Whether you have binged countless hours of HGTV or covet your neighbor’s open floor plan, you likely have a list of home renovations you’d love to make a reality. Sinking thousands into a chef’s kitchen can make you fall in love with your house all over again, but homeowners should also consider which home improvements will pay off when it’s time to put the house on the market.
What is the ROI for a Home Renovation Project?
Your return on investment, or ROI, is defined by how much of your initial cash output you get back when you sell your house. If you spend $20,000 to update your master bathroom, but sell your house for just $10,000 more than the purchase price, was that investment worth it? What if you could get an extra $15,000?
Your ROI will depend on a number of factors, including the tastes and trends of the area where you live and what types of projects you take on, along with the type of materials you use.
We looked at the most recent Cost vs. Value Report by Remodeling magazine and checked in with real estate experts from around the country to find the home improvement projects with the highest ROI.
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Potential Cost: Approximately $20,000
ROI: 80 to 100%, depending on location
This is one of the top projects all but guaranteed to net you more money at resale.
“It’s all about kitchens and baths. That’s where we say you actually almost get all of your money back,” said Gitika Kaul, a realtor and principal of the Kaul Home Group of Compass. “If you’re looking to sell a property that’s where you want to put all your time, energy, and money.”
Buyers in Kaul’s Mid-Atlantic region of Maryland, Virginia and Washington D.C. are on the lookout for kitchens that are bright and modern.
“The white and the greys,” she said. “The wood tones are considered more a little bit more traditional and dated.”
Updated kitchens are also worth the investment in the South.
Elizabeth Peak, a realtor with Top Agent Realty in St. Tammany Parish, Louisiana, just north of New Orleans, has the ROI conversation regularly with sellers and property investors. She’s seen sellers have a lot of success with swapping out their contractor-grade kitchen sinks and upgrading their countertops.
“A buyer is going to come in and they’re going to see the changes and they’re going to see dollar signs of how much they are going to save and put towards something else,” she said.
Peak said granite countertops, once a mainstay of classy kitchens everywhere, are beginning to downward trend in favor of quartz. She’s also seen buyers wowed by creative materials such as a well-poured concrete countertop to fit an industrial-themed kitchen.
Master Bathroom Remodel
Project Cost: Up to $20,000
ROI: Nearly 70%, possibly more depending on your location
This is another major project that can really up the wow factor of your house and it’s resale value.
“Imagine yourself moving into a house where the bathroom is old and dingy. It’s just not what you want,” Kaul said. “You want it to feel fresh and clean.”
“This project can be as expensive or cost effective as you need it to be,” Peak said. “You could spend tens of thousands on a gut job, a cost you are unlikely to fully recoup, or spend $800 on gorgeous vanity and a couple hundred bucks on updated faucets and hardware, which you will get back and then some.”
An outdated master bathroom runs the risk of making buyers shy away from the house, worried about the cost of doing it themselves.
“If you can face some of those objections on the front end, that’s what I say to do,” Peak said.
Construction of an Addition
Project Cost: Between $20,000 and $67,000
ROI: Up to 100% or more
The most surefire way to add material value to your property is to increase its footprint, according to Jiyan Wei, cofounder of BuildZoom, an online platform to connect people with licensed contractors all over the country.
BuildZoom has analyzed data from the 185 million permits from improvements made through BuildZoom connections; time and time again they found square footage was the best predictor of a higher resale value.
All it takes is a little ROI math to know if this is the right move for your house.
“What is the cost to add each square foot … versus the value or the selling price per square foot,” he said.
If the seller is in San Francisco, Wei said, it may cost $400 per square foot to build an addition, but you can get back up to $1,000 per square foot thanks to the city’s hot (and pricey) real estate market.
Smaller Projects with a Great ROI
Not every home renovation has to come with a five-figure price tag to pump up the resale value. These projects freshen up your home for just a few hundred dollars.
A fresh coat of paint
Neutral shades of white or light grey will go a long way with potential buyers. That goes for your kitchen cabinets also.
“If you get a good painter who knows what they are doing and they remove the doors and paint them,” Kaul said, “they can look brand new.”
Update your hardware
Swapping out all the outdated brass door knobs, light fixtures, and cabinet pulls are some of the easiest and least expensive upgrades.
“You can find some economically priced light fixtures … in a material that’s trending now that’s going to be more pleasing and going to show better than the brass,” Peak said.
Replace window panes
While it’s always good to make sure your window panes aren’t cracked or chipped, this is especially a big deal in the South, where severe weather frequently destroy the pressurized seal in energy efficient windows, leaving them foggy and hard to see out of.
“What more and more people are doing now instead of replacing the whole window is just replacing one pane of it. And that’s maybe $300 a window,” Peak said. “The whole window, depending on the size, can be double that.”
When is the Right Time to Renovate?
No matter what project you pick, remember to give yourself some time to enjoy the money and effort you put into it. Kaul is currently renovating her master bathroom even though she doesn’t plan to sell for another couple of years.
“If you are going to sell in the coming years and there are necessary updates, go ahead and do them now,” she said. “When the time comes to sell, you know that you’re going to get the majority of your money back, but you’ve also had some time to enjoy it.”