The amount or money you put into a home remodeling project depends on whether you intend to sell, rent or live in the house and what's standard in your neighborhood.

You’ve gotten some very rough estimates about what a project will cost by looking at the 2006 Cost and Value Report. You might even have called a builder or architect over to look things over to get a preliminary idea of what it will cost to make your remodeling project a reality.

After getting over the shock, you’ll may be wondering whether it’s worth putting so much money into the house.

The secondary question that you should be asking yourself, is whether your neighborhood merits this kind of an investment? There are some neighborhoods where you can sink $300,000-$500,000 into a remodeling project. At the end of the day, you have some reassurance that you’ll see some of that money back when you sell. There's no guarantee though. There are also neighborhoods where it doesn’t pay to do that at all, unless you are planning to be there a long time or don’t care about seeing a return at all.

To get an idea of whether you should go ahead with your remodeling project, you should find out what comparable homes in your neighborhood are selling for. You can do this by consulting with a Realtor who specializes in your neighborhood. Just ask the Real Estate Company what Realtor sells the most houses in your area. The Realtor will conduct a Comparative Market Analysis that is based on prior and current sales in your neighborhood. A seasoned Realtors will based their analysis on both the previous sales and where prices are headed. Remember, they are closest to buyers and sellers so put a lot of stock in what they say.

A good Realtor should be able to tell you, whether you’re over improving or within the range of the neighborhood. If you’re going to sink $70,000 into a new kitchen and two new bathrooms, and end up with a house that’s worth $200,00 in a neighborhood where most houses sell for $300,000 then you’re in reasonable shape. That assumes of course that the remodeling is tasteful and when you are ready to sell the housing market is good, etc.

We’ve consulted several Realtors on a home in a good Maryland suburb close to Washington DC. We were told to limit remodeling to no more than a certain dollar amount that was well below the average in the neighborhood. The Realtors said they were not enthusiastic because our house was on a street not in the best area of the subdivision. We followed their advice and were very glad we did.

Some people say that it’s probably not a good idea to improve more than 25 percent over the prevailing prices. If you don't over improve, you will likely recoup most, if not all, of your investment. If you over improve, you will have to hope that if you do sell the house, you can find a buyer who has similar tastes and is willing to pay your price. If you stick to neutral colors, your chances of finding such a buyer are higher than if you used the latest color scheme and styles.