ArcaMax

There was an upside surprise in the February Existing Home Sales report, as sales increased by more than expected and inventory climbed.

Of course, one month does not change the fact that housing affordability is still tough, and there are many homeowners who are unwilling to give up those ultra-low mortgage interest rates that they locked in a few years ago. As of the end of last year, the percentage of outstanding loans under 4 percent was 55.2%.

As a result, many are gearing up for spring home improvement projects. Before you start the process, it is worth considering which renovations pay back the biggest dividends when you ultimately sell the property.

The Journal of Light Construction’s Cost vs. Value analysis provides insights that might surprise you. (That said, maybe you don’t care about recouping your investment, which is certainly understandable. Sometimes you are willing to throw money towards enhancing your living space. As long as doing so doesn’t derail your other financial goals, then go for it!)

For those who would like to maximize their investment and might sell their home within the next couple of years, the good news is that you don’t have to spend tens of thousands of dollars.

Some projects like a new garage or steel entry door cost less than $5,000 each, but upon sale, you can recoup the cost of those upgrades – and then some – those who replaced garage doors recouped 193.9% back at sale, almost doubling their money, and the entry door was 188%.

If you don’t want to pay someone to stage your house in preparation for a sale, consider making minor repairs like touch-ups on paint, replacement of broken windows, cleaning or replacing old carpets, fixing leaky faucets and re-caulking the showers and tubs. For the outside, cut the lawn, plant flowers and tend to the garden. These cosmetic improvements can increase your chances of selling the home quicker.

People are staying in their homes an average of 8.18 years, the longest tenure since at least 2000, according to data analytics firm Attom. Some of these owners have been waiting to upgrade everything from a kitchen to a bathroom to an office. Before you shell out big bucks, consider a cheaper, more efficient solution.

For example, if you want a brand-new kitchen, know that a minor remodel recoups almost all of your investment, mid-range will get about half of your money back upon sale, and the high-end major kitchen upgrade will only get you about 40% of what you spend.

There are similar returns on the investment of a bathroom upgrade, so maybe slow your roll on the new Jacuzzi and stick to the basics that will make a difference – or add living space, which can increase your home’s value.

Finally, paying for the work is an obvious consideration. The best way to do so is to save in advance for the project. For money that will be spent within the next 12 months, use a high yield savings or money market account.

If you have an investment account, feel free to tap it, even if you have to pay capital gains taxes. If you are looking at financing the improvements, don’t give up that ultra-low mortgage rate by refinancing; instead, consider a home equity line of credit (“HELOC”) or a home equity loan.

You should also check out whether your project qualifies for a government Title 1 or 203 (k) loan, which are geared to low-moderate income homeowners. The loans are backed by the FHA but are issued through private lenders.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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