tomorrow’s standard. Backyard decks, for example, were difficult to find 30 years ago; now they are common. Decks may not have paid back very much in resale value decades ago, but as decks have become more desirable, their resale value has increased.

Cost
The price of home improvements fluctuates depending on economic conditions and region. If remodeling costs are particularly high in your area (or home sale prices particularly low), you may not recoup as much on your investment as you would if costs were in sync with sales prices.

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