Expert: Jessica Bryan - 10/19/2006

Question
My fiance and I bought our first house a few months ago and are doing some minor renovations. Because we don't want to stay in this house for more than a few years, I'm concerned about spending significantly more money on renovations than we'll be able to recoup upon selling.

We paid around $100,000 (inexpensive, Ohio neighborhood) for a 2/3 bedroom, 1 bathroom house that is 86 years old, but has many updates--renovated kitchen and bathroom, updated wiring and plumbing, expensive appliances, jacuzzi tub. The previous owner was not able to recoup the costs of his renovations--most houses of this size go for approximately $100,000 in this neighborhood. He originally listed it around $116,000, I believe. Basically, he made it "too nice" for the neighborhood (which worked for us, as the buyers!).

My fiance and I have already done a completel tear-off and re-roof on the house. (As part of negotiations, seller paid for approximately half--we paid roughly $2700.) The inner windows are all original, and in not-so-good shape, although the outer storm windows have been replaced (with aluminum?) at some point in the 86 year life of the house. We're leaning towards replacing all of the windows with inexpensive vinyl windows (half now, half next year). It looks like it will cost roughly $5500-$6000.

Is this an insane thing to do if we're only planning on being in the house for 3 years or so? What kind of payback would you typically see for replacing 86 year old windows with new windows in the house I described?

Thank you!!!
Andrea  

Answer
Dear Andrea;
Replacing the windows is necessary for the resale if they are in bad shape.  If you don't do it, the prospective buyer will see them and immediately discount the offer to include window replacement.  You won't necessarily get the full price for doing this, but then you can consider it as part of the cost to upkeep the home.  All homeowners must put money into their homes that they don't necessarily recover.  However, as part of the capital improvements to the home you can keep track of these costs and at some point use it against capital gains.  (This is a tax issue and you should discuss those things with an accountant or CPA.)  My feeling is that you will probably sell the home for around the same price as other homes in the neighborhood and if that is the case you will lose a few thousand on your improvements.  However, you will have lived there for a few years and reaped the benefit of the updated look and the better windows.  That has to be worth something too.

Good luck.

Jessica Bryan