Estimating the Return on Your Home Improvement Investment

Market Watch / August 4th, 2010
Real estate professionals agree that good cabinets, such as this mix of styles from Wood-Mode, will help sell a house or apartment.

Eager to triple check what kind of return on investment my husband and I could expect on the home improvements we hope to make, I talked to two other real estate professionals recently to get their views on how best to prioritize my Wish List from a resale value perspective (see my June 15 post for what a host of A&E’s Flip This House had to say). Both agreed that all of the renovations plans we planned would be worth our while, should we ever decide to sell our home in the future—but not without some caveats.

Gary Seiden, a real estate broker with Regatta New York Realty, told me improving the floors and updating the kitchen should be top on the list. “Good floors are key—and opening up a kitchen and adding new wood cabinets and appliances and stone or stone-look counters and new appliances will help to sell a place, even more than square footage,” he told me. “The trick is not to customize too much, or you narrow the market. If the buyer doesn’t like what you’ve done it means demolition for them.”

Tara Nicholle-Nelson, a real estate expert with the San Francisco-based online real estate resource Trulia, agreed that upgrading the floor and renovating the kitchen would bring the highest return on investment. “A large expanse of immaculate floors makes an amazing first impression on a buyer—but good floors are also important to appraisers, who look at comparables,” she said. “And kitchens are one of the first things on the list that people look at, even if they don’t cook.”

Tara, who is also the author of The Savvy Woman’s Home Buying Handbook and Trillion Dollar Women: Use Your Power to Make Building & Remodeling Decisions, also told me that custom closets were a plus. “Buyers love them,” she said. “They help them visualize a more orderly life for themselves and storage is always at a premium in urban apartments.”

While both real estate pros were sure that the home improvements we want to make would pay off, neither saw us making back the investments dollar for dollar. “If you continue to live in the apartment for 10 years, the kitchen will no longer be new,” said Gary. “But you’ll get the value out of it while you live in the apartment.” Tara, concurred, adding that over-investing in high-end appliances or other bells and whistles in the kitchen won’t necessarily yield a premium in resale value if comparables aren’t standard in other apartments in the area.

Since the size of our kitchen and our budget are limited, our risk in over-investing is probably about zero. So I think I’ve got the assurance I need that our renovation investments will generate a fair return—both short term and long.

Classic elements, such as these painted recessed panel cabinets from Brookhaven, are likely to yield a higher resale value.
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