Home improvement ROI is an important subject for homeowners to research. Frederick homeowners are renovating their homes for several reasons in today’s real estate market. Many owners who purchased since the early to mid- 2000’s have been resigned to stay in their homes because they owe more than the house is presently worth. They realize that since they will be staying in their home for a while, they might as well make improvements that they will enjoy.
Others are improving their homes to make them more market ready when they decide to sell. Either way, it’s always a good idea to maintain and repair your home at all times during the years that you own it. When upgrading a home, it is always wise to keep with the standard of the neighborhood, or of comparable homes in your market, if you are concerned about return on investment.
Whatever the reason, making careful and thoughtful decisions about home improvement ROI is very important if you want to get the highest return. Generally, home improvements do not bring the full return of the cost at the sale of the home, but some improvements bring a better return than others. Some improvements are simply necessary to make the home more attractive to today’s buyers.
Cost Vs. Value in Remodeling Projects
Remodeling Website has published the 2017 Cost Vs. Value Study results, comparing the average cost for 29 popular remodeling projects with the value those projects retain at resale in 99 U.S. markets. The cost-value ratio was 64.3%. This ratio shows the resale value as a percentage of construction cost. The average remodel regained 64.3% of the cost in the sale of the home. (The highest ratio was 86.7% in 2005.)
See the Remodeling Website for the full list of projects and the ROI of each. You’ll also find how-to articles, products and lots of other resources. There are good articles about aging in place and renovations that might be necessary, as well as simple solutions that might not require a full renovation. Universal Design is a newer topic in the Cost Vs. Value Study, as more boomers are choosing to age in place.
Minor renovations usually net a higher ROI than major renovations. The improvements that got close to 100% return on investment were:
- Attic Insulation (fiberglass) 85% – 123%
- Garage Door Replacement 89% – 102%
- Minor Kitchen Remodel 80%
- Manufactured Stone Veneer 81 – 92%
- Steel Entry Door Replacement 84%
- Siding Replacement 82%
The improvements that got the lowest ROI:
- Bathroom Addition: 42% – 44%
- Master Bedroom Addition: 52% – 54%
- Backyard Patio: 53%
- Backup Power Generator: 46.5%
- Major Kitchen Remodel: 54%
Remodeling Projects For the Home – Return on Investment
As you can easily see by this report not all home improvement ROI is equal. In most, but not all cases higher end improvements got a lower return on investment than improvements in the mid-range cost.
Some remodeling projects get a better ROI than others, and some projects help sell a home more than others, regardless of the ROI. Some home improvements are absolutely necessary to get the highest sale price for a home. How does a homeowner navigate the home improvement waters?
Considerations When Renovating
While the cost vs. payback factor is important in planning renovation projects, it shouldn’t be the only consideration. For homeowners who are renovating to be able to age in place or who need to care for an elderly family member, or remodel for a home office so they don’t have to commute, other issues may be more important than return on investment. For some projects, the satisfaction and quality of life while living in a house that you love is the main priority.
Homeowners should always consider the trends in their market, in their neighborhood and in their comparative price range. Renovating far above the standard of homes in your area may produce features in your that you absolutely love, but you should understand that you won’t likely get the return on investment that would make the renovations the best financial decision. In that case, make sure that you are doing renovations only for your own enjoyment.
Avoid Over Improvement
After 25 years of working with home sellers in the central Maryland area, it is always a challenge to interact with homeowners who have spent too much money on the wrong renovations and home improvements, expecting to get their money back on those expenditures when they sell their home.
If you are planning a renovation, do yourself a favor and consult your local real estate professional before you take the plunge. Find out what today’s buyers are looking for, as well as what home improvements are trending in your market. You’ll save yourself some money and you’ll be confident that you are investing wisely. Getting the highest home improvement ROI is a wise move.