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.
