Thinking of converting your basement, garage or spare room into a home office? Think again. In terms of return on investment, home office renovations rank dead last among home improvement projects.
According to Remodeling Magazine's annual Cost vs. Value Report for 2011-2012, home office remodels rank dead last in return on investment, in a list of the 19 most popular mid-range projects:
Converting a 12-by-12-foot room to a home office.
Job cost: $27,963
Resale value: $11,983
Cost recoup: 42.9%
Ouch! Across the country, you're expected to make less than half of your office investment back at resale time. Regionally, returns varied only slightly, with the highest rate of return, 50.5%, in the Pacific West, and the lowest, 32.4%, in the upper Midwest.
It's an interesting find, especially considering that in 2010, an American Insititute of Architects survey revealed that a home office space was the most popular special function room requested in new homes or additions.
Of course, many of us manage to find room for perfectly functional office spaces without spending $28K. Construction costs factored into the report include custom office cabinetry, a custom work surface, wall-mounted storage, re-wiring the room (for a computer, fax and multiple phone lines) and adding new floor and wall finishes.
The lesson here, dear reader, is to make sure that every penny spent in building your home office is spent with purpose and with an eye on your future needs and wants in the space. Because you sure aren't going to recoup your cash when it's time to sell.
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The up side is that you can take a tax write off for an office if that is ALL it is used for. You can't have a TV or anything that might resemble a bed. If you do get audited and the room looks like it is used for more than the office, you'll get dinged.
Plus, consider the amount of time and money saved since you won't be commuting.
I realize this sounds like 'I'm in" for a custom office, but I'm not. I agree with the writer who said that you can make an office without the custom price. My office is a very small knook in my bedroom. Not the best, but my second room is now occupied by my Mother who is living with me until she can find a senior home she likes.
There is a difference in renovating a previously unfinished space (garage, basement) into finished space, and just throwing a ton of money at an already finished space (spare bedroom) in the form of custom furniture,etc. You can't put those two actions in the same ROI box, they just are not the same thing.
Turning any unfinished space into livable space is usually a rock hard ROI, however installing built-ins and fancy, personalized office furniture is not (in the typical single family home of course.)
Does it really cost $28,000 to convert a spare bedroom into a home office? I could see if you maybe converted an unfinished basement,which you'd think would have a better return, but if the space already exists you're pretty much just putting some furniture in an empty room.
So the moral here is, use portable furniture like Armoires, Kitchen Pantrys and anything else than can be moved out to return the room to a bedroom for resale. To spend $28K to turn a space into an office is a little out there. By the way you can have a TV in an office space, if your using it as a Monitor.
I agree with all of the above. If you need a home office, invest in pieces you can take with you, and convert a space that can be easily converted back to another function (such as a bedroom) by the future buyer of your home. Dont spend a fortune finishing unfinished basement or attic space unless you account for another use as a sales point to a potential buyer - extra bedroom or family room for example. Formulate a plan to show the space in the more appealing function when your home is listed for sale.
I have to take issue with this. I just had my home appraised, as it happens. The appraisers name and value the rooms by configuration, not use. So a bedroom remodeled and used as an office will still count towards home value as a bedroom if it has a window and a closet (in my state, anyway). A converted basement or garage is a family room or general purpose room if it has a legal-height ceiling, and a "bonus room" if it is wonky. Any custom cabinetry outside of the kitchen or baths counts for little other than overall quality of the home. Wiring for broadband, etc, does add value, but once you have that installed it can be extended to other pars of the home easily -- and you get the value no matter where it is.
Beyond he appraisal, of course, is the marketing approach taken by the realtor, and the quirks of the local real estate market. But where I live most people look at any customized room that isn't quite new and think "remodel".
Having gone though a few houses in my life, I figured out years ago that you remodel for your own pleasure, not for buyers. Unless you are flipping (a risky thing these days), don't bother thinking of future buyers at all. (One caveat: if you have a mortgage and think you may want to refinance or get an equity loan in future, keep any converted bedrooms within the "bedroom" definition. You will be docked many thousands in valuation if you are docked a bedroom.)
Who wants a room in the house that looks like a cubicle?
I think the lack of ROI is on all tha built in desk and storage stuff which limits the layout of the room (and to my eye looks like misplaced kitchen cabinetry). Far better to put up a wall of shelves and place a desk or table with some decorating style.
I'm with @Rural and rueful.
I just remodeled my house and did some stuff that will get me low ROI (dollar-wise) but I am planning on staying there for a long time, so my personal ROI is 100% - every penny spent was worth it.
I think anyone spending $28,000 on a home office is completely unnecessary. And yes, if you're doing the plan above with custom cabinetry, etc. limits the use of space for the next owner so I can see why it doesn't have a good ROI.
Their budget included sheetrock costs, so that must mean ripping open the walls to run new wires, then re-rocking (tape, float, repeat) and painting. With wireless networking, that probably isn't necessary. Custom cabinetry, as everyone noted, also isn't necessary. And new flooring probably isn't needed either. So yes, you can convert a bedroom for a fraction of their "midrange" cost.
I also doubt that a remodelling trade magazine is the best, least-biased source for how much certain projects should cost. Would you ask an auto-dealer how much you should pay?
I don't see why you wouldn't go multi-functional if you were paying for a custom fit-out. The best home office reno I've ever seen was a built-in desk/cupboard/shelving unit along one wall that worked just as well when the room was converted to a nursery.
Agreed with everyone above. Clearly $28k is a bit much for an office remodel, even with built-ins.
The photo with the graph overlaid is of my home office which I spent less than $5k on (all furniture) — and when I move, I'm taking it all with me. I guess technically I'll loose the money spent on paint, but I can live with that.
typo, *less than $3k.