5 Home Improvements That Are Worth the Cost


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Mr. Gao co-found and became the CFO at Oxstones Capital Management. Mr. Gao currently serves as a director of Livedeal (Nasdaq: LIVE) and has served as a member of the Audit Committee of Livedeal since January 2012. Prior to establishing Oxstones Capital Management, from June 2008 until July 2010, Mr. Gao was a product owner at Procter and Gamble for its consolidation system and was responsible for the Procter and Gamble’s financial report consolidation process. From May 2007 to May 2008, Mr. Gao was a financial analyst at the Internal Revenue Service’s CFO division. Mr. Gao has a dual major Bachelor of Science degree in Computer Science and Economics from University of Maryland, and an M.B.A. specializing in finance and accounting from Georgetown University’s McDonough School of Business.

Existing home sales jumped 4.2 percent in May, the highest level since 2009. This is just the latest sign that the housing market is finally making a comeback.

The Case-Shiller Home Price Index shows prices are up 12 percent since 2012 (although still down 28 percent from the peak in 2006). And homebuilder confidence is at a seven-year high.

If builders are convinced it’s the best time in seven years to start nailing up new houses, maybe it’s time for the rest of us to think about investing some time and money into the old homestead. Perhaps we should fix up our houses to make them more comfortable, convenient and attractive, not only for our own benefit, but for the reward we’ll reap when we sell.

Still, there’s no point in getting carried away like some people did in the early 2000s. Even in a strong real estate market, most renovations do not pay back 100 percent of what they cost. You need to think of a home improvement as a consumer good, something you enjoy using and are willing to pay for.

Nevertheless, some home improvements have better resale value than others, just like some cars have better resale value than others. Here are some of the best home improvements:

Kitchen. People spend a lot of time in the kitchen, so upgrades in that area are both visible and valuable. It’s not just aesthetics. A kitchen has many working parts, like a refrigerator with a water and ice dispenser, a built-in microwave and a double oven. But it doesn’t have to be an all-or-nothing deal. If your counter top is scratched and stained, but the cabinets are still in good shape, just replace the counter top, and maybe add new cabinet hardware. And new appliances by themselves add both utility and sparkle to your kitchen. Rule of thumb: Expect to recoup about three quarters of the cost of a kitchen remodel when you resell your house.

Bathroom. People like big, expansive bathrooms, so any fix-up that adds space – a vaulted ceiling, a skylight or stealing space out of an adjacent closet – is likely to pay off. Big, bright mirrors, modern lighting and extra cabinets are also desirable features. But don’t get carried away on plumbing fixtures and expensive tile. You can spend a lot of money on fancy faucets and special shower heads, and that money will go right down the drain.

Outside the house. Landscaping is the first thing any visitor, or potential buyer, sees at your house, and this type of first impression matters. You don’t have to hire an expensive landscape architect. Just spruce up the lawn, clip back the bushes and add a few strategically placed shrubs. Decks, patios and screened-in porches are all highly desirable add-ons that are not that expensive in the overall scheme of things. Rule of thumb: You recoup almost 100 percent of the first thousand dollars you spend on landscaping, but close to zero on anything after that.

Roofs and windows. No one will want to buy your house if the roof leaks or if plants are sprouting from your gutters. New windows can be expensive, but they bring in natural light to your home and often save money on heating and air conditioning bills. Rule of thumb: Look to recoup 30 to 40 percent of the cost in utility bills, and 60 to 70 percent at resale.

Cosmetics. Don’t underestimate the value of a simple paint job. It’s relatively inexpensive, especially if you do it yourself. Ditto with cleaning and decluttering, as well as a few new lighting fixtures. All of these improvements return at least as much money as you put into them.

What not to do: Install a swimming pool. Unless you live in a high-end development in Florida or Arizona, home buyers think they’re more trouble than they’re worth. Super luxury upgrades are nice, but nobody wants to pay for them. Garage conversions will give you more living space, but what do you do with the car? Better idea: Finish your basement (but only if it’s dry) or your attic (but only if it has standard-height ceilings).

Exactly how much you will recoup in costs on your home renovation depends on a lot of factors. One is the direction of the broader housing market. And that, finally, is in our favor. Another is the nature of the improvement itself. That one is up to you.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.

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