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By Judy Dutton | Jan 11, 2018

Planning to remodel your kitchen, add a master suite, or undertake some other pricey home renovation in 2018? Watch out—not all of these home improvements pay off like they did in the past, according to Remodeling magazine's latest Cost vs. Value Report.

For this much-referenced annual report, now in its 31st year, researchers pinpointed the average return on investment of 20 popular home renovations by canvassing contractors nationwide on how much these upgrades cost to complete, then compared that with how much real estate agents estimated these features would boost a home's market price (in other words, their value).

And the news isn't so good for homeowners looking to remodel on a massive scale: The report found that in 2018, Americans should expect to make back only about 56% of the money they spend on renovations. That's down from 64% the previous two years.

What gives?

"This year, the most expensive projects didn't have much of a gain," says Craig Webb, editor of Remodeling and manager of the report. "I think it's because real estate professionals think we're getting close to a peak in market prices. So consequently, spending a lot of money does not automatically mean your house will just ride the escalator up and be worth a lot more."

Current events could also play a role. New tax laws curtailing the deductibility of mortgage interest and local property taxes might be dampening real estate agents' confidence that piling on the improvements will pay off. Plus, recent wildfires, mudslides, and other natural disasters have created what Webb calls “a freight train of extraordinary demand” on materials and labor that is bound to jack up renovation costs all round, leading to thinner margins on their return.

But it's not all doom and gloom. As usual, this year's report found that the ROI varied widely by project. A new garage door, for instance, essentially pays for itself, earning you a whopping 98.3% of your money back, making this the best value of the whole bunch. And the worst? Installing a back patio, which will recoup only 48% of your expenses.

Check the chart below for a full rundown of the top renovations, including how much they cost, their value at resale, and the percentage you'll recoup. And if you're looking for some general pointers, here's one: If you're going to shell out money, do it where everyone will notice—on the front of your house.

"Curb appeal projects tend to have high paybacks than inside-the-house projects," Webb continues. "Any real estate professional will tell you curb appeal matters a lot, and these numbers prove it."

This explains why garage doors top this list, followed closely by manufactured stone veneer (which offers a 97% ROI) and wood decks (83%).

Another golden rule of renovation?

"It's better to replace or repair than add and remodel," says Webb. In other words, go ahead and fix that frayed siding or replace the roof before you add a master suite or overhaul the kitchen.

Mostly, keep in mind that if your tastes are, ahem, unique, that could lead to trouble if you're expecting home buyers to swoon over the same things.

"You may spend gobs of money on what you think is the perfect kitchen remodel," Webb says. "But if your idea is to have something from the 1970s with avocado ovens, the next person could walk in and say, 'That's ugly. I don't care that you spent $75,000 on that—let's tear it out anyway.'"

Top 20 remodeling projects and their ROI

📷 ROI for home renovations

Judy Dutton is a deputy editor at covering news and advice about personal finance, home buying, selling, decorating, and everything in between ( Follow @judy_dutton

Updated: Sep 12, 2018

Jeffrey Steele May 4, 2018 in Real Estate

7 ways to know whether to remodel your home or move

Jeffrey Steele May 4, 2018  in  Real Estate

You’ve been in your house for a while and are still fond of the place. But it’s no longer exactly what you need or want. So, do you put the home up for sale and move out, or upgrade and settle in for the long haul? To answer that question, you’ll have to think about your emotional attachment to the house, whether renovating will bring a good return on your investment and whether you can afford to buy a replacement home. These and other factors will help you make your choice. Here’s what experts believe are the essential issues when deciding whether to remodel your current place and stay put, or buy a different home and move out.

1. Is your home in your heart?

Your emotions will have a lot of say in whether you stay or go. “Think honestly about your relationship with your neighbors and how you feel about your location and the surrounding area,” says Fred Wilson, a principal with Morgante-Wilson Architects in Evanston, Illinois. “If you have a strong connection to the neighborhood and emotional ties to your home, renovating may be the right answer.” Wilson’s firm estimates that 70 percent of homeowners in the remodel-or-move quandary ultimately decide to stay put and make changes to their house. A residential architect may envision upgrade possibilities you may not see and help you get maximum functionality out of the home you already have. You might tap your home equity to pay for the improvements.

2. Can you budget realistically?

Realistic budget planning is critical when deciding whether to make your current home work or look for another one. “This should include thinking far down the road. How long will you keep the home if you remodel it?” says David Wirth, a financial adviser with Savant Capital Management in McLean, Virginia. “Talking and putting in writing one’s goals is such a valuable tool for identifying the financial risks associated with dreams and aspirations.” Budgeting accurately is essential if you do decide to renovate. “A lot of homeowners don’t know exactly what they want,” says Prashanth Pathy, an agent with Keller Williams Realty in Chicago. “Say they have $50,000 and the contractor says he can do it for that. But then their wishes change, they want different materials, it doesn’t come out as they imagined — and that’s where the budget gets blown up.”

3. More room or more rooms?

Many homeowners base their decision to sell on the need for more space. However, a smarter layout that adds one more room but not more square footage can help some homeowners avoid moving, says Doug Perlson, New York City-based founder and CEO of real estate brokerage RealDirect.

“A spacious three-bedroom home can often be reconfigured to four bedrooms and allow a family to have a more efficient layout without needing to leave the home they love,” he says. “We recommend laying out your floor plan with a designer and seeing if a reconfiguration could make sense. It is often much less disruptive and expensive than a move, and may solve your problems.”

If you can’t find a spot for a new room? “Maybe it is time to sell,” he says.

4. Will only a move be enough?

Does your current home have what you consider to be a serious problem? It could be neighbors you can’t tolerate, a not-so-great school district or a cramped physical setting — including home and yard — that will never meet the needs of your growing family. If that’s the case, you really have just one choice: Move. But maybe the issue is that you essentially can’t afford the home you currently have, so a downward rather than upward move is necessary. This is fairly common. The most recent “How Housing Matters” survey from the John D. and Catherine T. MacArthur Foundation found that more than half (53 percent) of Americans struggle to make housing payments and have had to make sacrifices or trade-offs to cover those costs. If your mortgage rate is a source of pain, shop around for a lower rate and refinance.

5. How long will a renovation take?

Many people overlook the fact that renovation involves “a serious, long-term commitment in time and energy,” says Pathy of Keller Williams. “They have to get their head around the process — time being the first and foremost consideration.” He’s not kidding. A kitchen remodel involving new countertops, cabinets, appliances and floors can stretch on for three to six months. If ductwork, plumbing or wiring has to be addressed, the job could take longer. A bathroom remodel can require two or three months, while a room addition can take a month or two. Pathy says you have to be ready to be very patient. “It’s very difficult to live in something that’s being renovated.”

6. Will you earn back the upfront costs?

Before opting to remodel or sell, try to determine what return on investment you’ll see on either option. So says Brian Davis, who has bought, renovated, leased, managed and sold many homes and is director of education for Spark Rental. If upgrading, “What’s the average return on investment for the renovations you’re considering?” he asks. Most home upgrades do not pay for themselves in the form of a higher eventual sale price. Some renovations manage to recover 80 to 90 percent of their costs, while others barely cover half their expenses. If you’re thinking of listing your current home and buying another one somewhere else, ask yourself whether you’ll be in the new place long enough to recoup the costs of taking out a new mortgage and moving. Davis says it has traditionally taken seven years to earn back those upfront costs.

7. Would you be ‘over-improving’?

Weighing against renovation is the risk you’ll “over-improve” your home compared with others on the block. An over-improved home won’t sell for as much in its location as it would in a neighborhood with similar houses, says Kevin Lawton, a real estate agent at Coldwell Banker Schiavone & Associates in Yardville, New Jersey. “When you are in a neighborhood that has starter homes and smaller homes, adding a large addition or doing an extensive renovation may not yield the return one would expect,” he says. With one of Lawton’s listings, sellers had added a large, handsome fifth bedroom suite to the first floor. Buyers passed on the house for smaller ones in the same development, and the house lingered unsold even after the sellers chopped $30,000 off the price.

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