looking at comps, how much to spend on remodeling?

Question

How do you decide how much money to spend on remodeling? What should your cap be. Say you bought a home for 200k 5 years ago and the houses in your neighborhood have a more updated look and selling for 260.
Is there a formula to estimate a cap on how much you should spend on updating and remodeling.

Answer 1

Think about it...if comps (homes in your subdivision or in a one mile radius of your home which have the same or similar amenities, ie: # of beds, baths, garages, square footage. In other words, similar construction, excluding the condition and upgrades) in your neighborhood are selling for $260K, you have $60K to play with. But it would be silly if you used it all for remodeling.

Follow your own formula. Write a list of all the things the comps have that your home doesn't (upgraded counter tops & floors, etc.). Get an estimate on what it would cost to make your home up to par with the recent sales in your area. If the total cost (including labor and not to mention, headache) is less than $60K (preferrably less than $50K) youre in the clear.

Answer 2

I don't have a formula, but I would say, that once you've updated your home, you won't recoup the costs you've incurred that are above the standard value for the neighborhood. In other words, if the houses in the area are selling for $200,000, and your house is already valued at $200,000, any additional renovations will be for your own enjoyment.

Plus you need to remember that some things don't add value to your home, but improve the saleability. For instance, decorating things like painting and carpeting don't increase the value, but they make the house look better so it may be easier to sell.

If you're trying to increase the value, concentrate on updating the kitchen and bathroom. Those rooms are the ones that make buyers hesitate the most. Once the living room, dining room and bedrooms are painted and carpeted, there's not much you can do to them without knocking out walls. But updated appliances and fixtures make the home much more desirable to people.

Answer 3

There is no rule of thumb as to cap your expense in your remodeling, after all the work you are doing is to make your house more livable by you and there is no guarantee you will get it all back when it comes time to sell. Still you are absolutely right to be wary of over-improving your home. Since you are aware of the difference in value between what you originally paid and what updated comps are going for in your neighborhood now you have the answer to your question if you demand to get back everything you spend. If you are adding square footage you can go higher.

Answer 4

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Answer 5

I don't know if there is a cap perse but I do know that the two most important rooms in the house as far as selling are the kitchen and the bathroom as the majority of women focus on those and of course they are usually (90+%) the final deciding vote in a purchase decision.

The next most important is curb appeal.. a well lanscaped property reflects a pride of ownership and the buyers want to have that.

Good luck