What's Restoration Worth?

Determining how much money your old house restoration project is worth.

By J. Randall Cotton

	Like antiques, rich interior woodwork and finishes are what bring some buyers to pay more for old houses in good condition. Photo Courtesy of Gordon Bock

Whether it's an old house or a recent house, almost any improvement will increase value. The more relevant question, perhaps, is whether it's possible to recoup all the investment in home-improvement projects including restoration projects when it's time to resell the house.


For example, if a homeowner invests $50,000 in restoration work, will the future selling price increase by at least that amount? An answer to this question is hard to come by, primarily because there are so many often interrelated reasons why residential property values appreciate. Among the more common factors are location (and location and location!); the reputation of the local school district; community amenities and services; accessibility to transportation, jobs, and shopping; local taxes; lot size; and the safety of the community (or at least the perception of safety). Nonetheless, there are studies and anecdotal reports indicating that historically minded home-improvement projects do indeed pay off, though not always on a dollar-for-dollar basis.

Crunching the Right Numbers
The magazine Remodeling conducts an annual cost vs. value report that determines the average national return on investment, upon reselling the house one year later, for common, specific, home-improvement projects. At the top of the list are bathroom additions (94 percent return on investment), bathroom remodelings (88 to 91 percent), kitchen remodelings (67 to 80 percent), basement remodelings (79 percent), and family room additions (79 percent). A similar national survey by the Appraisal Institute of Canada reveals practically the same results.

The problem is that such surveys rarely, if ever, encompass typical restoration projects. OHJ readers might be dismayed to learn that some activities specifically discouraged by the Secretary of the Interior's Guidelines still consistently rank near the top of the lists. For example, siding replacement recoups 79 percent of investment after one year; window replacements garner a 74 to 77 percent return. What is not known, however, is how these generic remodeling projects compare to the return on investment for sensitive restoration work say, restoring (instead of replacing) the original siding or window sash and frames.

Another issue complicating any comparison of restoration and remodeling economic benefits is the do-it-yourself factor. In many residential restoration projects, the homeowner provides the free sweat equity of his or her own time, so the actual out-of-pocket costs reflect only part of the investment. Restoring original clapboards, for example, might just require buying paint, sandpaper, and the occasional new clapboards, compared to the remodeling expense of hiring a contractor (time, materials, and profit) to install man-made siding.

Despite the difficulty in obtaining empirical evidence of the direct economic benefit of home restoration on property values, real estate agents specializing in the sale of historic homes, as well as published studies, agree on some market observations:

• Not everyone wants to buy an old house, so the pool of potential buyers for older houses might be smaller than that for comparable new homes. However, this smaller pool consists of more motivated and more discerning buyers who are willing to pay a premium to get what they want.


• Furthermore, many old-house buyers have very particular preferences say pre-1820s homes or the high ceilings of Victorian homes and will pay for just the right architectural era.


• Serious old-house buyers value the original features, finer craftsmanship, and higher-quality materials embodied in an older house. Agents report that buyers regularly look for fireplaces, tongue-and-groove floors, solid-wood paneled doors, rich hardware, and old window glass.


• Although the overall condition of a house on the market will obviously affect the asking price, we all know that buyers of old houses are often more willing to accept less-than-perfect conditions. In fact, some investors specifically buy a fixer-upper, make necessary improvements, and then sell it at a handsome profit. Anyone tempted by this kind of short-term investment should bear in mind two time-tested axioms: 1) Buy the least desirable house in the most desirable neighborhood, and 2) Don't overimprove for the neighborhood.

• Fix structural deficiencies, such as rotted sills, bulging walls, insect damage, sagging beams, wood rot.


• Replace worn-out roofing materials.


• Remove or encapsulate potentially hazardous materials, such as asbestos.


• Repair, upgrade, or replace outdated heating, plumbing, or electrical systems. (Wholesale replacement, however, is not always needed. For example, the original branch-circuit wiring might be perfectly acceptable, but heavying up to 100-amp service and a modern circuit-breaker box may be a good investment and even required by code for sale of the house.)


• Remove architecturally insensitive and incompatible remodelings, particularly from the 1970s era, advises one sales agent.


• Keep up with routine maintenance, such as cleaning out gutters, painting exterior woodwork, or repairing broken fixtures.


• Upgrade the kitchen and bathrooms to modern standards. The styling of these improvements can be within the spirit of the home's historic period, or even thoroughly contemporary.

• Decorating tastes are highly personal, and what you admire alas, even well-researched, authentic period dØcor may not be to the liking of the next buyer. Few folks are going to pay extra for custom wallpaper, expensive decorative finishes, or top-of-the-line fixtures they will change anyway.


• Authenticity can be irrelevant. You may know that the painted crown moulding in the parlor has been meticulously re-created using hand planes and the highest-quality clear pine, but will the next owner know or care? Solid-brass replica doorknobs may be more authentic than brass-plated versions, but for strictly investment purposes the latter may suffice.