Real estate myth 3

This is the continuation of a feature inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. I think an educated market benefits everyone, so I intend to debunk as many myths as possible, one myth at a time. I hope you find this information useful. Please feel free to comment!

Myth #3 'Our New Kitchen Is a Great Investment'

When folks buy a house, they fret over how many bathrooms and bedrooms they are getting and what sort of remodeling might be needed. But these things won't determine the home's future appreciation.

Indeed, as time, weather and use take their toll, the house itself will tend to depreciate, necessitating costly repairs. Instead, over the long haul, what propels home prices higher is the value of the underlying land. A new home can always be built. But the land has scarcity value.

Which brings us to the subject of remodeling. To be sure, home improvements can add to your property's value. But they aren't a moneymaker.

For proof, consider the annual survey by Remodeling magazine. The 2000 survey found that you might recoup 60% of the cost of adding a sun room, 69% of the expense of refinishing your basement and 81% from a bathroom remodeling.

Numbers like these might sound encouraging. But think again. If you get back 81% of the money lavished on your bathroom, that means you have just lost 19%.

Moreover, Remodeling magazine's estimates are based on selling your home within a year. The longer you wait, the scruffier your home improvements will look and the less you will recoup.

That doesn't mean you shouldn't undertake home improvements. If you get a lot of pleasure from your remodeled bathroom, it is money well spent. But don't kid yourself. It's not an investment.

Thanks to Jonathan Clements of The Wall Street Journal