High-Value Home Additions

When we moved into our present home 15 years ago, we picked the smallest of the three bedrooms for our master bedroom. It had a corner fireplace and a small bathroom, and it was a few steps from our three-year-old son’s room.

But now that little guy has become a big guy. And though we love to hear his rock group practicing in the evenings, we’re beginning to yearn for a private retreat—a quiet master suite where we can relax, read, or luxuriate in a hot bath away from the household hustle and bustle.

And we’re not alone: Nearly every new house built in our community features an elegant master suite. Clearly, builders know that a beautiful master suite ranks high on buyers’ lists.

But here’s our dilemma: If we add on a new master suite, will we get a return on our investment if we sell the house someday? It’s a question worth asking before launching into any remodel, particularly if the work is being done with a higher selling price in mind.

Real estate professionals and trade publishers offer up statistics each year that help in sorting out answers. One of my favorites is a “Cost vs. Value” study published each year by Remodeling magazine, a trade publication targeted primarily toward professional remodeling contractors. This study compiles and analyzes data gathered from real estate agents throughout the country to determine both national and regional average returns on investment for various home improvements.

In looking at the results each year, I’m surprised to see that, on a national average, most improvements will not recoup your full investment if you sell the house within a year. Of course, exceptions abound, depending upon the region, the vibrancy of the real estate market, and the type and cost of improvements.

In hot real estate markets filled with aging houses, returns on investment are higher than returns in slower areas, and the returns generally exceed the costs of improvements. Hot markets include Honolulu, San Francisco, San Diego, Seattle, Minneapolis, Boston, Philadelphia, Birmingham, and Garden City.

Certain kinds of additions do much better in particular places. Building a deck in San Diego or Hawaii is a solid bet. Adding a family room in San Francisco or Garden City will typically return upwards of 140 percent of the cost. Almost any major improvement in Garden City returns more than 125 percent of the cost.

Which improvements return more than others? Minor kitchen remodels are always a standout, but the national average for cost recouped is only 88 percent. In other words, in higher-end real estate areas, if you revamp cabinets, change appliances, and recover your floors, you’re likely to get your money back—and then some. But in slow-moving areas, you won’t. Bath remodels and major kitchen remodels are a close second.

Improvements such as adding a home office or replacing windows or siding are chancier. Your results will depend heavily upon where you live. The average cost recouped in Cleveland for replacing windows is under 30 percent, whereas it’s closer to 110 percent in New Haven.

Of course, certain improvements give a house more curb appeal or help it to sell more quickly. Replacing shoddy siding on a house in Boston or Chicago, for example, will not only boost the price by more than 120 percent of the job’s cost but also make the house look more appealing to more buyers.

Then again, if you intend to live in your home for years, short-term return-on-investment figures don’t really matter. The longer you stay in your home, the longer you enjoy a higher quality of life because of the improvements you make. And you can’t put a price on that.

I think I’ve just convinced myself that it’s time to start drawing up plans for a new master bedroom suite.