3 Home Renovations That Increase the Value of Your Home…and 3 That Don’t
After spending so much time in their homes throughout the pandemic, many homeowners set about planning and taking on remodeling projects, renovations and major additions. In fact, about six months into lockdown, almost 80% of homeowners reported they planned on tackling some sort of renovation or remodeling, according to a Discover Home Loans survey. While home updates can be cumbersome, disruptive and overwhelming, they can add to the functionality and enjoyment of your home. Additionally, the right renovations have the potential to increase the value of your home and make it more attractive if you decide to sell. How do you know which projects will provide the biggest financial rewards? Here we review which home projects have high rates of return.
Home Projects and Renovations That Increase Value
1. Kitchen remodel. It certainly comes as no surprise that kitchen updates have the potential to add significant value to a home. In 2021, USA Cabinet Store found that “80% of buyers in the market consider a newly finished kitchen as one of their influencing factors of selecting and valuing a property.” Not only is a kitchen remodel worth your time but most experts estimate homeowners recoup about 60% of what they spend on a mid-range remodel, according to a HomeLight blog post. Some aspects of your remodel are more appealing in today’s market than others. These include, but are not limited to, matching appliances, recessed lighting, updated sinks, clever and thoughtful use of outlets, and updated venting. In addition to adding equity to a home, kitchen remodeling is linked to high homeowner satisfaction rates and reportedly results in homeowners enjoying more time spent in their homes.
2. Bathroom addition/remodel. According to Today’s Homeowner’s 2022 State of Remodeling in U.S. survey, bathrooms are the most popular home renovation project. Depending on the level of renovation, these can be very costly because you may be replacing old fixtures and some plumbing may not be up to current code, meaning replacements and labor costs for contractors will rise. The actual cost of the remodel varies widely from state to state with the national average for such projects as $26,574.
The good news is that while bathroom remodels are expensive, you can typically recover anywhere from 60-70% of the cost when you sell your home. While bathroom remodeling costs vary significantly across states, the return-on-investment rate remains consistent and high.
Today’s Homeowner research also found that a bathroom remodel can increase your home’s value by 3%. Minor renovations yield an approximate $1.70 increase in your home’s value for $1 you spend on the project.
3. Exterior improvements. Historically, kitchens and bathrooms have garnered the most attention in this category (and rightfully so, in most cases), but exterior improvements also deserve some of the spotlight. For instance, updated siding, exterior painting and landscaping are very attractive to potential buyers. Homesandgardens.com notes that most landscaping projects boast a 100% return on investment.
A few words of caution, though: It should be noted though that when planning a landscaping renovation, you must be honest with yourself about both your skill level and your ability to maintain the project. In addition, a complex, high-maintenance landscape design can be a double-edged sword when it’s time to sell a property. To the gardening enthusiast, an intricate landscape design can signal hours of enjoyable gardening and maintenance as well as enhance the value of a property while other potential buyers may see it as long hours of unwanted work and/or gardening expense.
Update if You Want, but Do Not Expect a Large Return
1. Garage conversions. Garage conversions do not tend to provide a high return on investment because they are costly projects. Take converting a garage into living space, for example. You are looking at adding heating and cooling, insulating walls, replacing doors and possibly adding windows and raising the floor. This can be cheaper than starting an addition from scratch, but, overall, it is expensive. According to Rocket Mortgage, a conversion like this doesn’t always add value to a home and eliminates potential buyers who want a garage. Such conversions can be expensive and the average cost recovery on such projects is a miniscule 4.3%.
2. Quirky or luxury extras. Wine cellars, indoor pools, basketball courts, quirky wallpaper—these highly personal, and often expensive to maintain, “extras” are not very desirable for home buyers in general, even as cool and exciting as they may seem at first glance. Unfortunately, these specific features can be expensive to build and maintain and, because they are highly personal in taste, they can often turn off potential buyers. As with any custom project, you need to consider your personal preference and pleasure versus the impact of your choices when the time comes to sell.
3. Swimming pools. Swimming pools, especially in certain geographical locations, can deter buyers and fail to provide a high return on investment, according to a New York Times article. Pool installation and maintenance are expensive and, consequently, can limit your buyer collective. The exception to this limitation could be if you live in a climate where the pool can be used year-round and/or the norm in the neighborhood is that every home has a pool.
Final Thoughts
Of course, the above guidance can vary slightly based on climate and regional market, but these general guidelines provide a solid foundation for your home improvement investigations and decisions. Ultimately, your chosen renovations should provide personal joy and contentment in the present with the promise of some return on investment in the future.
