Every year Remodeling Magazine surveys hundreds of contractors, realtors, and appraisers from major cities across the country, compiling data to determine the cost of various types of remodeling projects and their impact on the resale value of homes. The goal is to quantify the payback on money spent on improvements. For example, if you pay $50,000 for a new kitchen, how much of that expense can be recouped when it comes time to sell?

Some people interpret a less-than-100% return on investment as a reason not to remodel, but it’s important to consider other factors as well. If your $50,000 kitchen makeover justifies raising your selling price by $39,000 (a 78% value-to-cost ratio), effectively you’ve paid 22 cents on the dollar ($11,000) for new cabinets, countertops, appliances, etc., all of which will presumably improve your quality of life over the duration of your stay in the house. Moreover, energy-efficient upgrades in building materials result in lower utility bills. Finally, the $39,000 recouped at the time of resale is normally tax-free.

The 2007 Report shows that, generally, value-to-cost ratios have declined slightly this year. This is not surprising in light of the record appreciation in home values that occurred until recently.

Midrange Projects		Cost Recouped
Bathroom Addition	:	83.8%
Bathroom Remodel	:	82.2%
Major Kitchen Remodel	:	78.3%
Garage Addition	:	70.5%
Roofing Replacement	:	68.2%
Master Suite Addition	:	68.7%
Sunroom Addition	:	54.5%
Two-Story Addition	:	74.3%
Window Replacement (Vinyl)	:	76.2%
Window Replacement (Wood)	:	81.4%

Upscale Projects		Cost Recouped
Bathroom Addition	:	69.4%
Bathroom Remodel	:	68.2%
Major Kitchen Remodel	:	75.9%
Garage Addition	:	65.2%
Roofing Replacement	:	70.0%
Master Suite Addition	:	66.6%
Window Replacement (Vinyl)	:	79.4%
Window Replacement (Wood)	:	80.5%

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