Bogleheads

[bigH]

Bogleheads when you make a major home improvement do you see it as a sunk purchase, investment, zero sum expense or a little bit of the three?

Some people I know see home improvement as an investment (if done correctly of course). Their argument is that if I pay contractor X today for an upgrade, that upgrade in 5 years may cost more due to rising labor expenses (i.e. inflation). The upgrade may even create more value than the expense (like an investment)

Others see it as a zero sum expense that pays itself by a higher sale price but does not add extra value.

What has been your experiences?

[mfen]

I find energy efficiency upgrades including mechanical systems (appliances, ac, furnace, etc...) payout pretty quickly and are good investments. The return comes from reduced utility costs over time. This idea could be stretched to landscaping. As far as landscaping it could be considered an appreciating asset whereas everything else depreciates.

Windows and door upgrades can be good energy efficient upgrades but not always. Condition would be a major factor. If they are in really in bad condition then upgrade, but I would not go from good condition windows to thermals and consider it an "investment".

The rest are a matter of style, personal comfort, security and maintenance.
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Maryanne

[catchup]

Our real estate agent sent out something a couple of years ago which seemed to indicate that the value of the home rose by a large fraction, but not the entire amount of the money invested in major home improvements. My general memory/impression of the data.

[zaga21]

We upgrade things that we want to live with. Recently that's been a new roof (that is all one color with no patches), new windows instead of the 50 year old single pane ones, paint in a few rooms, and trees outside. I guess a house to me isn't an asset but a place to live in and enjoy.
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Zaga

[BruceM]

[mhalley]

Liz Weston had a recent article about this:
http://articles.moneycentral.m....money.aspx
Mike

[expat]

Home improvement presents a dangerous opportunity to overspend on yourself. It's definitely not an investment, IMO.

[Qtman]

We are almost finished with an major renovation, is it a wise investment?

Happy wife, happy life.

So yes, it is wise for me.
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Don’t wear yourself out trying to get rich; be wise enough to control yourself.
Wealth can vanish in the wink of an eye. It can seem to grow wings and fly away
like an eagle. Proverbs 23:4-5

[Babakhani]

[jebmke]

[LadyGeek]

I did a major renovation to avoid moving. A nice property in an old neighborhood. The only constraint was the size of the house.

Unless you are investing in the property, and not living in it, then you should look at costs as a primary factor. Otherwise, it's a happiness of lifestyle choice, which is why you make investments in the first place.
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Some say the glass half-full. Others say the glass is half-empty. To an engineer, it’s twice as big as it needs to be. Link to Wiki

[bigH]

[stratton]

If you're planning on living there for the next 10+ years then you get usage out of the upgrades.

There is also the "necessary" upgrades. She updated the bathroom with a simple vanity and new toilet and shower surround. But the kitchen is still the orignal 1947 one with the faucet coming out of the wall and cabinets. Even the cheapest cabinets and counters from Home Depot would improve the value. I'd guess a she'd take a $20K or $30K hit on a sale, for a $250K house, if no kitchen upgrades were made.

Paul

[neverknow]

[epilnk]

The sensible/conservative approach is to consider it consumption. That way you don't get too carried away with rationalizing the expenses away. And in most cases that is probably closest to the truth anyway.

Individual cases will vary of course - the "average" probably isn't relevant when you are addressing a specific problem, especially if it's one that would be visible to buyers. In our case, we just completed a modest renovation of a dreadful tiny kitchen and the result was a very pleasant space with effectively double the work area. We considered it consumption because we did it for our benefit - the kitchen was difficult to live with - but it is clear that the upgrade has a disproportionate impact on the house value because it fixed a major blot on an otherwise nice house. So in retrospect it was also investment. But had we felt the need to install high end fixtures, the higher cost would have represented consumption.

Linda

[patriciamgr2]

I agree with earlier posts. I invested in real estate for several years. Two types of improvements pay off for resale: (1) category changers, and (2) "fluffing" done immediately before the sale. Examples of #1 are adding a master suite to a 2BR, 1BA home; examples of #2 are repainting in neutral colors, freshening up landscaping, deep cleaning carpets & maybe, refacing (not replacing) truly awful kitchen cabinets.

Most improvements will either be too taste specific or too dated to really improve your resale value. (I'm old enough to remember avocado green fixtures as the height of fashion; I'm proud to say I never indulged! )

If you measure costs spent on an improvement as offsetting money you would otherwise absolutely spend (e.g. purchase price of efficient appliances offset by electric bill savings)--those "efficiency" expenditures may pay off. Buyers won't really give you credit for them, however.

In the past when prices of real estate rose each year, homeowners attributed appreciation to their improvements when, in fact, a large percentage of the increase in price was due to general appreciation which would have accrued whether or not the improvement was completed.

In the final analysis, if the homeowner can afford to spend the money purely as consumption--do what makes you happy. Do not EVER consider it as an investment unless you're willing to have an appraisal done before and after the job. My experience is that very few projects will result in a gain at all, much less a satisfactory investment return.

Good Luck

[neverknow]

[Ilovevolleyball]