When you’re ready to embark on a home improvement project, one of the most important considerations to make regards the return on your investment. Whether you’re planning to move, looking to improve your home’s value, or simply updating your abode with the latest and greatest, you want to avoid putting too much money into a renovation that won’t yield a good return. Sure, you want your renovation to make a difference functionally and aesthetically, but you need to make smart decisions throughout each phase to ensure that it pays for itself.
Your remodeling project’s recoup rate will depend on many factors: your neighborhood, the materials you choose, the style of your home, and even the town you live in. Even if your long-term plan is to raise a family and live in the same house for decades, it’s still important to continuously improve your property’s value to build your equity. However, if your home doesn’t exhibit any obvious vulnerabilities, it can be difficult to decide which renovations will do the most to grow your home as an asset. The list of potential improvements may seem endless, but there are some projects that are better choices than others when it comes to seriously increasing the value of your home.
Bathroom and Kitchen Renovation are Solid Bets
When potential buyers enter a home, the kitchen and bathroom are among the first areas that they inspect. This shouldn’t be a surprise to anyone who’s opened a home design or interior decorating magazine lately. They are typically filled with pictures of amazing kitchens and bathrooms. Interior design trends may come and go, but the homeowner’s need to create a luxurious bathroom or a beautiful kitchen fit for a chef has never waned. These are such pivotal sections of any home that buyers have no issue with paying more for quality spaces. Bottom line: if you want to get the most bang for your remodeling buck, redo your bathroom or kitchen; but remember, every choice you make has a profound effect on your recoup rate, from the quality of materials you select to the scope of the project.
Don’t Invest Too Much
If your renovation’s main purpose is improving resale value, one of the biggest mistakes you can make is to ignore the correlation between how much you spend vs the current value of your property. The amount of money you should put into a project depends on where you live, the size of your home, and the reason for the project. Though there isn’t an exact science to figuring out your magic number, a good rule of thumb is that you shouldn’t spend more than 25% of the total value of your home on any renovation project, period.
Though it may be tempting to have the most feature-rich home on the block with a fully redone exterior and state-of-the-art roof from the area’s top roofing company, the truth is “over-improving” will not make your home any more appealing to potential buyers - and it certainly will not do any favors for your wallet. A prospective buyer will look at comparable properties in the neighborhood, and if your home is way over the average asking price, you’re going to have a hard time selling.
Modest Renovations Can Be Just as Effective
If you’re renovating to simply to create the interior space you’ve always wanted, however, there’s nothing wrong with going big, if you have the means to do so. There are plenty of home remodelers out there who are more than willing to fill any room with high-end bells and whistles with features. Similar to the “over-improving” example above, it can be difficult to resist the urge of opt for flash over function, but it’s important to remember that even modest home improvements, like outfitting your home with replacement windows can yield a huge recoup rate because it directly mitigates two priority concerns for prospective buyers: moisture intrusion and energy loss. Renovations that address common homeowner concerns have a much higher resale value than purely cosmetic ones that may end up alienating buyers if your aesthetic preferences do not mesh with their own.
If you are dead-set on improving one or more rooms in your home, however, keep in mind that you don’t need an exhaustive transformation to gain a significant ROI. According to data published by Remodeling Magazine, a minor kitchen remodel carries an average cost of $14,773, but brings in a return of 87%. The same high-yield dynamic applies to modest bathroom renovations, so long as the changes made optimize the function and comfort of the space.
Even though you may be tempted to plunk down the money for a full renovation, a few savvy updates here and there may do the trick. While some home remodelers do provide reconfiguration services, completely changing a room’s layout is not always the way to get the most out of your kitchen or bathroom. Less-intensive improvements, like cabinet refacing, a fresh paint job, lighting fixture replacement, window treatment, or the installation of high-efficiency appliances can make your space look and feel completely different. It’s not about how much money you spend, it’s about spending wisely so you get the most out of your project. You can easily achieve that “wow” factor with some easy changes that won’t break the bank.
Maximize the Value of Your Home Improvements
Whether you’re putting your home up for sale or simply updating your space to improve its functionality or aesthetic, smart renovation choices are a must if want to maximize your recoup rate. The most important thing to remember is that, while a full, transformative remodel has its merits, you should prioritize smaller updates that address concerns commonly held by other homeowners, like energy efficiency, foundational strength, and appliance reliability. If a renovation is too personalized or marginally effective, you run the risk of not being able to leverage it as much as you originally intended when it comes time to list your property.
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