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mimsathome 06-05-2011 10:34 AM

Calculating Cost vs Benefit Ratio on Renovations
Hello all,

I am about to embark on a fairly extensive renovation project on my home. Here's my question. How do I calculate the benefits of doing the renovations vs resale value of my house? What does that ratio tell me (I'm lousy in math)? Let me leave behind a few facts:
  • Home purchased for cash 125,000 in 2009
  • 1300 square foot house, one acre of land
  • Current tax assessment 160,000
  • Budget for renovations 35,000, paid in cash no loan
  • Will be living in the house for at least 15 years
I'd be interested in anyone's thoughts on how I can be sure these renovations will be paid back when I think about selling this house down the road. If the ratio comes back as a number 5:1 (as an example) what does that mean?

Mims in Massachusetts

oldognewtrick 06-05-2011 01:28 PM

Mims, theres no way this side of reason to be able to tell what your cost on the renovations will be worth. What type of projects do you have in mind? How is the neighborhood price value trending? Is the neighborhood in transition? What is the values of other similar houses in the neighborhood? Having yours at the top will make it harder to sell later. Property tax valuation may or may not be an indicator of actual market value.

If you have the funds to complete the projects and these renovations will make your life more enjoyable then do them. Adding swimmimng pools, hot tubs, etc won't be a value you can recoup, and few if any renovations pay back more than their actual cost.

Things like painting are maintaince items and not necessarly improvements like granite counter tops, and who nows whats going to be the must have feature 15 years from now.

joecaption 06-06-2011 04:29 AM

With the sale date that far away I'd only spend my money on maintaince items. By the time your ready for selling, the "up grades" would be dated or need to be replaced anyway.
Keep up with the roof and any outside painting so when it does come to selling there's less cost. Add replacement windows if it needs them, add insulation in the attic, there going to last forever and save you money on HVAC cost every day.

JoeD 06-06-2011 07:13 AM

I would do the renovations that make you happy to live in the house. Who knows what the market will be in 15 years. Plus anything you do now will be 15 years old and probably need to be redone by that time anyway to gain any resale value.

DIYHomeDesign 06-07-2011 03:01 PM

I agree with Joe--there's something to be said about renovations that are for your own enjoyment and benefit, rather than a future seller's. Maybe it's about finding a balance between the two.

DIYHomeDesign 06-07-2011 03:01 PM

Oops, meant future buyer's, not future seller's.

CyFree 06-08-2011 07:48 AM

Remodeling Magazine's 2001 Cost vs. Value Report can help you calculate that.
It gives you an idea of the average cost for some of the main improvements, and how much you can expect to get in added value to the property, nationwide and per region/state.

Remodeling Magazine: Home remodeling, kitchen and bath design, renovation, and building products for the professional remodeler

inspectorD 06-08-2011 03:58 PM

The calculations are from 2001...a totaly different market than todays. I see nothing useful there, but did notice your link for an advertisement to the same Hanley wood careful.:cool:
Just enjoy your house as you want to. Someone else will never reap the benefits of what you do today, and Either will you in the long run.
The best thing you can do to a home is continuos maintinence, and keep up on it or the end result is bigger money spent to fix major projects.
Just my 2 cents worth. :D

CyFree 06-13-2011 10:58 AM

Hi Inspector D,

I did mistakenly post the 2001 (yeah, I need better glasses) link but these reports are published annually and there is a 2011 version as well.

I completely understand your concern about posted links. Last thing we want here are spammers, but I assure you I have no affiliation whatsoever with said publisher, and posted the link because I perceive value in it and think it can help the person asking the question.

These reports are used by many professionals in the remodeling and real estate industry, and are cited in many other publications (not just the publisher's). I cite them often as reference myself and to my experience, the numbers there are quite accurate.

Truth is that, when you cite and link to sources, you will be "advertising" someone's work no matter what, but I would imagine that, as long as the source has some level of relevancy to the subject, and doesn't take you to a sales pitch of some sort, that would be ok... Sorry if I am mistaken.

I understand that people come here for advice, not "opinions", and without credible sources or some serious data, everything is an opinion.

Anyway, I apologize if I broke some rule but I really thought that to be helpful.

bobtheblindguy 06-13-2011 11:06 AM

I think the best person to get your answers from is a local realtor. They can tell you if the improvment you what to do to a particular area will increase your property value and by approx how much. Most realtors will be happy to go over this with you in hopes of getting your listing or your referral.

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