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Is your renovation worth it?: The cost vs. value of remodeling

Matthew Grocoff

January 28, 2016

By: Matthew Grocoff, Green Renovation Expert

In: Green LivingGeneral Remodeling

How much does a renovation increase your home's value? This is the question asked by the annual Remodeling Cost vs. Value Report. The 2016 report makes clear that in almost every case renovation will not increase the value of your home by more than the cost of the renovation.

If you'd like a new kitchen and you think it will make you happier, then go for it. But don't delude yourself into thinking that a renovation is going to make your house worth more. To be fair, a new bath will make your house worth more . . . but it won't return the full cost of the remodel.

There are a few exceptions. Green renovations like insulation and solar remain extraordinary investments. In fact, investing in insulation, solar, or geothermal heating and cooling will return more money than almost any other type of conservative Wall Street investment. Solar pays a dividend in free energy (avoided payments to the utility company) and increased home value. Simply put: you get more money out than you put in.

According to the 2016 Remodeling Cost vs Value Report, attic insulation will return a whopping 117% on your investment. A recent study by Lawrence Berkeley National Laboratory of nearly 23,000 homes showed that investing in rooftop solar returned a jaw-dropping 133% in added home value compared with the cost of the system. Think about it: if you invest $15,000, you make an added home value profit of almost $5,000! As a bonus, if you stay in your home you get free energy for the life of your solar panels.

But if you're not improving your home with hidden comfort, energy saving, or money saving features, you are simply spending money - not investing it.

Consider some other home remodeling projects. After solar and energy efficiency, the next best return is on curb appeal cosmetic improvements. For curb appeal projects, it's really not accurate to call the appraisal value added a "return" since you will not recover the full cost of the remodel. For 2016, manufactured stone veneer has the biggest bang for the buck with an added value of 92.9%. Well, maybe it's more of a whimper than a bang. That's still a 7% loss on your money.

A midrange bathroom addition is your biggest loser for 2016. It trails the pack with a lousy 56.2% or a loss of nearly 44%. Please go ahead and enjoy the hot bubble bath in your new claw foot tub. But it's a lousy investment, even if it is fun to show off to your friends.

When selling your home, realtors will often give you a list of expensive things to do to improve the sale. What they won't tell you is that you might not ever see that money back. Yes, it will increase the value at sale and maybe make it sell faster. Yes, your realtor will get a larger commission. No, you are not likely to see an improved return based on the cost of the renovations.

If your main remodeling goal is a sure-fire profit-making investment, then put your money into solar or other green renovations. If you want to listen to Barry White serenade you while you luxuriate in a shiny new jacuzzi tub, filled with rose petals and lavender scented bubbles, then go ahead and get the new bathroom. But remember that when you drain the tub, your money goes down with the bath water.

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