Unless your budget is unlimited, you plan to stay in your home for a long time or your location is among the most sought-after, you know that you can’t undertake every remodeling and decorating project of your dreams. And well you shouldn’t.
With real estate appreciation slowing and sometimes even nonexistent, you’re wise not to do too much work, incur too many expenses and possibly overimprove your new home because you may not recoup those costs when you sell.
On the other hand, a home is a place to live and enjoy rather than view solely as a cold, hard investment. Some improvements therefore should be undertaken if they’ll up your happiness quotient, even if they won’t be “oohed” and “aahed” by the next buyer. The bottom line: Understand the risks before you do the remake of “The Money Pit.”
So how do you decide which projects to tackle and how much to spend? Most real estate agents, architects, designers and contractors say there’s no guaranteed formula, particularly since everyone’s taste is different and what may be popular this year may well be passe within a few years.
Even within different geographic areas and price points, wish lists may differ dramatically. In spite of this inability to offer a single master plan, most professionals have honed a few pointers. Most suggest first trying out your new abode to understand what you can live with–both functionally and designwise–and what you need to change.
“You may decide that the washer-dryer in the basement is unacceptable and you want to bring it to the bedroom level, but you might not have known that if you hadn’t lived with it for awhile,” says Brooke Givot of First Impressions, a Chicago interiors consulting firm.
Also essential from the start is deciding on a budget, which may change over time, but which offers some parameters.
For those whose finances are tight, Givot advises spreading out your work, which also ensures quality. Her own son, Justin, who recently started his first job, heeded that advice by buying a nice couch, armoire, hardware, paint and one $600 poster to start a collection rather than buying roomfuls of lesser quality furniture.
Your budget should be based as much on your pocketbook as on your home’s value and the value of comparable neighborhood homes. You’re wise not to go beyond that price range.
“A house on the North Shore will allow you more leeway than one in the Western suburbs generally,” says Chicago architect H. Gary Frank. “You may not get your full investment out tomorrow, but you probably will get a large percentage at sometime. And the other thing improvements do is help your house sell faster.”
Jennifer Ames of Coldwell Banker/Kahn’s Chicago office suggests never spending more than 20 percent of the highest comparable sale price of a home in your area on your total improvements.
Thus, for a $100,000 home, you shouldn’t put in more than $20,000. Chicago architect Allan J. Grant offers a slightly different point of view. He recommends never spending any significant money unless you plan to stay for a minimum of five to seven years because paybacks usually don’t occur sooner than that.
And everyone counsels against putting much money into your house if it already is the best on the block, because you’ll only price it further out of the housing market.
The flip side of that argument also holds true. If your house is in such dire condition that doing some work will bring it up to the value of nearby homes, go ahead, but again don’t go overboard.
Mary Cook, a Chicago interior designer, heeded such advice when she bought a Rogers Park two-flat with her spouse Gerald Gallagher five years ago. Knowing they eventually would move, they kept their outlay to $11,000 for quality materials and products that offered a wide appeal–white laminate kitchen cabinets instead of dark ones, linoleum rather than ceramic floors, some new middle-of-the-road appliances.
They also converted their back porch to a home office. And though they paid for a landscape plan, they are slowly doing the work themselves because the project would run to $10,000. To date, they’ve spent $3,500 on their back yard and $800 for a brick patio.
In addition to deciding how much to spend, deciding where to spend those dollars requires thought. Experts suggest developing a wish list, writing it down and prioritizing. Consider nationwide trends when you do. For example, kitchens/breakfast rooms and family rooms represent the best investment of your housing dollars, both for your own enjoyment and for resale, says Maurice A. Forde, president of Forde Windows and Remodeling Inc. in Glenview, who’s also president of the Chicagoland chapter of the National Association of The Remodeling Industry.
Remodeling magazine’s “1996-97 Cost Versus Value Report” estimates that owners will recoup 90 percent of a major kitchen remodeling investment and 83 percent for a family-room addition if they sell within a year.
A hypothetical kitchen would measure 200 square feet, have new cabinets, laminate countertops, a midpriced sink and faucet, energy-efficient wall oven, cooktop and ventilation system, microwave, dishwasher, garbage disposer, custom lighting and center island.
In more than half of the country’s Southern cities, owners would recoup more than 100 percent of their original cost within the same time period. Chicagoans, however, can expect less–an 88 percent return, which is 10 percent above the Midwestern average of 78 percent. And any homeowner improves his chances if the new kitchen has recycling bins or hampers and light-colored wood or white cabinets rather than dark wooden ones.
The hypothetical family room would be 16-by-25 feet, have drywall and plenty of light and look compatible with the existing home. In Chicago, the payback is higher than elsewhere–106 percent of the typical cost of $31,846, versus 83 percent nationwide.
Because most homeowners look for a minimum of two full bathrooms, if your house only has one consider adding a second bath. In some markets there’s demand for a third full bath, says Ellen Carmignani of Baird & Warner’s Hinsdale office.
If any of the bathrooms is going to be used by more than one person, you should also consider adding a second vanity but not a pedestal-style one, which doesn’t include much counter space, Carmignani says.
Homeowners also care about having a nice master bathroom with brand-name products and top-of-the-line materials, but how nice depends again on the price point of your home and neighborhood. You may be wise to clad the shower in ceramic rather than marble and add just one showerhead rather than a battery of steam nozzles.
The average payback on remodeling an existing 5-by-9-foot bathroom that is at least 25 years old is 77 percent of the nationwide average cost of $8,500.
The cost versus value ratios are weakest in the Midwest at 66 percent, according to Remodeling’s same survey. Chicago comes out a tad above, at 67 percent. Adding a second bathroom, which costs an average $11,645 for a 6-by-8-foot room, brings a higher return of 91 percent nationwide, but just 72 percent in Chicago.
Still another wise investment for homeowners is a fairly recent one–the home office. Most observers like Forde don’t think the location matters as long as the room looks professional and functions. “If it’s in the basement, you may need to add more light. If it’s in the attic, you might install skylights,” he says.
Don’t create that office, however, by eliminating a third bedroom, Remodeling magazine’s survey warns. The average nationwide cost to convert a 12-by-12-foot room into an office with custom cabinets, computer workstation, overhead storage, desk, wiring for electronic equipment and carpeting, runs about $8,000 with a 67 percent payback. In Chicago, the return is way below at 49 percent. And outdoor living spaces are gaining ground.
“The best ones don’t just sprawl across the yard but offer a place to sit, dine and cook and blend with the home’s interior,” says Paul Deffenbaugh, editor in chief of Remodeling magazine. Other features that appeal to a wide cross section of buyers are good hardwood floors, natural and artificial lighting and solid hardware.
The intangible changes that you don’t necessarily see, but which make your life more pleasurable, keep your home in tip-top condition and will be looked on favorably by an inspector if you sell should be undertaken at some point, preferably early.
Among these are up-to-date wiring, plumbing and HVAC systems. The payback is much less, however, if you make highly personalized changes in the arrangement of rooms or decorating, no matter how expensive and chic.
A fourth bedroom turned into a walk-in closet may be a turn-off to families who are looking for a four-bedroom house. Similarly, your fancy paint finishes, elaborate curtains that conceal windows and block sunlight, sophisticated recessed lighting, wall-to-wall carpeting, tile and marble work and strong color scheme rarely appeal to potential buyers.
Even built-ins and closet systems are risky unless they’re very generic in style and flexible or in rooms where they’re expected such as kitchens and bathrooms.
What happens, says Elizabeth Ballis of Prudential Burnet Realty in Chicago, is that many potential buyers try to calculate how much they’ll have to spend to eliminate your expensive choices, then deduct that amount from any offer they make.
If you want to safeguard your investment dollars, opt for a neutral palette. Don’t fear that you’re going to have to live in a vanilla box. Neutrals today range from warm grays to rich beiges and even the palest buttercup yellows. Finally, keep in mind that the best remodeling or decorating change you can make is to keep your surroundings squeaky clean and neat, indoors and outdoors.
