Wednesday, January 16, 2013

The ROI Case for Remodeling: It's Got a Pulse! (But Does That Matter?)

"That's right, Mr. and Mrs. Customer. If we go forward with this kitchen remodel, I personally guarantee that it will dramatically increase the value of your home and you'll get back every penny. Especially the dual dishwashers, terrazzo marble countertops and floors made from reclaimed French wine barrels."

Let's hope you never said that in a sales call. But many remodelers fondly remember the days when they could assure prospects that they would likely get back most of the money they spend remodeling, if not all of it. (Remember averages like this, as shown in the image below? 2005 was shortly after I began covering this industry, when everyone thought homes were the best investments around.)

Those days may never come back. But the return-on-investment case is getting stronger, according to this sneak peak from Remodeling magazine about its latest Cost vs. Value Report.
"We're finding that for the first time in six years, the overall average cost-value ratio has improved to 60.6%. This is 2.9 points better tan the 2011-12 number, which hit a historical low of 57.7%, and is more than a half-point better than the 60.0% ratio from two years ago.
The 2013 Cost vs. Value report will be released today. Go here for the full download.

By the way, we'll explore the benefits of "the ROI pitch" in d5R soon. I can tell you in the meantime that some remodelers think it's a futile cause. Said one in a series of tweets yesterday:
"It's such a funny metric. Totally the wrong way to approach remodeling your home. I ask what the ROI of a car is. [Remodeling] is about quality of life. Spend what you are comfortable spending to live well."
What do you think, remodelers?

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Otogawa-Anschel said...

IalwayslaughwhenIseethatreport. highendbathroomfor$26...hahahaha

Myers Constructs Inc. said...

What Michael said!

Though the report is not so funny as my favorite HGTV comedy shows, "Property Brothers" and "Income Property".

Diane Menke
Myers Constructs

Abe Degnan said...

Right. Scope of work is the key in these things. Its junk! Plus I don't think they necessarily sample professional remodelers. Bathroom addition for $22K, another example.