One of the great things about owning a home is that you can truly make it your own. Don’t like the carpet? rip it out. Hate tan walls? Paint them any color. Don’t like the wall between the living room and the kitchen? Tear it down (as long as it’s not a load-bearing wall)!
More homeowners are choosing to renovate their existing space rather than purchasing a new home. Whether you’re updating out of necessity, personal taste, or a desire to build equity, it pays to research which home renovations provide the best return on investment before you pick up that hammer.
Questions to ask yourself
It’s great to personalize your space through home renovations, but keep in mind that these “improvements” can affect the value of your home. This effect can be positive or negative.
Not everyone, for example, wants a sunroom at the expense of sacrificing their backyard space. Or a bathroom where there is no separation between the toilet and the shower (yes, we’ve seen that!).
There are, of course, plenty of home renovations that can produce higher returns on investment (ROIs) for the money spent. This is where you want to focus your time and attention.
Before you get that hammer, think about how long you plan to keep your home. If the answer is one to three years, you should answer these questions before starting any home renovations.
- Will these home improvements be attractive to potential buyers?
- Will these updates increase my home equity?
- What will my return on investment (ROI) be?
If you plan to stay in your home longer, the questions are a little different:
- What do I wish my home would be?
- What do I value most in my home?
- What makes me feel relaxed in my home?
- Will these home renovations meet my personal needs?
Calculate return on investment
Although home renovations can be a good investment, you can’t calculate your exact ROI — also known as net ROI — until you actually sell your home. It is one of the limitations of ROI. At that time, the project value will help determine the home’s resale price and your net profit.
To calculate your ROI, take the resale value of your home renovation and divide it by the total cost of the project, including labor, materials, and any other associated expenses. This number is expressed as a percentage.
An ROI of over 100% means you get back more than you spent. For example, replacing a garage door that costs $4,672 and adds $12,507 in resale value results in an ROI of 267.7%. An ROI between 0% and 100% means you get back part of your investment but not the full amount. Either way, this formula tells you how much of your initial investment you can expect to recover when you sell.
Redesign projects with good ROI
Light Construction Magazine brings together a great idea Cost versus value report Which provides a breakdown of home improvement projects that yield the highest return on investment. Here are some national statistics on which home renovations can add the most value to your home.
Garage door replacement
Installing a new garage door can enhance your home’s curb appeal, improve its safety, and increase its energy efficiency. The number of garage door designs and materials is almost endless!
When choosing a new door, think about how much insulation you want, whether you want windows or hardware, and what style and materials you prefer. The garage door should fit the architectural style of the home, as well as the windows, doors, and other exterior details of the home.
- Project cost: $4,672
- Resale value: $12,507
- Calculating return on investment: 267.7%
Manufactured stone veneer
Manufactured stone veneer has an outstanding yield rate. Manufactured stone veneer mimics natural stone, but is easier and more cost effective to install.
In this project, you will remove the bottom third of your siding and add manufactured stone veneer around the perimeter of your home (and the walkway above your door if you have one).
This really improves the look of your entire home. Better yet, stone veneer is durable and requires virtually no maintenance.
- Project cost: $12,150
- Resale value: $18,460
- Calculating return on investment: 151.9%
Small kitchen remodel
If you have to choose between a kitchen and bathroom remodel, you may want to go the kitchen route. You may be surprised to learn that a minor kitchen remodel has a better net return on investment than a major kitchen remodel, as you can get back more than you spend. Small changes can make a big difference in the look of your kitchen.
In this project, you will replace the cabinet fronts, drawers, and hardware while keeping the cabinet boxes. You will replace appliances with energy-efficient models.
You’ll also install laminate countertops, a mid-priced sink and faucet, and new resilient flooring. This can include vinyl tiles and planks, cork, rubber or polymer flooring. Finish your kitchen by painting the walls, ceiling and decorating.
- Project cost: $28,458
- Resale value: $32,141
- Calculating return on investment: 112.9%
Add a deck
Everyone uses their outdoor living space a little differently, so keep that in mind when you’re looking to get a good return on investment. Something like a wood deck adds variety, giving you many options in your backyard!
Consider adding a built-in bench, planter, and stairs (made from the same wood panels as the deck), as well as a full railing system to make your deck as versatile as possible.
- Project cost: $18,263
- Resale value: $17,323
- Calculating return on investment: 94.9%
Replace siding
Want to upgrade your curb appeal? Consider replacing your exterior siding with fiber cement or vinyl siding. New siding can completely change the exterior appearance of your home.
You will also benefit from better insulation. Modern siding materials feature insulation in their design, which helps your home retain heat in the winter and reflect heat in the summer, which will save you money. Siding also helps protect your home from the elements and pests. Here’s how the two most popular options compare:
Fiber cement:
- Project cost: $21,850
- Resale value: $19,228
- Calculating return on investment: 88.0%
Vinyl siding:
- Project cost: $18,280
- Resale value: $14,624
- Calculating return on investment: 80.0%
Bathroom remodel
A new sink and sink, complete with the fixtures you love, can change the look of a room.
If you have a standard mirror, replace it with a framed mirror and add updated lighting on both sides. If you’re in the market for a larger upgrade, consider surrounding the shower with tile, or even installing a freestanding bathtub if space and money allow. Flooring is also a great upgrade, and there are plenty of options available!
- Project cost: $26,138
- Resale value: $20,915
- Calculating return on investment: 80.0%
Other high-impact, low-cost improvements
paint
Painting is very simple, but it makes the biggest impact on the interior and exterior design of your home. Plus, it’s one of the least expensive changes you can make! Many people choose neutral colors to give their home a timeless look or have the freedom to change up the decor. Neutral colors are also highly recommended if you are selling your home soon.
Flooring
It can be difficult to feel comfortable in your home if you don’t like your flooring. Hardwood floors always look great and are great for resale. Maple, oak, and walnut trees are sturdy options, as are bamboo, cork, and other eco-friendly options.
Luxury vinyl tile and wood look tiles are also durable, especially if you have pets or a pool. It is waterproof and virtually indestructible.
If you have young children, you may want to consider upgrading the carpet instead (with a comfy cushion underneath), to keep your little crawlers and walkers safer. But if you can, keep rugs in bedrooms only.
Replace entry door
Did you know that a new front door can bring a great return on investment? First impressions are everything, and so is curb appeal. When you’re considering low-cost home improvements to increase the price of your home, this is something you don’t want to ignore.
Make your home special
Of course, there are many other home renovations that can spruce up your home and serve as an investment gain when it’s time to sell. Simply consider the investment costs versus the potential rate of return.
In a changing market, a home filled with upgrades can really stand out. Additionally, you can use the equity in your home to finance or partially finance these home renovations. APM is happy to help. Contact us today to find out how you can use your hard-earned capital to your advantage.
This blog has been updated from its original publication date of May 31, 2020.
