One of the most
rewarding things about being a homeowner is that you can make changes to your
home that will make it a more enjoyable place to live. However, you probably
won't be living in your home forever, so it is also worth considering how your
home improvement projects will affect your home's value.
The ROI or return on
investment of a project tells you how much of the project cost returns to you
in the form of a higher home value. The ROI is typically given as a percentage,
based on research on home characteristics and sale prices. In most cases, the
ROI is less than 100%, which means you spend more on the project than you
recoup in the sale price. Therefore, most projects are best done if you still
plan to live in the home for several more years so you will be able to enjoy the
home improvements that you make.
As you consider making
home improvements, keep in mind which projects tend to have the highest ROI and
which ones will not do much to improve your home value. You do not necessarily
need to choose only the projects with a high ROI, but you should at least keep
values in mind so you do not face any surprises when you go to sell your home.
Best
renovation projects for improving home value
- Interior painting: If you are willing to do the painting yourself, this is
one of the few projects that returns over 100% of your investment. In
particular, one or two neutral colors painted throughout the house is very
appealing to potential buyers.
- New entry door: Replacing your front door with a reinforced steel
entry door has an average 97% return on investment. These types of doors
are very low maintenance and improve both your home's curb appeal and
energy efficiency.
- New exterior siding: Many homeowners are choosing to replace aging
siding with types of exterior siding that require less maintenance over
the years. This improvement will boost curb appeal and have an average 80%
ROI.
- Kitchen renovations: These days, the kitchen tends to be the heart of any
home. Minor kitchen renovations, like refinishing cabinets, updating
hardware and fixtures, and upgrading appliances have an average ROI of
82%. More extensive improvements, which might include new countertops and
flooring, offer a lower ROI of about 66%.
- Attic bedroom conversion: If you are looking to add to your living space,
the best return on investment comes from converting your attic into a
bedroom. This project has about an 80% ROI because it adds lots of square
footage without changing the footprint or profile of your home.
- Window replacement: Replacing aging windows has about a 75% to 80%
ROI. These projects improve the appearance of your home and help with
energy efficiency, which are top concerns of many buyers these days.
- Deck addition: Adding a wooden deck has an average return on
investment of 85%, not to mention that it gives you a pleasant place to
spend time outdoors. This is an appealing renovation because it adds
living space at a very low cost.
Worst renovation projects
for improving home value
- Home office conversion. Converting a spare bedroom into a home office by
removing the closet and adding built-in storage might sound like a good
idea, but the ROI is only about 45%. This is because many people do not
need a home office and would prefer an extra bedroom.
- Sunroom addition: Adding an enclosed sunroom will return only about
45% of your investment. Overall, you will be better off with just a deck,
which is less expensive but has a similar added value.
- Swimming pool: This is one of the lowest projects for ROI,
primarily because potential buyers often don't want the added costs of
maintenance and insurance. The actual ROI varies widely depending on your
climate and how common pools are in your area.
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It is also worth
mentioning that nearby home values affect the ROI on all of these projects.
Your goal should be to have your home's value near the median in your
neighborhood, rather than pricing yourself out with fancy renovations or
skimping in an upscale neighborhood. Through all of this, though, remember that
any improvement could be worth it to you if you find personal value and plan to
keep the house for a long time.