Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Get The Best Return On Your Remodeling Dollars

Written by Than Merrill

A 2014 report by Remodeling magazine listed 35 professional projects nationwide, excluding DIY-jobs, along with estimated costs and return at resale. Accordingly, there are only certain projects you want to consider when rehabbing a home. When it came to adding the most dollar value at resale, here are the five that topped that list:

5.) Upscale Master Suite Addition

According to the survey, the inclusion of an upscale master suite addition is often overlooked. However, that is not to say that it wouldn’t warrant your consideration. The magazine acknowledges that a project of this nature can potentially add the most dollar value to a home at resale. Don’t get too excited, though. Expectations must be tempered. While such an addition may promise high returns, it is also one of the most expensive projects you can attempt. On a national level, people who added an upscale suite to the master bedroom were able to recoup 56 percent of the original cost. While impressive, it offered the lowest return on this particular list.

One feature in an upscale master suite addition that can help with resale: a fireplace, says Dick Gaylord, past president of the National Association of Realtors (NAR) and broker with Re/Max Real Estate Specialists in Long Beach, California. Not only would it be featured in the listing, but it can make the home easier to sell because “many people love” a master-suite fireplace, he says.

4.) Moderate Master Suite Addition

Along the same lines as a kitchen or bathroom remodel, the inclusion of a moderate master suite addition can boost resale value. Master bedrooms are a focal point of prospective buyers and should therefore be treated as such. Any improvements made should facilitate a more profitable transaction.

“You’re going to put in double sinks, you’re going to put in plenty of closet space, you’re going to have a sitting area,” and all those things can make the home easier to sell and likely move the price needle upward, too, says Gaylord.

Typically, a more modest addition can be a smarter move at resale. In the Remodeling report, the moderate master suite additions return almost 68 percent at resale versus 56 percent for the upscale versions.

“Oddly enough, you’ll probably make back more of your money if you keep it inexpensive,” Gaylord says. “When it comes down to budget, the only way to save without doing it wrong is to go with simple finishes,” he says. “It’s fairly easy to upgrade cosmetics later, if you want.”

3.) Upscale Major Kitchen Remodel

As an investor, you are probably aware that the most attractive rooms to potential buyers are kitchens and bathrooms. For all intents and purposes, these areas demand an acute attention to detail. Most everyone will appreciate any time spent on making them more functional and aesthetically pleasing. Therefore, it is safe to assume that kitchen remodels are an above average candidate for adding value to a home. Fortunately, for your sake, you don’t have to assume. An upscale major kitchen remodel will help your home sell for more if the right additions are made.

Perhaps even more importantly, there is no need to cater to a specific population. An upscale kitchen remodel will peak anyone’s interest. In other words, any potential buyers do not necessarily need to be chefs or “foodies” to appreciate a good kitchen. Even for people who don’t cook, “kitchens are important,” Gaylord says. “Very often, in selling a home where the kitchen hasn’t been upgraded, buyers talk about upgrading the kitchen,” he says. It adds resale value, regardless of who the end-buyer may be. Older homes, in particular, benefit immensely from an upscale kitchen remodel.

Should the home be on the older end of the spectrum, investors are advised to look beyond finishes and appliances to add significant value. Accordingly, a purely cosmetic remodel will do little to capture the heart of a buyer. Having said that, functionality is equally as important as appearances. Yes, the kitchen needs to look great, but it also needs to work accordingly. Older homes may require an update to their internal systems (plumbing, electrical, etc.).

2.) Family Room Addition

This particular remodel centers on the idea that most homeowners would appreciate a family room. However, do not let its name fool you. Even those without families appreciate a useful commodity such as this. More importantly, it doesn’t need to be designated as a family room; as great rooms, dens and even entertainment areas serve a similar purpose. Some people may even like the idea of some added square footage where they can just watch TV or hang out.

Since this is an addition, Mike Holmes, contractor and host of HGTV’s “Holmes on Homes,” recommends combining it with another project, like a kitchen renovation, to get the most for your remodeling dollar. “If you do it all at once, you’re going to save some money.”

If an entirely new addition is out of the budget, similar results may be made possible by repurposing existing space. Depending on your floor plan and the age of your house, you could use a formal dining room, old-fashioned living room or even finish a basement. Each of these options will cater to the majority of buyers, making the home more desirable.

1.) Remodel The Basement

It may come as a surprise to many, but a finished basement remodel may be the best return on your investment. Of course, this is not an option for every property and the resale value provided by a finished basement depends largely on the neighborhood in which the property resides. However, it warrants consideration.

While remodeling a basement into functional space isn’t easy, or cheap, it essentially creates something out of nothing. More importantly, it is something that people appreciate.

It is important to note that spending more on a renovation like this does not necessarily translate to more money at the time of resale. To calculate how much completing unfinished space adds to home value: Divide your home value by finished square footage. Now, multiply the result (dollar value per finished square foot) by the number of square feet you’re having finished.