Rate of Return on Home Improvement Projects
Content written by Carl Johnson marketing
Remodeling can lead to increased comfort and enjoyment of your home and a higher sales price when you sell. Enjoy the benefits of keeping your home in good shape and updated, while you are still living there. It’s important to think about the return on investment you will receive, while remembering potential buyers will be looking at how many repairs and updates they will need to make. If you are planning on moving within 3 to 5 years, this is especially important. Check out our list of projects that can add significant value to your home and some that you should stay away from.
Add Value with These Projects
1. Kitchen Remodel
The kitchen is the heart of a home so it is always a good place to invest your money. There is no need to go overboard and create a deluxe kitchen that is much fancier than the rest of your house; Potential future buyers won’t be interested in a kitchen that doesn't match the house’s size, quality, or style. Instead, focus on maximizing your money by using modern colors and fresh paint, replacing cabinet fronts and replacing laminate countertops. According to CBS News, you should expect to recoup above 80 percent of investment and potentially as high as 120 percent, HGTV claims. Additionally, replacing appliances with energy efficient ones will save you money in the long run as well as be an attractive home feature when selling in the future.
2. Bathroom Addition
Adding an extra bathroom to your home, if you have only one, can add significant value to your home. To find space for a bathroom, search for underutilized spaces such as a closet or underneath the stairs. Half baths require 18 sq ft and full baths with a stand up shower needs 30 sq ft. The cost of the bathroom depends mostly on what accessories you want to add and the cost of them, but according to HGTV, expect to recoup 80 to 130 percent of the money you invest.
3. Adding Energy Efficient Windows
By installing “green” windows to your home, you will drastically decrease your heating and cooling bill. These windows can cut up to $500 off your bill a year. The average cost of a window replacement is between $7,500 and $10,000, however you will regain some of the cost from a green energy tax credit. This will allow you to recoup your investment over time and if you are selling the home soon, expect to recoup approximately 90 percent.
4. Deck Addition
In today’s housing market, outdoor spaces are becoming increasingly appealing to prospective buyers. The 2020 Cost vs Value report by Remodeling Magazine found a majority of exterior replacement projects were high-return. The cost of building a deck varies widely from $2,000 to $15,000 depending on built-in utilities, size, and number of stairs. You can save lots of money doing the work yourself, however this is not recommended, for it is not an easy task and it requires specific tools. If hiring a contractor, check references and get multiple quotes to compare. According to HGTV, expect to recoup somewhere between 80 to 90 percent of investment.
5. Energy Efficient Insulation
If your home lacks basic insulation or has doors that let in plenty of hot or cold air, consider installing energy efficient insulation. The US Department of Energy estimates the average house has leaks equivalent to a 3 by 3 foot in a wall. Sealing these cracks and adding insulation will save you hundreds on your utility bill each year. Use a thermal leak detector around doors, windows, electrical sockets, and light switches to determine if this project is for you.
6. Basic Updates
The most important home improvement project you can do is regularly maintaining your home. Overtime, this will keep your home from deteriorating and add the most value. Basic updates include keeping the paint fresh, fixing the roof if a leak is present, replacing rotten wood, removing any mold, and more. By keeping your home healthy, you will see a larger rate of return when selling the home.
The kitchen is the heart of a home so it is always a good place to invest your money. There is no need to go overboard and create a deluxe kitchen that is much fancier than the rest of your house; Potential future buyers won’t be interested in a kitchen that doesn't match the house’s size, quality, or style. Instead, focus on maximizing your money by using modern colors and fresh paint, replacing cabinet fronts and replacing laminate countertops. According to CBS News, you should expect to recoup above 80 percent of investment and potentially as high as 120 percent, HGTV claims. Additionally, replacing appliances with energy efficient ones will save you money in the long run as well as be an attractive home feature when selling in the future.
2. Bathroom Addition
Adding an extra bathroom to your home, if you have only one, can add significant value to your home. To find space for a bathroom, search for underutilized spaces such as a closet or underneath the stairs. Half baths require 18 sq ft and full baths with a stand up shower needs 30 sq ft. The cost of the bathroom depends mostly on what accessories you want to add and the cost of them, but according to HGTV, expect to recoup 80 to 130 percent of the money you invest.
3. Adding Energy Efficient Windows
By installing “green” windows to your home, you will drastically decrease your heating and cooling bill. These windows can cut up to $500 off your bill a year. The average cost of a window replacement is between $7,500 and $10,000, however you will regain some of the cost from a green energy tax credit. This will allow you to recoup your investment over time and if you are selling the home soon, expect to recoup approximately 90 percent.
4. Deck Addition
In today’s housing market, outdoor spaces are becoming increasingly appealing to prospective buyers. The 2020 Cost vs Value report by Remodeling Magazine found a majority of exterior replacement projects were high-return. The cost of building a deck varies widely from $2,000 to $15,000 depending on built-in utilities, size, and number of stairs. You can save lots of money doing the work yourself, however this is not recommended, for it is not an easy task and it requires specific tools. If hiring a contractor, check references and get multiple quotes to compare. According to HGTV, expect to recoup somewhere between 80 to 90 percent of investment.
5. Energy Efficient Insulation
If your home lacks basic insulation or has doors that let in plenty of hot or cold air, consider installing energy efficient insulation. The US Department of Energy estimates the average house has leaks equivalent to a 3 by 3 foot in a wall. Sealing these cracks and adding insulation will save you hundreds on your utility bill each year. Use a thermal leak detector around doors, windows, electrical sockets, and light switches to determine if this project is for you.
6. Basic Updates
The most important home improvement project you can do is regularly maintaining your home. Overtime, this will keep your home from deteriorating and add the most value. Basic updates include keeping the paint fresh, fixing the roof if a leak is present, replacing rotten wood, removing any mold, and more. By keeping your home healthy, you will see a larger rate of return when selling the home.
Avoid These Projects
1. In-Ground Swimming Pool
Depending on the type and size of pool, this project can cost $30,000 to $75,000. Many families will not buy a house with a pool because they are worried about the safety of their young children. By eliminating this demographic, you significantly reduce the number of potential buyers. Installing a pool also raises energy costs, increases homeowners insurance and requires maintenance that could cost around $1,500 to operate, according to Money Crashers. Only invest if you are planning to stay in the home for 5 or more years, for you should expect to recoup 50 percent at most on the project.
2. Expensive Landscaping
Landscaping a home can transform the way the property looks but going overboard will not add to the asking price. This project can improve your quality of life, but simple changes to the lawn will add the same amount of curb appeal, according to Money Crashers. Focus on keeping your lawn clean and use small trees and shrubs.
3. Home Office Remodel
Unless you work from home full time, don’t waste your time and money investing in this project. The average office renovations cost $28,000. Investing in new wiring and home office technologies will not transform into additional income when selling the property; it will eventually become outdated. You should expect to receive only a 46 percent return. Instead, focus on good lighting and comfortable office furniture to upgrade your home office.
Depending on the type and size of pool, this project can cost $30,000 to $75,000. Many families will not buy a house with a pool because they are worried about the safety of their young children. By eliminating this demographic, you significantly reduce the number of potential buyers. Installing a pool also raises energy costs, increases homeowners insurance and requires maintenance that could cost around $1,500 to operate, according to Money Crashers. Only invest if you are planning to stay in the home for 5 or more years, for you should expect to recoup 50 percent at most on the project.
2. Expensive Landscaping
Landscaping a home can transform the way the property looks but going overboard will not add to the asking price. This project can improve your quality of life, but simple changes to the lawn will add the same amount of curb appeal, according to Money Crashers. Focus on keeping your lawn clean and use small trees and shrubs.
3. Home Office Remodel
Unless you work from home full time, don’t waste your time and money investing in this project. The average office renovations cost $28,000. Investing in new wiring and home office technologies will not transform into additional income when selling the property; it will eventually become outdated. You should expect to receive only a 46 percent return. Instead, focus on good lighting and comfortable office furniture to upgrade your home office.
When improving your home, think about budget-minded buyers. You want to concentrate on small projects that make your home appealing, not extravagant changes that polarize your home. Center your efforts on energy efficiency and upgrades that will add comfort and character without breaking the bank. If you are interested in selling your home, Call Carl at 919-880-0904 or CLICK HERE for more information.
