How to budget for a home renovation project is a big mystery for many homeowners. The unknown cost and resale value can be cause for many people to delay a needed project indefinitely. Because there are so many factors involved in an addition or remodel project, it can be difficult for a builder to provide homeowners with an accurate sense of what it might cost. There is one resource, however, that can be used as a fair starting point in thinking about a project’s cost, and its potential resale value down the road.
Every year Remodeling magazine does an in-depth survey of the cost of construction, by region, and the associated resale value of that construction work. It is the Cost vs Resale Value Report.
These are generic numbers, remember, so custom design can further raise the cost. From my own experience their cost figures are fairly accurate, with an occasional estimate seeming slightly high. Where these costs may sometimes be conservative, it is always better to be happily surprised when a builders estimate comes in lower than expected, than the other way around.
Following are a couple excerpts from the study, but check here for the 2019 PDF Cost vs Value report for the Boston area.
Key Trends in the 2019 Cost vs. Value Report
Returns on investment for big ticket remodeling projects inch upward
“While the overall changes since last year are modest, the 2019 Cost vs. Value report reflects the robust market that the remodeling industry has enjoyed over the past year. All projects covered in the report show an increase in value over the previous year, as reported by real-estate professionals in 136 metro areas. But costs have correspondingly increased—and in some cases, the increases are significant, likely due to tariffs that have roiled commodity markets. This has led to slight downturns in the percentage of costs recouped for a number of projects, but overall returns are up slightly compared to last year.
…year-over-year changes in the percentage of costs recouped from upscale projects have increased at a greater rate, suggesting that buyers of existing homes are willing to invest a little more for opulence these days.
As in years past, the national averages for exterior replacements outperformed those of larger discretionary remodeling projects. [Think curb appeal.] Garage door replacement is ranked first, continuing a two-year streak of returning on average nearly 100% of the project cost at resale.”
Trends in construction are ever fluctuating, however, as are the recouped value of a construction project. Longevity is a factor that lies outside the scope of these cost vs resale value studies. The longer you plan to stay in your newly renovated home, the greater its value becomes—both monetarily with inflation, and experientially, as you have longer to enjoy the fruits of your labor.
Bathroom Remodel, mid-range job cost—$26,786 resale value $19,329 (72.2%)
Scope of work: ”Update existing 5x7-foot bathroom. Replace all fixtures to include 30x60-inch porcelain-on-steel tub with 4x4-inch ceramic tile surround; new single-lever temperature and pressure-balanced shower control; standard white toilet; solid-surface vanity counter with integral sink; recessed medicine cabinet with light; ceramic tile floor; vinyl wallpaper.”
Master Suite Addition, Upscale job cost—$352,698 resale value $189,993 (53.9%)
Scope of work: ”Add 32x20-foot master bedroom suite over crawlspace. Add spacious sleeping area with lounging/sitting area adjacent to large master bath. Include custom bookcases and built-in storage with millwork details; high-end gas fireplace with stone hearth and custom mantle; and walk-in closet/dressing area with natural light, mirrors, and linen storage. Add French doors. Bathroom includes walk-in shower with 2019 dual-shower system, stone walls and floor, and custom frameless glass enclosure. Add freestanding soaker tub. Include two sinks in separate custom vanities with stone countertops and large mirrors. Create partitioned area for luxury one-piece toilet. Outside the bath, add 5-foot-long hospitality center with bar sink, undercounter refrigerator, custom cabinetry, stone countertop, and microwave. Include soundproofing, in-floor heating, custom wall finishes and hardware, general and spot lighting, and high-end lighting controls.”
(For the New England area, the study claims a confidence in these figures of 95%, for an accuracy of +/- 6.1)