When you own your own home, it’s natural to eventually (if not immediately) want to make some renovations. With people spending more time at home than ever before during the past 18 months, that desire to turn your property into your perfect home has only increased in a lot of people.
But, you also hear that many home improvements simply don’t pay off for the homeowner, in terms of increasing home value and resale. So, what should you do if you want to make some changes, but also want to make sure you are spending wisely?
One key thing to think about. There is a difference between making renovations focused solely on getting your home ready to sell vs. renovations, you are making for your own enjoyment and then hopefully to increase property value. The main difference is the enjoyment you will personally get from a renovation. There is value in that enjoyment, so you should factor it into any renovations decisions.
If your renovation is focused on helping you get the house on the market and drive the highest sales price possible, then your own enjoyment of any renovations is largely unimportant. You should be focused only on the potential return on investment. However, if you have no plans to sell, and simply want to update the home to better suit your needs, then your enjoyment of the renovation is at least as important as any future home value improvements.
Also, please note that these renovation valuation figures are not looking at something like a fix-n-flip. Instead, they are assuming the house is ‘fine’ as is, but you want to make some upgrades. The ROI on a big fix-n-flop project follows some different guidelines.
Home Renovations with the Highest ROI
Let’s look at some of the renovations that pay off the biggest when it comes to increasing the value of your home.
Kitchens
Statistics suggest that kitchen remodels can be among the better options when it comes to ROI. They can range from an 80-87% range on the return on the money spent on the renovation (meaning if you spend $10,000 on a renovation, you could expect from $8-8,700 as an increase in home value or sales price.) However, in a hot market, you could indeed recoup 100% or more of your renovation investment in the kitchen.
Bathrooms
Much like kitchens, you can expect to get a fairly strong ROI on any standard renovations you do to bathrooms. 80% and over are not at all uncommon, and again in a strong market, you could definitely see more like a 100% return, or more. Actually adding a bathroom can also deliver a strong return on your renovation investment.
Adding Space
Actually adding square footage to your home can be a great renovation decision. Whether this is via an actual house addition or finishing a previously un-finished basement, it can have a big impact on your home’s value. But, be aware of the building codes and rules in your area, as some basement rooms aren’t counted or treated the same way as above-ground rooms in some places.
Renovations that Don’t Increase Value
Maintenance and Repairs
This is a tricky one. If you have a leaky roof, you obviously want to get that fixed. However, it only improves your home’s value if your previous value was based on having a roof that needed to be repaired.
In an instance like this, what may happen is that the leaky roof is discovered during a home inspection from a potential buyer. They ask that the homeowner repair the roof or give the buyer a concession in the amount of the repair as part of the home sale. In neither instance does the home’s value increase due to fixing the roof issue. It simply returns the home to the value that the home would normally have, without the issue.
Basically, buyers anticipate they are buying a home where all of the infrastructure works (furnace and A/C, windows, plumbing, electrical, roof, etc.). So, renovations to bring a home up to the expected level of functionality with these basic aspects don’t represent an increase in value compared to other houses where that functionality is already in place.
While repairing your furnace may not suddenly increase the value of your home by $10,000, it should make it easier to sell, since some buyers will be scared off by looming repair expenses.
Landscaping
Great landscaping and curb appeal can help get your house sold faster (possibly), but they aren’t overly likely to drive a huge ROI.
