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 2000s have been forced 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.
ROI – 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 on investment. 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.
Along with National Association of Realtors, (NAR) Remodeling Magazine conducts an annual survey that is one of the most comprehensive on the subject of return on investment when it comes to home remodeling. The 2016 survey has just been published at costvsvalue.com.
The average payback on home improvement projects in the Washington metropolitan area was 64%, with a low of 50% on a master suite addition, and a high of 103% on a manufactured stone veneer.
The improvements that got close to 100% return on investment were:
- Attic Insulation (fiberglass) 99.4%
- Garage Door Replacement Mid-range 102%
- Garage Door Replacement Upscale 89.5%
- Minor Kitchen Remodel 96.4%
The improvements that got the lowest ROI:
- Bathroom Addition Upscale: 52%
- Bathroom Addition Mid-range: 55%
- Deck Addition (composite): 56.4%
- Backup Power Generator: 57%
- Major Kitchen Remodel: 59.4%
Remodeling Projects For the Home – Return on Investment
As you can easily see by this report not all home improvement ROI is equal. Some remodeling projects get a better return on investments than others, and some projects help sell a home more than others. Some home improvements are absolutely necessary to get the highest sale price for a home. How does a homeowner navigate the home improvement waters?
Cost Vs. Value in Remodeling Projects
Remodeling Website has published the 2016 Cost Vs. Value Study results, finding that the cost vs. value ratio was up last year for 35 major remodeling projects. The cost-value ratio jumped 5.5 points over last year to 66%. This ratio shows the resale value as a percentage of construction cost. The average remodel regained 66% of the cost in the sale of the home. (The highest ratio was 86.7% in 2005.)
The recent appreciation in resale values has contributed to the increase in the ratio of cost-to-value. See the Remodeling Website for the full list of 35 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.
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.
After 24 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. 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.