The Unexpected
If you think a project will pay for itself, but just barely, be prepared for something to tip the balance against you. Home renovation is rife with "hidden" expenses: the extra costs when a project takes longer than planned; the experts' fees for asbestos testing or heat-loss calculations; the monthly interest payments for a home-equity loan. Not to mention the higher property taxes you may have to pay when your new-and-improved home is reassessed.

When all is said and done, most experts counsel against home improvement as an investment. Be smart about what you spend, sure. But a new deck isn't a mutual fund. Real estate agent Chasin suggests that once you've done your homework, make your decisions based on what you want and what you can afford. "I had a listing where the husband had taken an early retirement, so his wife convinced him to put in a very expensive home office for $50,000. Ultimately they moved to Florida, and they didn't get the money out of that home office," Chasin says. "But she didn't care. It made him happy."

Payback by the Project
Since the mid-1980s, Remodeling magazine has done an annual analysis of cost versus value for residential remodeling projects around the country. By polling real estate agents and appraisers in various regions, the editors determine about how much projects cost to complete and how much those improvements might add to a house's selling price one year later. The report is widely considered the most authoritative study of the subject. But even Jim Cory, the editor in charge of the survey, admits it only goes so far. "We provide a benchmark with our study," he says. "Cases have to be decided on an individual basis."
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