Elise Schreiber and her husband, Marc, bought a duplex unit in a vintage Chicago condominium building before the builder had finished rehabbing.
”The plumbing was in, the room plans were in, but there were no vanities or bathtub or appliances or kitchen cabinets or vanity cabinets,” said Elise, an interior designer, who was excited about the prospect of designing her own kitchen and bathroom, almost from scratch, with the help of her business partner, Bill Olafsen.
In the bathroom they put in a black granite countertop, a black and white granite floor, white cabinets, an undermounted sink with white faucets and a lot of mirror work with incandescent vertical lighting. A stepup whirlpool tub and walk-in double shower finished it off.
In the kitchen they installed Italian-made black rubber floor tiles, a black and white granite countertop with an extra-high backsplash and white cabinets. They opted for top-of-the-line appliances: a Jenn-Air oven with a grill, a Sub-Zero refrigerator and a Thermador dishwasher.
Elise Schreiber estimated they spent $40,000 to $50,000 on these two rooms. Because she is a designer and able to get special pricing, she believes the investment doubled in value almost immediately.
Today, five years later, she believes her slick and yet tastefully neutral kitchen and bathroom have tripled in value and would add $150,000 to the price of their home should they decide to sell.
Money-back guarantee
She is not just thinking wishfully. Like many in the world of real estate and its related fields, the Schreibers can put a figure on remodeling not only in terms of what it costs now but also what the payback will be later.
”People are looking at their home as their best investment,” said Peter Miller, publisher of Remodeling, a monthly trade magazine. ”They`re looking at remodeling not so much as an expense but as a protection of their most precious investment.”
According to Miller, who spoke at a remodeling conference for the trade this week at the Merchandise Mart, the escalating cost of new construction and land prices have spurred the growth of the $100-billion-a-year remodeling industry.
Instead of moving up and out, many homeowners simply are staying put, pouring their money into improving their home to suit their changing lifestyle.
Although remodeling generally is perceived as an instant gratification-a lifestyle improvement to be enjoyed here and now-it has become more. It is a savvy investment in many cases, adding value that can be recovered should the homeowner decide to sell.
But, like all investments, some are safer and more profitable than others.
The nitty-gritty
What remodeling jobs make sense from a dollars-and-cents point of view?
Can you recoup your money on things as seemingly frivolous as a whirlpool tub in the master bedroom or a glass-encased sunroom? What is the payback on adding a second bathroom?
Remodeling magazine produces an annual ”Cost vs. Value” report in which it quantifies the value of remodeling jobs. The report cites popular projects and estimates both their cost and resale value if the home is sold within a year of completing the project.
The report takes into account regional differences in the housing market and in remodeling costs. Statistics for 40 U.S. cities are given and then figured into a regional average.
Real estate agents from each of these cities, who provide the data, are asked to base their estimates on a midpriced house in an established neighborhood in which neighbors also are sprucing up homes.
The fact that other homes are being improved nearby is important, according to the report. A new-and-improved, remodeled house will not enjoy the best resale value on those improvements if it is in a neighborhood of rundown homes or homes that simply have not kept up with the times.
Professional results
The agents also assume that all projects are designed and constructed by professionals; no allowances are made in the data for do-it-yourselfers.
One other assumption: Projects are appropriate to the house and neighborhood. In other words, the homeowner is not remodeling a one-year-old bathroom or adding a $50,000 sunroom to a $100,000 starter home.
Miller labeled as a ”good investment” projects that offer a payback of 75 percent or more.
From an investment standpoint, here are the top remodeling jobs in the Chicago market. Remember: All figures are estimates.
Family room
You actually can make money on this one. The realty agents surveyed suggest that homeowners build the family room off the kitchen, if possible, and that the addition blend with the existing house in size, style and materials.
The project calls for the addition of a 16-by-25-foot room on a new foundation with wood joist floor framing, matching wood siding on exterior walls and a matching fiber glass roof. It includes a drywall interior with batt insulation and a hardwood tongue-and-groove floor.
In the Chicago market this will cost $33,905. But its resale value (the amount it will add to the price of a home if sold within a year of completing the project) is $43,750, meaning you can recover 129 percent of your money, or put $9,845 into your pocket for having taken on the project in the first place. (And this does not take into account the high rate of appreciation in some housing markets, which will contribute to an even greater return over time.)
Master suite
The Chicago market openly embraces the idea of a luxury master bedroom/
bath combination. According to the report, creation of a master suite makes your home competitive with new construction, which started the ”suite craze” in the first place.
This project is not an addition per se but a recrafting of space you have. It calls for combining two existing bedrooms and a bath into a 335-square-foot master bedroom/bath suite. It involves no load-bearing wall removal but does involve adding wall treatments and carpeting, three wood replacement windows, a wood patio door and a deck or patio. The existing bathroom is remodeled with new fixtures and fittings, tile on the floor and in the stall shower area, a separate whirlpool tub, a laminate counter surface and tub platform, two molded sinks and new lighting. It also calls for building a separate walk-in closet and dressing area.
The price tag on this job is $22,495. You can expect to recoup 116 percent of your money, meaning the resale value is $26,000.
Lyn and Michael Mathews recently put such a suite in the sprawling, 55-year-old, New England-style farmhouse they bought less than a year ago on the North Shore.
It boasts 565 square feet of luxury: a whirlpool, a stall shower, eight feet of Corian countertop and two walk-in closets, which used to be the small bedroom next door.
Taking into account the high rate of appreciation on the North Shore, the couple believe their five-figure investment will add twice the amount they spent to their house`s value when they decide to sell it.
Because it involves sacrificing a bedroom, though, the realty agents consulted for the report recommended creating a master suite only if it leaves the house with at least three bedrooms.
The kitchen generally is considered to be the room that makes or breaks a house`s saleability. Nearly every dollar spent on remodeling it can be recovered.
The report includes data on both a major and a minor kitchen remodel.
The major remodel calls for updating an outmoded 170-square-foot kitchen with the design and installation of a functional layout of midpriced cabinets, laminate countertops, an energy-efficient oven, a cooktop with a ventilation system, a microwave, a dishwasher, a disposer and custom lighting. A resilient floor, wallcovering and ceiling treatment are added along with a 3-by-5-foot island of cabinets and counter space.
Estimated cost for this project is $21,519. The resale value is $21,250, a 99 percent payback.
The minor kitchen remodel costs considerably less: $8,443. It involves refinishing cabinets, repainting and installing a new energy-efficient oven and cooktop, new laminate countertops, cabinet hardware, wallcovering and resilient flooring.
The payback is 83 percent, meaning you can expect to recover $7,000 of the $8,443 you spent.
Two bathroom projects are covered in the survey, a remodeling job and an addition of a new bathroom. Both bring high resale values.
The bath remodel calls for sprucing up an existing 5-by-9-foot bathroom by installing a new standard-size tub, toilet and solid-surface vanity counter with molded sinks. New lighting, a mirrored medicine cabinet and ceramic tile floor and walls in the tub/shower area with vinyl wallpaper elsewhere are also part of the job.
The project will cost you $8,106, of which you can expect to recoup $7,500, or 93 percent of your money.
The specs for adding a second full bath, measuring 6 by 8 feet, within your existing floor plan include a cultured marble vanity top, molded sink, standard bathtub with shower, toilet, lighting, mirrored medicine cabinet, linen storage cabinet, vinyl wallpaper, ceramic tile floor and walls in the tub area.
The addition will cost $10,931. In selling the house you can expect to recover $10,000, or 91 percent of your money.
If you include one ventilating, insulated glass skylight in your addition to lighten and brighten the room, which is particularly helpful if it is an interior, windowless bathroom, the total project will cost $12,495. You can expect to get 88 percent of your money out of it, or $11,000.
Siding
First impressions mean a lot when selling your house, realty agents agree. A house that looks good from the outside will sell faster and for more money than the same house with an unkempt facade.
This project calls for replacing deteriorated siding with 2,000 square feet of vinyl, aluminum or steel siding using one-quarter-inch foam insulating board. It includes new soffits, fascia and trim and gutters.
To do this, it will cost you $8,551. The resale value is $7,750, giving you 91 percent of your money back.
Not all of the projects listed in the report proved to be rewarding investments.
In Chicago, for instance, if you replace your front door with an insulated wood door, you can expect to recoup only 28 percent of your money, according to the report. If you live in Los Angeles, however, the payback on the same project is a very high 161 percent.
Besides the full-fledged jobs listed in the survey, Miller cited some basic projects that can enhance the salability of a house without requiring a major outlay of cash.
Repainting was one.
”It`s the easiest, cheapest thing to do to make a house show better,”
Miller said. ”That and sand the floors or shampoo the carpets.”
Miller emphasized that although remodeling is an investment, the best and most popular reason to embark on a home improvement project is because you want to improve your lifestyle or the comfort of your home.
”The lifestyle decision is the most important one,” Miller said. ”The main reason to remodel is because you want to enjoy the extra space, unless you are in the business of speculative remodeling.” –
