Thinking about remodeling your home? You might want to reconsider. Most of the time, remodeling doesn’t cover the costs it incurs. Even I’ve learned this the hard way after remodeling several properties in San Francisco. Here’s some insight to help you maximize your profits if you decide to remodel.
One common misconception is that every dollar spent on remodeling will yield a high return at resale. Unfortunately, this isn’t the case. National data shows that you’re unlikely to recoup your full investment on remodeling alone, especially in less expensive cities. In pricier areas, buyers might pay more to avoid the hassle of doing the work themselves, but this is an exception rather than the rule.
Now, if you’re considering remodeling, think expansion instead of just a makeover. Expansion can increase the value of your property by adding more usable space. This is particularly true in markets where bigger homes fetch higher prices.
When it comes to the financials, the return on remodeling investments has been declining over the years. For example, data from a source shows that from 2005 to 2015, the return dropped from 80% to just 65%. This means you’re losing money, as increasing material costs outpace the growth in home values.
Despite this, remodeling shouldn’t always be about financial gain. It’s often more about improving your living standards. Want a luxury kitchen or a spa-like bathroom? Go for it if it makes your home life better. But if your goal is to increase property value, focus on expansions that add square footage, which is a big selling point.
So, when does remodeling truly add value? Consider improving the layout, like adding an extra bathroom, or upgrading an outdated property if you snag it at a good price. Paying for a well-known designer might appeal if you’re not worried about the expense and are going for a specific, high-end look.
Remember, always remodel with permits. It assures future buyers that all work was up to code and professionally handled, which can be a huge plus when selling.
Lastly, if you’re not looking to cash out but want to improve your living space, remodeling can be fulfilling, even if it’s not financially rewarding. Just don’t confuse a stylish upgrade with a solid investment—it often isn’t.
