Not Profiting on Home Improvement

WalletPop’s Zac Bissonnette has a great post on what a poor investment home remodeling is. Every year the folks at Remodeling Magazine (yes, really) publish a survey of the impact on a house’s value of various types of home improvements. Helpfully, they do this as a percent of what was spent, so if you blew $20,000 on a new bathroom that only increased the value of your house by $15,000, then that’s a score of 75%.

The survey breaks out 19 types of projects, across nine regions. Most of the recoup values are in the 60%-80% range. The best from this year seems to be the 97% of your money you get to keep if you are adding a wooden deck onto a midrage house on the Pacific Coast. As far as I know, the survey has never found a value over 100%.

To be fair, this does not quite mean that all home improvements are money losers. These are averages, so almost half of those West Coast decks actually did add value. And the survey only covers relatively large projects, the kind for which you would hire a contractor. If you ask a good real estate agent how to make your house more valuable he will suggest cosmetic improvements, e.g. a new paint job. I am guessing that those sorts of fixes really do turn a profit.

But the basic observation, that home remodeling is a terrible investment, still holds. In a more perfect world, this would be so obvious that nobody would bother to mention it. Buying something at retail and hoping to sell it used at a profit, essentially what we are talking about here, is rarely a winning strategy.

But as Bissonnette points out, there is an entire category of cable TV shows based on the premise that you can make money remodeling. How can it be that home experts on responsible networks can advocate something so contrary to reality?

Because these are only TV shows. The people who make and broadcast TV shows are successful if people watch the shows, not if the shows are factually correct. And people want to see video of gleaming new kitchens and hear what a great investment they are. Ending a show saying “And Bob and Sue’s new sun room only vaporized $10,000 of their net worth.” would not help ratings.

Which brings up an important point about personal finance advice. We all make an unspoken assumption that successful givers of advice must give good advice, otherwise people would stop listening. This is not (quite) true. Popular givers of advice tend to get that way because they say what their audience wants to hear and wants to believe is true. People want to believe that they can become millionaires relatively easily by skipping the lattes or that they can work only four hours a week. That doesn’t mean it’s true.

No Comments

  • By Rebecca Behrens, March 10, 2011 @ 8:53 pm

    I agree with your view; I have never remodeled or painted, etc., without realizing that the cost would be at the expense of my necessity, pleasure or convenience.

  • By Marsha Killington, Colonial Heights VA, May 14, 2011 @ 4:44 pm

    Houses are Money Pits. Beginning, Middle, and End of the Story.

    Not until every single person agrees with this will they stand a chance of being decent ‘investments’ again.

  • By Keven Keup, June 21, 2011 @ 11:25 pm

    Hi! Your article rocks and is seriously a really great comprehend

  • By acromKawnar, July 16, 2011 @ 5:44 am

    exactly gonna reveal hello…

  • By TeweesyDiek, November 25, 2011 @ 8:27 am

    http://www.apzxlt.com

  • By boibreCox, December 12, 2011 @ 9:46 am

    google hr v

  • By Wahidi, January 18, 2012 @ 1:15 pm

    I agree with you that not ever home remodeling or home improvement will add value to your home. However you have to stay frugal when making choices to remodel your home and pick the right places to remodel. This is a great post and informative.

  • By chursorrifich, January 28, 2012 @ 6:29 pm

    Hey fellas, I want to see if somebody used the ti nail to smoke their oils. I’m looking for trying it, found it on one site for like 35 bucks and looks pretty easy to be used but i’m looking for some feedback from experienced users, if it worth buying it. Here is a Youtube video for this titanium nail. Thanks

  • By RManU, February 20, 2012 @ 7:57 pm

    I disagree completely.
    Try inspecting the comments on a news site (CNN) that isn’t moderated as carefully as the news blogs are and see what happens when “adults” are allowed to speak freely.
    —————
    heart rate

  • By AGreenP, February 21, 2012 @ 5:59 pm

    This is the only bulletin board I have seen that still uses thumbs good or bad. The popularity challenge doesn’t bother me, it is the clan that are afraid to exchange their opinion and use the thumbs instead. Take away that voice and then they either have to explain themselves.
    ————————————–
    occupational health

  • By jay, March 31, 2012 @ 1:17 am

    It is always crucial to decide on what areas of the home to remodel…not all areas of the home will increase the value… Great post

  • By querank, August 26, 2012 @ 2:37 am

    http://www.QueRank.com

    Question and Answer, Q+A with Photos, Answer Ranking

  • By #anja9876, October 19, 2012 @ 10:49 am

    At this website you will find information about body piercings , tattoos, body art and many amazing body modification pictures and products

  • By Fredericataf, December 21, 2012 @ 1:57 am

    Backpack Vacuum remedial and special education pc66 ram pcg 9401 17mm tokina beef tenderloin nirvana albums cindy sheehan air jordan retro
    creative zen vision:m 30gb office phone accessories private enterprise ch flightsim yoke pro solution reviews return wolfenstein movado rings boy underwear sd memory flash white crib skirt Monster Dr Dre
    paper air planes leather gloves nikon coolpix 8700 selber usb flash drive 2gb air jordan thunder
    polyvision whiteboards sony ps lx250h ceiling mount speakers hid kits bmw tail lights

  • By ErussyRes, April 8, 2013 @ 11:05 pm

    Phen375 is a dietary supplement for fat decline that capabilities being a extra fat burner and an appetite suppressant. It’s among the ideal slimming capsules utilized that can help decrease excess weight in overweight persons by burning off saved overall body weight and lower their appetite at the same time. The results shall be finest when utilized together with exercise and diet.So, you have gotten information about Phen375 scam

  • By lvdnovxhrhlsob, April 9, 2013 @ 11:59 pm

    cheap jordans

  • By Grainypeengip, April 10, 2013 @ 12:06 am

    buy cheap viagraviagra online , http://ordergenericviagranow.com/#lbjhn viagra without prescription

  • By Verr, May 3, 2013 @ 2:55 pm

    Never applied to men and I was ready for it,” regulations did not prevent the plaintiff from using the donor of her choice unless he turned out to be infected. Spent a great deal of time together are collected and created his story will send shivers down the spine of any man who was asked to donate.
    Blow cum cunts job

  • By incensesticks.barrflast.com, July 25, 2013 @ 5:21 am

    Great post. I was checking constantly this blog and I’m impressed! Very helpful info specially the last part :) I care for such information a lot. I was seeking this certain information for a very long time. Thank you and best of luck.

Other Links to this Post

RSS feed for comments on this post. TrackBack URI

Leave a comment

WordPress Themes