The number of opinions on the value of a particular home remodeling project is at least as large as the number of remodeling projects homeowners might want to tackle. One constant, though, is how the project enhances the value of a home and, ultimately, its resale value.
Remodeling projects can be large (for example, adding a second floor to an existing house) or small (replacing the main entry door). On average among 29 projects included in a recent survey by remodeling magazine, the average residual value one year after the project is completed is 64.3% of the project’s cost.
As a result, all projects are not created equal. According to the ‘Remodeling 2017 Cost vs. Value Report’ from remodeling.hw.net, on a national basis only one remodeling project yields an increase in value that is more than the cost of the project. The other 28 projects return anywhere from around 91% of the cost to around 54% of costs.
Depending on the region of the country in which the house is located, there may be other projects that return more than their initial cost. In all, there were just 66 of 99 U.S. metro markets where the return on investment exceeded 100%. The single project with the highest number of 100%+ returns was installing fiberglass attic insulation, a relatively inexpensive job but one with lasting value. We covered the 9 projects that will provide the best payback this year in an earlier story.
Of the projects that provide the least return, none holds more than 60% of its original cost. Note, too, that mid-range costs are based on typical quality materials and the estimates were generated from identical specifications for the work to be done. The report also included projects calling for upscale work that is more expansive and complicated than the baseline mid-range projects.
Here are the three mid-range remodeling projects with the lowest return on investment. The list includes original cost, resale value, percent return, and a remodeling magazine’s description of the project.
Bathroom addition
> Cost:$43,232
> Resale value: $23,283
>Return: 53.9%
This project adds a full 6-foot by 8-foot over a crawlspace with poured concrete walls and includes the following features: cultured-marble vanity top with molded sink; standard chrome faucets; 30-by-60-inch white fiberglass tub/shower with ceramic tile surround; single-lever temperature and pressure-balanced faucet; white low-profile toilet; general and spot lighting; electrical wiring to code; mirrored medicine cabinet; linen storage closet or cabinet; vinyl wallpaper; painted trim; and ceramic tile floor.
Backup power generator
> Cost: $12,860
> Resale value: $6,940
> Return: 54.9%
Install modular electrical backup system with capacity for providing 70 amps of emergency power in two 240-volt circuits and six 120-volt circuits. Assume existing propane gas supply. Include generator mounted on 2-by-4-four-foot concrete or composite pad, automatic transfer switch, load center, exterior disconnect, and grounding rod. Include 30 feet of conduit and electrical cable for generator connections; grounded cable for circuits; 5 feet of flexible fuel line for connection to existing rigid gas supply line; and automotive-type storage battery.
Backyard patio
> Cost: $51,985
> Resale value: $28,546
> Return: 54.9%
Install a 20×20 flagstone patio on flat ground behind the home. Connect the house and patio by installing a lift-and-slide glass door on the back of the house. Place a gas-powered fire pit in the center of the patio and surround it with four mid-priced all-weather deck chairs. On the far end of the patio from the home, install a stone-veneer modular kitchen unit with gas grill, mini-refrigerator, sink, and storage. From each corner of the patio, erect a 20×20 cedar pergola capable of holding an awning that can shade the entire deck. Install mid-priced, low-voltage lights on the pergola sufficient to illuminate the patio at night. Install all needed gas and electrical connections underground from the home to the patio.
Now we’ll list the four upscale projects that offer the least return. A reminder: upscale work is more expansive and complicated than the baseline mid-range projects.
Deck addition (composite)
> Cost: $39,339
> Resale value: $22,171
> Return: 56.4%
Add a 16-by-20-foot deck using pressure-treated joists supported by 4×4 posts anchored to concrete piers. At one corner, add a second, 10-foot-diameter six-sided platform one step down from the main deck. Include stairs on the smaller deck, assuming three steps to grade. Install composite deck material in a simple linear pattern. Trim the perimeter joists and wrap the 4×4 posts with composite materials to match the decking. Using the same decking material, include a built-in bench and planter along one 16-foot side. On the remaining perimeter, provide a railing system using composite material of contrasting or complementary colors that includes decorative balusters, post caps, and lighting. Railing and trim should provide for overall curb appeal to the outdoor living space by integrating the deck with the home’s color and architecture, creating a custom look.
Bathroom Addition
> Cost: $81,515
> Resale Value: $46,507
> Return: 57.1%
Add a new 100-square-foot master bathroom to existing master bedroom over a crawlspace. Include 42-by-42-inch neo-angle shower with ceramic tile walls with accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Include a freestanding soaker tub with high-end faucets; stone countertop with two sinks; two mirrored medicine cabinets with lighting; a compartmentalized commode area with one-piece toilet; and a humidistat-controlled exhaust fan. Use all color fixtures. Use larger matching ceramic tiles on the floor, laid on the diagonal with ceramic tile base molding. Add general and spot lighting including waterproof shower fixture. Cabinetry shall include a custom drawer base and wall cabinets for a built-in look. Extend HVAC system, and include electric in-floor heating.
Bathroom remodel
> Cost: $59,979
> Resale value: $35,456
> Return: 59.1%
Expand an existing 35-square-foot bathroom to 100 square feet within existing house footprint. Relocate all fixtures. Include 42-by-42-inch neo-angle shower with ceramic tile walls with accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Include a freestanding soaker tub with high-end faucets; stone countertop with two sinks; two mirrored medicine cabinets with lighting; a compartmentalized commode area with one-piece toilet; and a humidistat-controlled exhaust fan. Use all color fixtures. Use larger matching ceramic tiles on the floor, laid on the diagonal with ceramic tile base molding. Add general and spot lighting including waterproof shower fixture. Cabinetry shall include a custom drawer base and wall cabinets for a built-in look. Extend HVAC system, and include electric in-floor heating.
Master Suite Addition
> Cost: $250,687
> Resale value: $150,140
> Return: 59.9%
Add a 32-by-20-foot master bedroom suite over a crawlspace.
Bedroom: Add a spacious sleeping area with lounging/sitting area adjacent to large master bathroom. Include custom bookcases and built-in storage with millwork details; high-end gas fireplace with stone hearth and custom mantle; and large walk-in closet/dressing area with natural light, mirrors, and linen storage. Add French doors to exterior.
Bathroom: Include a large walk-in shower with dual-shower system, stone shower walls and floor, and custom frameless glass enclosure. Add freestanding soaker tub. Include two sinks in separate custom vanities with stone countertops and large mirrors. Create partitioned area for luxury one-piece toilet.
General: Add 5-foot-long hospitality center with bar sink, undercounter refrigerator, custom cabinetry, granite or marble countertop, and microwave. Include soundproofing, in-floor heating, custom wall finishes and hardware, general and spot lighting, and lighting controls.
Methodology
Construction cost estimates were generated by RemodelMAX, a publisher of estimating tools for remodelers, using Clear Estimates remodeling software. The company prepares a detailed construction estimate for each project, and then adjusts this baseline cost for each city to account for regional pricing variations. Construction cost figures include labor, material, and subtrade expenses, plus industry-standard overhead and profit. However, project costs are based on estimates for generic projects and do not account for personalized design and product choices made by homeowners in connection with actual remodeling projects, nor do they account for local and short-term fluctuations in pricing, supply and demand, and other factors affecting cost.
Resale value data for each project was aggregated from estimates provided by real estate professionals via an online survey conducted by Hanley Wood. The survey contained project descriptions and three-dimensional illustrations, plus construction costs and median home prices for each city. Respondents were instructed not to make judgments about the motivation of the homeowner in either the decision to undertake the remodeling project or to sell the house. The survey for this 2016 data was in the field for approximately 10 weeks between August and October, 2016. Nearly 1,500 real estate pros participated.
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