Good Investments

How do you think about the money you are spending on an addition or remodeling project? Is it an expense – just money spent? or is it an investment – money spent with the expectation of a return?

I suggest that when you are considering adding on or remodeling, that you consider each expense – design, permits, construction – as an investment. You are investing in your home as, probably, your single largest asset. You are also investing in your home as a place to raise your family in safe surroundings, entertain your friends, live your life, and make incredible memories.

The pay off comes in a higher property value, yes. It also comes in a higher standard of living as measured in comfort, convenience, safety, health and happiness.

Recently, Lifehacker.com published a piece about the best and worst home improvements you can spend your money on. The article looks at the home improvements solely from a financial stand point. It also looks at the improvements using nationwide data. I suspect that there are significant differences if considered regionally, or even real estate market to real estate market.

For example, creating a master suite is seen as being a bad financial investment because you can only recoup 40% of your investment in increased home value. But the San Francisco Bay Area numbers are different. According to Hanley Wood, the publishers of Remodeling magazine, in the San Francisco Bay Area, a master suite is seen as a very good financial investment because you can recoup 83% to 96% of your investment in increased home value. There are so many older homes in the Bay Area that are 2 bedroom 1 bath, that adding a master is a really good idea financially.

It is also a great idea in terms of the quality of life for a family with children. The extra space, the extra bathroom, the additional privacy – which leads to intimacy – adding a master suite can only be a good thing.

In addition, in the Bay Area, again according to Hanley Wood, a minor kitchen remodel can result in a 147% return on your investment in terms of increased property value. That is a great return on your money. And it means that your kitchen is likely easier to cook in with lower maintenance requirements. How much time is being saved because the kitchen is more efficient? How many more home cooked meals are your kids getting? How much more fun is it to cook because the kitchen is remodeled? These are real positive changes in your life. That’s also a significant return on your investment.

Don’t get caught up in the “how much will it cost?” question without also considering “what is the pay off?” The pay off comes in two forms: money and quality of life. How much is a happy life worth to you?

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