Determining how much to spend on what to maximize your probability of a successful sale is the most difficult, and many times, stressful task of the home sale process. The discussion and examples we have provided here only scratches the surface of this vitally important topic. Determining just-the-right repair and renovation plan requires a combination of hard data and analytic models, along with a good measure of judgment.
To get you started, we have assembled some examples of average renovation costs and return on investment. Also provided are example repair costs for a variety of typical projects.
And because it’s not just about the numbers, we provided a short list of other factors to consider as you develop your plan.
Repair & Renovation — Where to Begin?
How much to spend on repair and renovation (R&R) to potentially increase the value of a property in preparation for sale is an early and difficult decision for many owners.
It all comes down to:
Will the cost of repairs exceed the value added?
But finding the answer to this deceptively simple question requires consideration of many inter-related factors:
- Property value relative to the values of the properties in the neighborhood and extended community
- Capability and experience with the tasks involved with making repairs to the propert
- Financial depth
- Schedule for Selling; and
- Intangibles which define your life and affect this decision, which cannot be quantified
That said, let’s look at how to determine what can be done to cost-effectively increase a property’s market value.
Actual R&R Costs and Payback
To help you get a handle on what these costs can be, we have compiled a set of actual cost figures and resulting property sale increase for a range of home renovation projects (Remodeling Magazine 2019 National Averages for Cost vs Value). These example projects span the range from an exterior door replacement through a master suite addition. These are national averages and the work is 100% contractor-performed. Also, keep in mind that these are categorized as “Midrange” as opposed to “Upscale” homes and projects.
Midrange Projects – Remodeling Magazine 2019 National Averages for Cost vs Value
|Entry Door Replacement||$1800||$1400||75|
|Major Kitchen Remodel||$66,000||$41,000||62|
|Minor Kitchen Remodel||$23,000||$18,000||81|
|Manufctr’d Stone Veneer||$8900||$8500||95|
Below are approximate cost estimates for repairs (not renovations) on a 1100 sqft single family home in average condition.
|Cleanout and trash removal||$850|
|Facia, soffit and trim||$600|
|Wall and Ceilings R&R||$3200|
|Trim and Moulding||$2400|
How to Reduce Your Costs
You can reduce your renovation and repair costs by using cheaper materials and components (e.g., refinishing instead of replacing the kitchen cabinets) but you will also reduce the sale price by some increment.
Another simple cost reduction method is to reduce labor costs by shopping for “moonlighters” (this may be an anachronistic term, but then I’m a bit of an anachronism) or doing the work yourself. Be honest about your skills. Whatever, it is you’re doing should look better when you’re done than it did before you started.
R&R PLAN DEVELOPMENT
First, answer these questions
- Are you up for the challenge. How does it fit with your personal life, employment situational and other commitments?
- Do you have the necessary capital to make repairs?
- What is your timeframe? Is getting your money nine months from today too late?
- Is anyone going to be living in the house during the repair/renovation process? If so, this is a game-changer. Be realistic about the impacts to those directly affected.
- Are you going to do the work yourself or hire it done, or some combination?
- Do you live near the subject property?
Still Interested in making repairs and renovations?
If your circumstances and finances permit making repairs and improvements, then begin the process by working through the process outlined below.
- Obtain an estimate of the property’s current value (as is) from a qualified source (e.g., real estate professional) who knows the local community.
- Work with the real estate professional to estimate target sale prices reflecting improvements to the house.
- Obtain an estimate of the cost to achieve your post-improvement target prices from qualified sources, e.g., local contractors. This estimate must be based upon a realistic assessment of the work in the local market.
How to Get Started
Back to the opening question. Will the increase in sale price more than cover the R&R cost? And if so, by how much? How much time, sweat, tears and money are you willing to spend to make what may be a very small return?
We have provided a glimpse of the magnitude of the costs and the factors to consider before committing to serious R&R work. The next step is to run the Park Real Estate Investments Home Sale Options Analysis. Take advantage of the Model’s ability to input your own R&R estimates to develop a preliminary plan. With that you can work with our local affiliate to refine your plan.
We have a team of industry experts which includes local building trades and real estate professionals to help you through the preparation and sale process as efficiently as possible.
Take Action Today
Use the Home Sale Options Analysis to develop your best plan for selling your home. Engage the professional support necessary to efficiently complete the sale.