Avoiding the Money Pit
According to Sal Alfano, editorial director of Remodeling, these 6 investments provide the lowest return when it comes time to sell your property.
- Home offices with high end custom cabinetry and electronic built ins
- Back up generators
- Sunroom additions
- Upscale master suite additions
- Adding an additional bathroom
- Customizing a garage with cabinetry, gadgets, and electronics
The best way to weigh the advantages of a possible remodel is to keep good track of your investment in your property from the outset. Keep a simple spreadsheet that shows what you paid for the property (the basis of the property) and any additional “permanent” improvements you have made. For example, you would include the cost of adding an electric garage door opener, adding ceiling fans and permanent lighting, pouring sidewalks, building a patio structure, and adding permanent plantings (trees, shrubs and perennials, yes; annuals, no). You would not add maintenance items; so if you replaced your worn carpet with a comparable product, or replaced a damaged section of builder-installed fencing, that would not count; however, if you upgraded to a better product, you could add the difference in cost to your basis. Having these records is important for two reasons: when you sell the property, it will help you establish your capital gain or loss for tax purposes AND it will keep you from “over-improving” your property given what the market in your neighborhood will bear. If, for instance, you invested $365,000 in your property to date and would like to upgrade your kitchen to a “gourmet” model that is estimated to cost $40,000, but the going resale rate in your area is $375,000, you may want to reconsider, particularly if life changes may lead you to sell sooner rather than later. Even for a “forever” home, keeping an eye on overall home value can lend perspective to your budgeting for improvements, helping you to prioritize expenditures (Kitchen? Bath? Garage?)and to moderate your plans so you are able to pace yourself for the long haul.
Most real estate agents and responsible contractors would recommend that you keep your home improvement and remodeling projects practical. Upkeep and curb appeal are the best investments you can make. Beyond that, complete those projects that would make the home more liveable and functional for anyone, and meet your unique needs for storage or work with ready-made options that can be re-used no matter where you land.