Return on Investment for Home Remodeling

The cost of home remodeling projects in Seattle can be a bit shocking, but will your investment pay off?

Although there is no financial crystal ball (...don't we all wish there was?!...), here are some tips for making an informed decision:

1. Find out the typical annual appreciation for homes in your neighborhood.  You can research data on neighborhoodscout.com, or ask a local real estate agent to provide you with data even more specific to homes like yours.  Using neighborhoodscout.com's 7% average over the last 5 years is a conservative approach, given that the past 5 years includes some of the recession recovery period and factors in both the most and least desirable neighborhoods.
2. Research the immediate return on investment percentages for project types like yours.  The annual Cost vs. Value report published by remodeling.hw.net is a great resource.
3. Answer honestly:  What is the least amount of time you will live here?
4. Include both "hard costs" and "soft costs" when estimating Total Cost of Your Remodel Project.  (And don't forget to add things that might not be included in the contractor's estimate, such as appliances, cabinet knobs, decorative light fixtures, and accessories.)

Sample data:

Current Home Value = $800,000

Total Cost of Your Remodel Project = $600,000

Total Investment = $1,400,000 (assuming that you don't have any equity)

Minimum Number of Years (that you will live in the house) = 10

Immediate Return on Investment (ROI) Factor for project type = 70% (conservative, based on lowest end of the ROI range for upscale Seattle projects)

Average Annual Real Estate Appreciation (conservative) = 7%

Sample calculation:

First, calculate your immediate ROI Value.

Current Home Value + (Immediate ROI Factor x Total Cost of Your Remodel Project) = Immediate ROI Value

$800,000 + (0.70 x $600,000) = $1,220,000

Then use an online compound interest calculator to calculate your home's Projected Value at the end of the Minimum Number of Years.

Then, calculate your Projected Profit.

Projected Value - Total Investment = Projected Profit

$2,399,924.66 - $1,400,000 = $999,924.66

So, although you would have started out with more money invested than you could immediately recoup, in ten years time, you will have more than made up for it.  And, consider the intangible.  You need to live somewhere.  Why not live in a home that is designed to work well for you and will bring you joy for years to come?  I can help you with that.

Project Update: Woodinville

Finishes have started being installed at the Woodinville project.  I rarely post photos at this stage of construction because much of the fun stuff gets covered to protect it from damage, leaving me with photos of things wrapped in cardboard with blue tape. 

During design, I did some quick sketches to help the homeowners visualize the shape of the indoor pool area and also to coordinate locations of the air registers with the mechanical engineer. 

Here's one of those sketches: 

The curved beam you see overhead will support a track for transferring wheelchair users from a changing area in the bathroom to the pool.

Now that drywall is up, you can see the shape of the space in real life (although a different angle).  There is currently scaffolding being stored in the pool pit for putting the curved beam up when it arrives. 

The waterproofing and tile installation are underway.  Here is a sneak peek of the tile pattern in the bathroom area.  The large mosaic area slopes to a long, linear drain against the wall.  There will be an adjustable height tub on the left side and a showering area on the right side.  The whole room is designed as a "wet zone."  The green color you see is the waterproofing coating on the waterproof substrate, before the tile goes up.

In the master bathroom, cabinetry is being installed.  You can see the unique pattern of bamboo plywood on the face of the cabinet sides.

Although the pretty things that will be seen and touched every day are being installed and everything is moving along nicely, this phase of construction always SEEMS slow because of all the detail work that goes into the final stretch.  That, and the fact that things get covered up and protected as quickly as they can!  The first day that the homeowner will really get to see everything all at once will be the "punchlist" meeting, which is when the team gets together to create a final list of minor items that need to be completed before the contractor's final pay application is approved.

I can't wait to show you this project when it is finished!

Sneak Peek: Madison Park Before & After

Remember this house that I posted about a while back on Facebook?  The one that tons of realtors had shown to prospective buyers without selling it?  Just look at that stack of realtors' cards that was on top of the flyer on the kitchen counter... (and that wasn't even all of them!)

We finished remodeling all three floors a couple of months ago. In order to make better use of the square footage, we made significant changes to the floor plan on both the first and second floors while completely renovating the kitchen, laundry, and all the bathrooms.

My client just sent me these before and after photos she took of the kitchen from the same angle, and I wanted to share this little piece of the transformation with you!