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Before Spending a Penny, Analyze Cost

Remodeling 101. First of 10 parts

September 03, 2000|KATHY M. KRISTOF | TIMES STAFF WRITER

The reasons behind the current surge in remodeling are no secret or surprise, says Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies.

First, there are the demographics. Members of the massive baby boom generation have hit their 40s and 50s--a time when they've already established households. While some will certainly "trade up" to larger homes, in many communities--particularly in established neighborhoods near city centers--it's tough to find the right house at the right price. The baby boomers' response: Take the house you've got and create the one you want.

Then there are the economics. The strong economy and rapid rise in the stock market over the last decade have left many Americans wealthier than ever, so more people have the money to sink into their houses.

Practically speaking, too, even durable goods, like plumbing and roofs, eventually wear out. That typically starts to happen about 15 to 30 years after houses are built. Since there are millions of houses that were built in the mid-1970s, the 2000 homeowner is smack in the midst of a repair zone, says Baker.

Moreover, the average 1970s home was a modest affair, with three small bedrooms and a bath and a half, bedecked with wall-to-wall shag carpeting. To do some updating while handling repairs is both natural and reasonable, he adds.

However, before you go hog wild on the idea of building up, out or in, you should know that some other things have also changed dramatically since the 1970s. Most pertinent among them are building codes. Not only have structural standards been revamped to better handle things like earthquakes and floods, cities have passed myriad rules and regulations to restrict and redefine what homeowners can do.

The first step for homeowners contemplating even the most modest remodel is to consult their city planning or building department. The city is likely to have a laundry list of rules and regulations that stipulate everything from how many square feet you can build on a particular-sized lot to whether you must upgrade foundations, wiring and plumbing to current codes when you add on or refurbish. Naturally, the cost of what you do will increase if you're required to do extensive behind-the-walls fixes at the same time.

In addition, some areas have architectural committees that must sign off on drawings. Although these committees can sometimes prove helpful, it's important to know how much they might hamper your design. If a planning or architectural committee has strong ideas that don't mesh well with your own, you could spend thousands of dollars redoing design drawings and still never come up with a workable compromise.

It makes sense to meet with city planners and design committees before committing yourself to any expense.

If all goes well with the city, your second step is to consider whether what you want is worth doing where you live, says Walt Stoeppelwerth, co-founder of HomeTech Information Systems in Bethesda, Md.

Although the primary motive for remodeling is usually lifestyle rather than resale value, your home is likely one of your family's most valuable economic assets. To overbuild or under-build for your neighborhood can cost you a fortune in the long run, he notes.

Unfortunately, if you're thinking that a remodel is going to be worth its weight in resale value, you're probably wrong, adds Paul Deffenbaugh, editor-in-chief of Remodeling magazine in Washington, D.C.

Remodeling magazine does an annual survey of the average cost of a wide array of remodeling jobs and the estimated value that a particular remodel adds to the resale price of the home within a year of completion. Even kitchen and bath remodels--among the most popular and worthwhile from a resale point of view--typically return only about 70 to 80 cents on the dollar spent, the magazine's survey reveals.

That's not bad, Deffenbaugh hastens to add. You shouldn't expect a lifestyle investment to generate returns like an investment in the stock market or even a bank deposit.

"The competition here is not the 401(k) plan. It's the trip to Florida, the new car or the diamond earrings," he says.

Lifestyle investments often have some return, but it's rarely as much as you invested. That's OK because you get to enjoy the results of the expenditures. In the case of your house, you get to enjoy them every day.

Nonetheless, it's wise to consider just how much it's going to cost against the return, so you can make an informed decision about whether the net amount is worth the increased enjoyment.

The first thing to look at in this regard is your neighborhood, says Stoeppelwerth. In some areas, a third bath or fourth bedroom is standard. In other neighborhoods, adding a couple of bedrooms and a bath could make your house the local mansion. No matter how much you like it, you have to realize that it almost never pays to own the most expensive home on the street.

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