When calculating the return on investment for remodeling projects, there's some positive news to be found for DIYers and handymen. It turns out that small projects often equal better returns.

Recently, I had the opportunity to speak with Sal Alfano, the engaging and always informative director of Remodeling Magazine, about the Remodeling 2010-2011 Cost vs. Value Report, this year’s survey comparing the average cost of 35 popular remodeling projects and the value those projects retain at resale. This year, the bad news comes with continuing overall declines; the good news comes with a bright spot for the handyman.

First the bad news: Overall, the national rate of return on remodeling dollars has continued to decline from the high of 86.7 percent in 2005 to today’s anemic 57.7 percent. The panorama changes from region to region and state to state, with some areas doing substantially better than others, according to Alfano. The average cost-value ratio for cities in the Pacific region is 71.3 percent due largely to higher resale values. Meanwhile, high construction costs and low resale values have kept remodeling return on investment below average in the Middle Atlantic and East North Central regions, while West North Central cities rank lowest at 49.5 percent. Texas and Washington D.C. are both examples of higher than average returns, while the upper plains states have fared poorly. The equation generally charts with the strength or weakness of the local housing market, but it also depends heavily on the local cost of construction, which has dropped in many areas due to high rates of unemployment in the construction sector and stiff competition for scarce remodeling jobs. Nevertheless, lower costs have been largely offset by even larger declines in the housing market.

Now for the good news: Continuing the trend of recent years, the top 10 projects yielding the highest return for each remodeling dollar fall largely into the category of moderate cost-replacement projects. This is very good news for the handyman. During our conversation, Alfano told me that, if asked by a hypothetical brother-in-law whether to set up a handyman service or remodeling company, Alfano would say, “Become a handyman.” In fact, Alfano confided that most of the remodelers he talks to nowadays have established a small-job division, “But handyman is a whole different business model, and a very appropriate one for today’s economy,” Alfano says.

Project Ranking
For the handyman, the good news comes with the type and size of the projects that provide homeowners with the best value across all markets. This year’s top 10 projects are concentrated in the moderately priced, replacement category, with the leading project also the least expensive: replacing a steel entry door, which costs slightly more than $1,200 while consistently recovering more than 100 percent of its cost at resale, according to Remodeling Magazine. Other leading projects include garage door replacement (71.6 percent cost recovery), foam-backed vinyl siding replacement (69.6 percent) and vinyl window replacement (69.1 percent). A minor kitchen remodel, which, according to Alfano, represents an interior version of a replacement project, consisting of replacing cabinet doors and drawer fronts, pulls, countertops and appliances, comes in is fourth overall, returning 72.1 percent, two places better than last year. Rounding out the list of moderately priced projects comes the wood deck addition at 72.8 percent, and new to the top 10, the attic bedroom addition at 72.2 percent. All projects that should make the handyman’s heart delight.