Improvements to Your Existing Home: Dollars and Sense

Periodically, I am contacted by clients that have purchased a home asking what type of improvements they should make to their existing home. As usual, my answer often begins with a series of questions:

  • What type of home do you own—townhome or single-family detached?
  • How long do you intend on remaining in your home?
  • Do you absolutely need this improvement?
  • Do other homes on your street and neighborhood have similar improvements?
  • What price range would you expect your house to sell in if you were to sell it today prior to the improvement, and then, what would the expected value be after the improvement actually is made?
  • Are you expecting this improvement to be an investment in your home that ultimately will add value to your property when you sell?

If you are not expecting it to add value, then you should be prepared for this result when you decide to sell the property

The answers to these questions generally will give me enough information to answer the initial question. In either case, whether you are improving a townhome or single-family detached home, you need to determine whether you are expecting it to add overall value to your property. If you are not expecting it to add value, then you should be prepared for this result when you decide to sell the property. A personalized improvement that does not add an overall value to the property is just that—a personalized improvement. The general marketplace is not going to pay extra for an improvement that caters directly to your tastes and preferences. Therefore, if you are like me and watch your budget, you should be concerned about spending too much money if you are considering an improvement that fits into the “personalized” category.

For this article, I will take the assumption that you are looking to make improvements that you will enjoy but, more importantly, will add value to your real estate.

Because of the limited amount of space in this column, I will not be able to address every improvement that you could make to your home. Instead, I will try to cover some of the most common improvements that I see in our marketplace.

You will not get your full investment back in the future if you over spend today

Let’s talk about common townhome improvements first. I will assume that we are referencing a starter home and not a “luxury” townhome. Let’s pick a resale value of no more than $485,000. Priority on my list would be to improve your unfinished basement. Add a recreational room, full bath, and extra bedroom when possible. A deck is a wise purchase as long as you do not spend too much. I have seen far too many starter homes with deck purchases that cost in excess of $15,000. This is simply spending too much on your deck.  You will not get your full investment back in the future if you over spend today.

Hardwood flooring on the main level can add incremental value to some homes but only in certain price ranges. Don’t get me wrong–hardwood sells! But the cost of installing it in a starter townhome versus the actual value added does not balance out. Fences are good as long as you keep the cost minimal. Do not add a deluxe-style fence to your townhome. Ceiling fans add little to no value on resale market, but you can always take them with you to the next house. Granite and Corian countertops could be advisable depending on the cost. Adding extra costs to the granite such as double bull nosing should be avoided.  Spending $800 to $1,300 for a professional to paint your kitchen cabinets is a much wiser decision than replacing the cabinetry.  Surround sound and dimmer switches are for convenience only and add nothing to the resale value of your property. Spending large amounts of money on window curtains in a starter home will not pay dividends for you. Upper-end interior painting schematics will put you in the hole as well.

For single-family detached homes you will see a direct correlation of the improvement adding value to the property when you consider the neighborhood price range. For example, a starter single-family home community (priced less than $600,000) is limited with the type and expense of improvements that actually will add value compared to luxury single-family homes ($900,000 or more). However, it is just this thinking that gets luxury homeowners in trouble. You must be smart with your improvements even in the upper-end price ranges.

Improvements, such as extra finished square footage in the basement, are the big hitters for all single-family housing. Dollar for dollar, the best return on your investment is in the basement. Finish out that basement recreational room, full bath, and additional bedroom. When you resell, you will be glad you did. However, be smart with the amount of money you are spending in the basement. It is very easy to go overboard in the lower level. You must keep a conscious eye on the cost of the improvement versus how much value that you are adding. Sometimes, you may fall into the trap of a convincing general contractor that is all too eager to spend your money on needless items.

The kitchen is generally the heart of the luxury home

Upgraded flooring is a worthy topic of conversation. Hardwood and ceramic tiling is overkill in starter detached homes, not a bad idea in the middle range market, and an absolute must in the luxury price range. The same rules apply with upgraded kitchen countertops such as Corian and granite and cabinets such as maple and cherry.

Perhaps the biggest mistake I see luxury homeowners make is spending their allotted money on landscaping in lieu of granite kitchen countertops, stainless steel appliances, and premium cabinets. The kitchen is generally the heart of the luxury home. I am not saying that landscaping does not assist in your future sale. What I am stating is that there are better places to start spending money if you are seeking to add value.

Swimming pools are another popular improvement and perhaps the most expensive. Be very cautious with pools.  It is easy to get caught up in the vision of pool and forget that there are other costs involved such as landscaping, hardscaping, and routine maintenance.  

Decks, patios, and fences are also good places to invest if you own a detached home. Be mindful of what backyard features your neighbors have in their backyards. This will usually provide you some guidance with regards to size and scope of your project.

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