There is often a misconception that remodeling adds value to a home and gives a multiple return on investment

Home Improvement
There is often a misconception that remodeling adds value to a home and gives a multiple return on investment. In this context it is important to distinguish between remodeling and repair. Adding a new kitchen, family room, or deck, does enhance the appeal of a home, but rarely will you be able to recoup the entire investment. On the other hand, cosmetic repairs such as painting, or replacing plumbing fixtures, can give a multiple return on investment. A relatively modest budget can "dress" the house with an appealing fresh look, and attract buyers.

Remodeling
When is it worth remodeling? If you have immediate needs for a new kitchen, an extra bathroom, or a home office, you may want to go ahead and remodel. But if you're doing it to get a better resale value in the near term, it may not be cost effective. As a general rule, if you plan to stay in your present home for the next four to five years, the convenience resulting from the remodel may be worth the investment even though there is no real monetary gain.

If the remodel is likely to cost upwards of $20,000, you may want to weigh the pros and cons of remodeling vs. buying another home that already has the facilities you are looking for. In today's market, buying a home may be a more attractive option, rather than pouring money into your existing home and pricing it out of the market.

As part of their annual nation wide survey, Realtor Magazine and Remodeling Magazine teamed up to research the average cost vs. value of the most common remodeling projects:

Midrange Kitchen Remodel
A kitchen is a key element in attracting home buyers, and the convenience of a recently upgraded kitchen is a major plus. An average cost of $43,213 could increase the home value by $28,760, and recoup 67% of the cost.

Upscale Kitchen Remodel
Average cost: $70,368, value:$56,137 (80%).

Bathroom Remodel
Average cost: $9,720, value:$8,506 (88%).

Family Room Addition (16'x25')
Average cost: $41,250, value:$31,842 (77%).

Deck Addition (16'x20')
Average cost: $5,294, value:$4,007 (76%).

Master Suite Addition (16'x24'), including bath and walk-in closet
Average cost: $69,173, value:$51,979 (75%).

Attic Bedroom (15'x15') including a 5'x7' bathroom
Average cost: $27,472, value:$20,070 (73%).

Home Office (conversion of an existing 12'x12' room)
Average cost: $9,500, value:$6,585 (69%).

Window Replacement: 10 3'x5' vinyl clad, including new sash and trim
Average cost: $9,424, value:$6,951 (74%).

Repair
When you are ready to sell your home, perhaps the best return on investment can be had from a targeted freshening up of the home through cosmetic repair. At the same time, it is important not to get carried away with such repairs.

Sometimes there is a tendency among sellers not to spend any more money on the house now that they have taken a decision to sell. The rationale is to keep the list price low and attractive, and let the buyers spend on whatever they want after closing. This strategy can work, provided the house is reasonably attractive compared to other homes on the market. If not, then it is essential that some sprucing up be done to make the house competitive. Curb appeal and first impressions are important, particularly in a buyer's market.

Whether you are remodeling or repairing, there is no magic formula that can be applied across the board. Each house has to be evaluated in the context of the market, neighborhood home prices, and mainstream appeal of the remodeling project. While you can build to satisfy some special individual need, don't expect the buyer to value it. Please note that the figures given above are averages, and your own costs may vary. In the final analysis, the value of the home is not determined by how much you paid for it, or what you put into it. It depends on what someone is willing to pay for it, and this is always a factor of supply and demand.