(MONEY Magazine) – To move or to improve? That is the question facing owners who have grown dissatisfied with the house they currently call home. Whether the problem is cramped living quarters, antiquated amenities or exorbitant fuel bills, Americans are increasingly opting to remodel their way into more comfortable homes. This year U.S. homeowners will spend a record $65 billion on professionally installed renovation projects, up from only $33 billion five years ago, and another $20 billion or so on do-it-yourself remodeling jobs. The projects range from such simple maintenance work as reroofing, re-siding, and replacing old windows and doors to more elaborate jobs, such as building additional rooms or overhauling kitchens and bathrooms. Economics is the main impetus. With prices of new single-family homes averaging $111,800 last year and rising at 9% a year, compared with only a 5.3% increase in family income, many people simply cannot afford the house they really want. Meanwhile, financing improvements to a dwelling you already own has never been easier, owing to the widespread availability of low- interest-rate home-equity lines of credit. Still, for many homeowners such as the Northrups of Edina, Minn., profiled on page 94, the decision to upgrade is more than dollars and cents. In many cases, remodeling is the best, if not the only, way to create exactly the kind of dwelling you want where you want it. If you are happy to stay in your neighborhood -- satisfied with its proximity to your work, the quality of its schools and other amenities -- remodeling can be the means to turn your less- than-perfect house into your dream. No matter how much time and energy you spend house hunting, you are unlikely to find a home that sports every amenity on your wish list. As Bryan Patchan, executive director of the National Association of Home Builders' Remodelors Council puts it: ''Remodeling affords homeowners the unique opportunity to put a personal stamp on a major investment that they will be living with every day.'' Just how far you will want to go with your remodeling efforts depends partly on how long you plan to live in your home. The longer you plan to stay put -- and thus enjoy the improvements that you make -- the less you need to worry about the dollar value that future buyers will place on your alterations. You should also take into account the value of your remodeled home compared with that of other homes in the area. In general, the highest return on improvements comes from bringing your place up to par with others in the neighborhood. Furthermore, especially if you are already in the same price range as nearby homes, you will want to stick with improvements that are likely to increase the value of your property, such as the creation of additional living space, modernization of bathroom and kitchen facilities, improvements in energy efficiency and the installation of amenities -- patios and shrubbery, for example -- that will enhance the house's appearance and comfort. But no matter what specific improvements you choose to make, the value of the remodeled home should be no more than 20% of the average value of homes in your neighborhood if you want to avoid losing money when it comes time to sell the old homestead. Here are the most common types of renovations, listed roughly in order of the size of the project, from the biggest to the smallest: Expansion. The complaint of insufficient space is the reason for moving most commonly cited by prospective sellers. It is also one of the housing problems that remodeling can best resolve. You can, for example, create an extra bedroom, family room or home office for a relatively modest outlay by converting an attic or -- less desirably -- a basement currently used for storage into livable space. Because these areas already have floors, ceilings, walls and rudimentary wiring, the cost of conversion is usually far lower than the cost of building a new room from scratch. According to a recent survey by Practical Homeowner magazine, a typical 16-foot-by-36-foot two-room attic conversion, which might require the installation of new wiring and windows, is around $9,500 and will return 104% of your costs if you sell your home within a year. A basement conversion is cheaper -- a 24-foot-by-20-foot room runs about $6,600, including the cost of insulation, floor coverings, paneling, trim and light fixtures, as well as contractor's fees. But because prospective buyers put less value on subterranean living space than they do on aboveground rooms, you will get a lower return on your investment, about 97% on average.

You can also remodel your way into larger living quarters by building an addition to your home. But room additions do not come cheap. According to the Practical Homeowner survey, building an addition onto a standard three-bedroom suburban ranch house could run anywhere from $23,000 for a basic 20-foot-by- 24-foot room to upwards of $27,000 for a 15-foot-by-25-foot addition that includes such upscale finishing touches as skylights and sliding-glass patio doors. Moreover, if the additional space makes your home considerably larger or more luxurious than the houses that surround it, the extra rooms may be viewed as an overimprovement, meaning that you may be unlikely to recoup your costs. Modernization. If your main gripe with your home is its old-fashioned facilities -- rusty plumbing, an insufficient number of bathrooms or a Flintstone-age kitchen -- remodeling may also be a better bet than going through the hassle and expense of moving. Indeed, kitchen and bath renovations with an eye toward modernization are the most common major home improvement projects being commissioned today, according to James A. Tolliver, executive director of the National Association of the Remodeling Industry. Figure on spending anywhere from $4,600 to $8,800 for a minor renovation of the kitchen and from $7,800 to $27,000 for a major overhaul, which includes installation of all new appliances, cabinets and countertops. There are ways, however, to cut the costs to more manageable sums. Refinishing cabinets rather than replacing them, for example, can reduce the expense of a kitchen renovation by roughly 20%. You can also cut costs by removing parts of the old kitchen yourself since demolition labor can account for about a third of the labor charges you will incur. You are likely to recover anywhere from 70% to 90% of the expense of redoing your kitchen. Redoing the bathroom these days costs between $4,200 and $10,400, and provides around a 75% return on your investment. Adding a full bath will, on average, run you about $7,300 and will rank among the most cost-effective improvements you can make. You will probably recover all the money you spend on the project and then some. Energy upgrading. A leaky, energy-guzzling house that is expensive to maintain is another problem that remodeling can frequently fix. Although you ! no longer get income tax credits on such work, you can cut your annual fuel bills at least in half, for example, simply by completing three basic tasks: weatherstripping and caulking doors and windows; insulating the attic floor, basement walls, ducts and pipes; and upgrading your heating system. The total cost of these improvements would be roughly $3,000 to $4,000. As a general rule, you can expect to recover about two-thirds to three-quarters of the money you spend to upgrade your home's energy efficiency. Adding amenities. If you hope to recoup most of your costs on resale, focus on those improvements that are prized most highly by prospective home buyers. Topping the list: fireplaces and decks. Even in southern climates, a fireplace, which costs roughly $3,000 to install, can return about 85% to 125% of the money you spend on it when you sell your home, according to remodeling surveys by Practical Homeowner and Remodeling Contractor. A deck, which costs about $15 a square foot to build, can return anywhere from 80% to 100% of its cost in added market value. You are likely to recoup about three-quarters of the cost of adding skylights, another popular feature, but only about half of the price you pay for landscaping. The worst renovation you can make if you are concerned about recovering costs: installation of a swimming pool, which many prospective home buyers regard as a danger to small children and an unnecessary encroachment of backyard space. The likely return: only 30% to 45%. When you do decide that it is time to move on, consider putting some money into yet another kind of remodeling job: the interior facelift, as it is called in remodelers' parlance, better known to homeowners as sprucing up. ''In most markets, money spent on painting, papering and general freshening up of the inside of your home will bring a 100% recovery or better upon resale,'' say the editors of Practical Homeowner in their 1987 Do-It-Yourself Annual (Rodale Press, $19.95). Even if you don't find a buyer or you change your mind and decide to stay put, giving your house a facelift will probably add considerably to your enjoyment of your home -- which, after all, is really the main purpose of remodeling.