Which Home Improvements Pay You Back? - TheStreet

By J.W. Elphinstone, AP Real Estate Writer

NEW YORK (AP) — Want to get a 30% return on a home improvement project? Replace your front door.

Spend $1,000 on a steel door and you'll get $1,290 back, according to Remodeling magazine's most recent Cost vs. Value report. A steel door provides increased security and safety from extreme weather. And it can be stylish too, with custom colors and double-paned glass windows. It's also the only project that pays back more than you put in.

That's an important calculation for homeowners. A house is the largest financial asset for most Americans, and wise improvements can help boost value over time as well as quality of life. For those needing a quick sale, smaller, cheaper projects can help a home stand out.

Indeed, homeowners are making improvements again after the recession and housing slump stalled spending.

Home Depot and Lowe's both reported that shoppers are spending more. What's more, remodelers with the National Association of Home Builders report they're fielding more customer calls. Remodeling activity is expected rise 5% this year to $121.5 billion, a level on par with last year, according to Harvard's University's Joint Center for Housing Studies.

Whether you're selling or nesting, start with the upkeep.

"Make certain the first dollars you spend are on required maintenance and repairs," said Ron Phipps of Phipps Realty in Warwick, R.I.

Outside maintenance improvements like siding or windows offer the best return, especially in areas with older homes like the Northeast. These aren't sexy, but they help your home hold its value. And if you're selling, house hunters will drive by a house in need of repairs.

Government incentives and a focus on green living has boosted interest in energy efficient improvements from both homebuyers and owners, said Leslie Sellers, the president of The Appraisal Institute, a trade group. Homeowners can cut their energy bills as much as 50 percent by insulating the attic or replacing heating, cooling and water-heating equipment with newer models. The Cost vs. Value report didn't rate these improvements.

On the inside, sellers should think small and focus on kitchens and bathrooms.

"I would do the least amount of work to make it look as good as possible," said Darius Baker, owner of D&J Kitchens & Baths Inc. in Sacramento, Calif.

Baker recommends easy and inexpensive cosmetic changes like repainting or redoing floors. Cabinets can get a facelift with new doors or hardware. Nationally, a minor kitchen remodel recoups 78% of its costs and a bathroom remodel nets 71%, according to the survey. Homeowners typically spend between $15,000 to $20,000 on these projects.

If you're staying put and have the funds, consider a major kitchen or basement remodel. Both recoup between 72% to 75% of their value, but often cost around $60,000. Convert an attic to a bedroom, a $50,000 project, and get 83% back.

Perhaps above all else, make sure renovations are in line with your neighborhood's houses and your own home. Don't build a master suite that's too grand for your house. Or, put high-end stainless steel kitchen appliances in a $150,000 entry-level home.

Also be aware that the value of home improvements varies by region and city. For example, the Pacific region statistically offers the best return on most remodeling projects, with 18 projects in Honolulu getting a full return on investment and 10 in San Francisco.

Climate, the age of housing in the location, and median income all play roles in regional differences. Local tastes also change. For example, decks and outdoor space didn't rate as high in the Northeast as in past years' surveys, and, in Providence, R.I., there has been a shift toward covered patios. Still, nationally, a wood deck offers the fourth-best return on investment and is a better bet than composite one.

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