Will a $20,000 kitchen remodel lead to a $20,000 increase in home value?

As I show my buyer clients properties, we'll often discuss improvements that they might choose to make if they buy the house we are touring.  It's always a good idea to consider what projects you will undertake after purchasing a home, as the cost of those improvements (whether small or large) need to be factored in as you consider the overall financial move you are making.

A common question, or area, that I explore with my clients is the potential return on dollars that they might invest in those projects.  If they spend $20k on a kitchen remodel, will they increase the home's value by $20k?  If they spend $8,000 adding a composite deck system, will they increase their home's value by $8k?

Before starting to look into the data, I assumed that most of these projects would likely return all, or most of the cost of the investment.  That is not the case.

Remodeling Magazine recently released their annual report showing how the cost of these improvements affects the home's value, where the conduct extensive research to answer the questions posed above.  Surprisingly (to me), nearly every project only has a partial return on the investment.

• spending $17k on a bathroom remodel will likely only earn you $11k in an increased home value
• Spending $11k on replacing vinyl siding will likely only earn you $8k in an increased home value
• click here to examine the rest of the comparisons

A knee-jerk reaction might be to wonder why ANYONE would make these improvements, if they are all going to show a net loss of the money invested.  But remember....you get to live in the house too....with the remodeled kitchen, remodeled bathroom, etc.  Thus, people typically make the investment to make their home a nicer place to live while they are there.....even though they aren't likely to get every dollar back when they sell their home.
 
View the entire 2010-2011 Remodeling Magazine Cost vs Value Report by clicking here.