With the stock

market doing an about face recently and with housing prices continuing

to rise, many homeowners are surprised to learn that the equity in their

home comprises a larger portion of their net wealth than the holdings

in their stock market or retirement funds. Compared to conventional financial

investments that rise and fall with regular frequency, housing has proven

to be a relatively stable and sound investment that keeps up with inflation

in most years and outpaces it in others.

Although few

of us purchase a home strictly for its investment value, in practical

terms it represents an asset that can pay high returns when it comes time

to either refinance the mortgage or sell your home outright. Of course,

a home that is well-maintained and offers up-to-date systems and amenities

will have a higher value than a comparable home that is poorly maintained

or lacking the conveniences and extra living space that today's buyers

want. Remodeling, then, becomes the key to protecting and enhancing the

investment value of your home, not to mention its many other benefits.

NAHB estimates

that owners will spend a record $150 billion in 2001 on maintaining and

improving their homes. There are several factors driving the demand for

remodeling, but one of the most important is the sharp increase in housing

values over the last several years. With home prices escalating virtually

almost everywhere, and in some metro areas at double-digit rates, more

homeowners are turning toward remodeling, first and foremost to add to

their enjoyment of living in the home, but also to boost the value of

their original investment.

"What

improvements will add the most value to my home?" To answer that

question, it is important to understand that remodeling - and your home

for that matter - are different from other investments that are primarily

financial in nature. What's unique about housing is that the "investor"

or owner receives the immediate benefit of being able to occupy and enjoy

their investment; i.e., live in it, all the while it is growing in value.

Stocks and bonds don't deliver on this aspect.

The longer

you intend to stay in your home and will enjoy the new family room or

whatever improvement you make, the more weight this factor contributes

to your overall return on investment.

The other part

of your investment return is the increase in resale value that the remodel

adds to your home. Ultimately it is a professional

real estate

appraiser who will decide the financial return of any remodeling you do

through the price he or she assigns to your home when you decide refinance

your mortgage or sell your home. The cold hard truth, however, is that

real estate appraisals are more an art than an exacting science.

The price of

your home will largely depend on the prices that comparable homes recently

sold for in your neighborhood. The value assigned to the improvements

you made to your home depends on a number of variables but depend heavily

on the location of your home as well as its overall condition. Some remodeling

projects lift the value of a home by the entire cost of the remodel and

sometimes by even more.

Despite the

limitations of the appraisal process in allotting what you might consider

fair value for all the improvements that you proudly made to your home

since first moving in, there are certain rules that you should consider

to increase the dollars you get back from your remodeling investment.

Maintaining

your home in good repair is the most critical of all investments that

you can make to your home. The shape it's in matters as much if not more

than what other attributes your home may have.

The quality

of the work you have done on your home is another factor that can't be

ignored, if you are looking to make a good investment. Shoddy workmanship,

low-grade materials and inferior products will wipe out any value the

remodeling might have added to your home.

Remodel for

yourself and your own family, not the next owner. It is a gamble to predict

what the likes and dislikes of the next owner might be. Keep in mind,

however, the more your tastes stray from the norm of most of your neighbors,

the less likely you are to get maximum return from your improvements.

Stay with styles and colors and features that have broad appeal.

Kitchen and

bath remodels are the two most popular remodeling projects year-in and

year-out, no matter where you live. Minor kitchen remodels tend to recoup

more of their costs than major kitchen remodels. Bathroom remodels also

vary on how much they add to resale value, depending on the extent of

the makeover. These two rooms carry the most weight when it comes time

to sell your home. Attractive kitchens and baths fully outfitted with

popular features will not only help sell your home faster, they also can

drive the price a buyer is willing to pay for your home.

Extra space

in the right place offers a high rate of return since existing homes tend

to lack the roominess of new homes. New family rooms, larger master bedroom

suites and eat-in kitchens are all examples of spaces that most buyers

value highly.

Although it

is difficult to put an exact price on the resale value of a particular

remodeling project, for most of us the real value of remodeling is the

comfort and pleasure it adds to the years we spend living in our home.

Eddie Lusher,

who is with Jerry Ballard Homes, is president of the Home Builders Association

of Midwest Georgia, which serves a membership of approximately 460 builders

and associate members in Fayette, Coweta, Spalding, Heard and Meriwether

counties.

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