Do you believe that remodeling a kitchen or bathroom will add value to your home? That is a reasonable premise but what needs to be taken into account is whether or not the return on investment (ROI) is worth the initial outlay. Let’s focus on this to determine how to add value to your home and how much it will actually be.
Our guide to this is Remodeling Magazine’s annual “Cost vs. Value” report. It is a very useful and objective resource that analyzes remodeling ROI on a regional basis that breaks down 27 types of midrange and upscale remodeling projects from as simple as replacing a front door to a major kitchen redo. It also compares to job costs to national averages.
While adding attic insulation (a 91 percent ROI) is considered remodeling in this report we will focus on what is typically considered home remodeling such as a new kitchen, bathroom, and deck and room addition.
The Typical Return on Investment: Remodeling St. Louis
In the Greater St. Louis region a mid-range kitchen remodel costs about $63,000 with an ROI of 62 percent when the homeowner decides to sell. An upscale kitchen remodel averages $122,000 with a 60 percent ROI. Other types of remodeling and their associated ROI include:
As the report indicates, investing in these types of remodeling projects provide a range of more than 50 percent to more than 80 percent ROI. That may surprise some as being too low. Conversely, others might find it attractive. After all, before you sell your house you get to enjoy its new look and features. They may be so enjoyable you might decide not to sell at all.
Whatever the type of project – mid-range, upscale minor or major – it requires a considerable investment, but where does that money go? With a design-build remodeling contractor like J.T. McDermott between 30 percent to 50 percent of a remodeling budget is taken up by materials and finishes. An additional 10 percent to 15 percent covers permits, disposal fees, and profit. The remainder covers labor costs and overhead.
We have found the Remodeling Magazine’s report to be fairly accurate, but other variables must be factored in as well when determining the ROI on of a project. The location of the home is a big one as is the availability of inventory in the overall market and that particular neighborhood.
That noted we can conclude with confidence that while home remodeling provides a decent to good ROI, rarely if ever is it a 100 recoup.