$mart Money: 5 Remodeling Projects With a Great Return

Whether it's a major overhaul or a simple make-over, in this economy remodeling in key areas of your home has never made more sense.

The Joint Center for Housing Studies at Harvard University anticipates home renovations will shoot up 12 percent this quarter; a big comeback after a three year slump.

People who thought about moving are now staying put due to the housing market.

"Real estate is not moving," said Theresa Rhoten of Forest Park who is now remodeling her home. "We’ve changed our way of thinking, 'What’s wrong with this house?"

Rhoten is remodeling her bathroom first, and experts say the timing couldn’t be better to save money.

Act now and you might get the best deal.

"We are seeing some companies offering potentially up to 20 percent off, said Angie Hicks, the founder of Angie's List, a rated database of home service companies.

In fact, 80 percent of contractors she polled said they are willing to negotiate now before the summer rush.

Contractor John Novotny with Prairie Homes & Renovations tells homeowners to put their money in the rooms that get used most often. One caution: don't overspend for the neighborhood.

Here are 5 Remodeling Projects with the highest return on investment:

  • The Kitchen – Your kitchen is your best investment. A major update could cost more than $20,000, but you can expect at least an 85 percent return on that money.
  • The Bath – An outdated bathroom can quickly spoil a sale, and it won’t be a pleasant space for you, either. Current trends of large showers instead of space-hogging garden tubs may serve you well, as will attention to classic features rather than unusual color schemes. A major update could cost less than $20,000, but yield an 84 percent return.
  • Decks – A new deck can cost a few thousand to tens of thousands of dollars, depending on size and materials used. Before you build, look at other homes in your area and build accordingly. If the deck is in good shape, your return could be more than 80 percent.
  • Siding – If your home’s façade is siding and it’s not in good shape, replacing or repairing the siding can bring instant freshness. You’ll likely spend at least $10,000, but you should get at least 80 percent back.
  • Window replacement – The energy efficiency of new windows is a clear benefit to switching out older windows, but in some cases, it’s a safety feature, too. Costs depend on the number of windows you’re replacing, of course, and the type. Expect a return on your investment of at least 80 percent. Pools, sun rooms and home offices tend to bring the lowest return, only 50-60 percent, said Hicks.  Most important, don’t be in a rush to hire.

"It’s really important to get three estimates because that will allow you to negotiate," she said.

Be sure everything is in writing, so you can really compare apple to apples.

A good contractor will be willing to guarantee their price for 30 days.  Reputation and references are important.

$mart Money: Navigating the Road to Financial Freedom
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