Landscaping, Toilets And Brickwork…Oh My!

March 12th, 2012

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Most people that own a home make some home improvements. Some home improvements are modest and some are substantial. It is important to get some enjoyment from whatever improvements you make, but it is also important to remember to watch the economics of your projects. Many people don’t consider the return on investment when they take on a renovation project, and some people make poor assumptions about how much they will get back from their cost to remodel.

Give me an example

I have had people say, “I sunk $100,000 into landscaping, outdoor lighting, a new driveway, and a new in-wall speaker system; so my house is worth $1.1 million, not $1.0 million.” Or, “my neighbor just sold a house identical to mine for $225,000, but I expect I’ll get $235,000-$240,000 for mine, because I had $15,000 of solar panels installed.”

I could tell dozens and dozens of these types of stories, where a homeowner values a renovation differently than a homebuyer. Some people assume they will get a dollar for dollar return for their investment, and in some cases they will. But in many cases you may be doing home renovations that result in a much lesser return than you ever imagine.

Think about which renovations add value, not all do

Adding finished square footage is always a good thing, but even then you might be surprised at what percentage of the cost you recover. And some things just won’t recover much cost at all. A sprinkler system is a luxury and is hardly a necessity. Fancy landscaping is always nice, but may be more of a marketing bonus than a value-adding project. Some improvements may simply help you sell a home (think painting, repairs, and new carpet) while some increase its value.

Where can I learn more?

There is an interesting website here that you can check to see the latest figures of what home improvement projects are returning what percentage of its cost in resale value.

What kind of return you get will vary based on region, the type of market you are selling in (high demand or low demand), the economy, etc. So the numbers are always changing, and its always good to do some research when you are considering a home improvement project, and then again when you want to sell your home.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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