By Anthony Marguleas
Special to the Palisades News
Many homeowners ask us that if they redo their kitchen or bathroom, will it be a good return on their investment? It depends.
There is a big misconception that most home remodeling projects will recoup an initial investment, and more, when you are ready to sell.
However, just because you spent $200,000 remodeling your home, most likely you will not get that back when you sell. According to the Remodeling 2016 Cost vs. Value Report (www.costvsvalue.com), which has been done every year for the past 30 years and compares the average cost for 29 popular remodeling projects with what the value those projects will return when one sells within a year, almost all remodeling projects do not recoup initial costs.
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The report compares nine regions and 99 geographical markets in the U.S., so we can compare Los Angeles (see chart below). They also compare a baseline “mid-range” cost for each of the 29 remodeling projects with a higher-priced upscale one.
They reached their conclusions by asking local contractors what the cost would be and local real estate professionals what the specific remodeling project would return if they were to sell within a year.
On average, when combining all the projects throughout the country, the return is only 64.3 cents on the dollar in resale value.
In general, what they found is “curb appeal” projects give a higher return that all other projects. This makes sense because painting the outside of a home and perhaps replacing the front door or a garage door makes a big first impression. In general, they found that exterior “curb appeal” projects returned 20 percent more than interior projects.
For Los Angeles baseline “mid-range” projects, the best returns were found to be in order: manufactured stone veneer (127 percent return), entry door replacement (111 percent return) and minor kitchen remodel (108 percent return).
The study also found interesting factors that can have an effect on the results, such as when real estate agents are more confi- dent in a market (when home prices are appreciating), they feel better how much a project will increase the value of the home.
In a hot market like San Francisco, for instance, 21 of the 29 projects (72 percent) recouped above 100 percent return on the initial cost of the project. By comparison, in the rest of the country, only about 33 percent of the 99 markets had a single proj- ect return over 100 percent.
Also, markets are localized. In one, a specific remodeling project was found to return a 55 percent payback, while in another the same project would return 100 percent.
In general, the study found that replacing something returned about 15 percent more than if they had remodeled the same project. So, while you will enjoy that new bathroom or kitchen, know that you may not get every dollar back that you put in when you sell.
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