HOME RENOVATIONS THAT GIVE YOU A RETURN ON YOUR INVESTMENT
Home renovations can be exciting. We all love sprucing up our “castle”. But, where is the best place to spend your money? What home improvements garner the best return on investment? We all want to know our money has been well-spent. Home renovations not only provide a return on the money spent but also improve the quality of our lives. Adding functional space and square footage usually provides the best return on investment vs. adding luxury upgrades or an out-of-the-norm home improvement project.
One must consider long-term value, short-term value, and potential value in different ways. In general, kitchens and baths add to short-term value improvement. Additions to square footage add to longer-term value improvements. And, things such as a swimming pool, luxury improvements, and landscaping projects fall into the potential-value category. Therefore, one must consider how long they plan on keeping the property that they're considering improving. Home improvement return-on-investment (ROI) comparisons can be a tricky call.
If one looks at their home as a place of refuge and enjoyment, improving it should be done with personal enjoyment as the key factor in their decision-making. What would make their home more suitable and more enjoyable for themselves? That's a good basis for evaluating projects, as, quite frankly, most home improvements, at least in the short term don't provide any return on investment. If one looks at their home(s) as investments, one's timeframe is a critical factor in evaluating which projects should be undertaken and which projects will provide the greatest rate of return.
If a property is in need of some improvements due to functional obsolescence or out-of-date features, those items need to be addressed first and foremost. Consider a home built in the '70s that had the common “popcorn” ceilings. Well, they're simply atrocious, dirty, and totally out of date. The “popcorn” must go. This can be done very inexpensively (spray water and scrape), and the ceilings can be retextured and repainted. This type of home improvement provides a very high return on investment immediately.
As mentioned previously, low-mid-range kitchen and bath remodels provide a great return on investment in the short term. It can be tricky though. Many times, the entire cost of the remodel will not be made up for by an increase in value. Rather, a remodel costing $15K may return a $12K increase in value. Nevertheless, if the kitchen is dated and/or functionally obsolete, the return on investment may be more than the cost of the remodel. Again, remodel for one's tastes and enjoyment. Put return-on-investment on the backburner unless you're simply looking at the home as an investment.
In general: midrange kitchen remodels will return about 85% in the short term costing about $25K; midrange bath remodels will return about 100% costing about $10K; minor landscaping work will return between 90-100% costing about $4500; entry door replacement will return about 80-90% costing about $2000; window replacement (great improvement as it lowers energy bills and new windows and frames look great) will return about 70% in the short-term but over 90% in the mid-term costing about $20K; adding patio space and/or deck will return about 70% in the short-term costing about $6K; and, adding an addition will return about 80% costing about $50K. Keep in mind, that spending more doesn't always yield higher rates of returns. One must be very prudent in their remodeling choices and try to save money where they can by doing some work themselves.
One major home improvement that can be quite costly is the addition of a swimming pool. Keep in mind, that pools do not provide a good return on investment, but they do add a lot to quality of life.
Spend money on your home judiciously. That's the trick to getting a good return-on-investment. Try to do work yourself if you have the skill-sets. If not, be prudent. Don't “overimprove”. Always rememeber that this is your home and YOU should enjoy it. Investing in your home improves your quality of life, and, over time, homes generally appreciate. Therefore, always keep up on maintenance and address any deferred maintanance issues before remodeling. Low-mid level kitchen and bath remodels provide the best return in the short run. But, in the longer-term, you're much more likely to recoup the costs of all remodeling projects.