A look at renovation returns
Homeowners can benefit from home renovations for a variety of reasons, but the main two represent great opportunities for them: quality of life and resell value. Simply put, the quality of life aspect makes your stay in the home more comfortable and makes living in the home more enjoyable; resell value is so that your hard work and stewardship of the property pays off in the long run.
While there are other ways you might go about increasing the quality of life or resell value of your home, renovations often allow you to do both at the same time. Of course, not all renovations are received equally in the market, nor can you add the entire cost of renovations (which can be considerable) to your asking price.
With that in mind, we've put together a list of the most popular home renovations to give you the national average both for how much you might pay, as well as how much value that might add to your home. Finally, we'll give you the percentage of ROI (return on investment) you can reasonably expect for that particular renovation type. Just bear in mind that all of the figures are estimated averages on a national scale and not definitive for your part of the country or the local marketplace.
Is it worth it?
Besides just the costs involved, renovations can prove disruptive depending on the nature of what you're doing. The sounds of heavy machinery or having work crews coming in and out of your home can be distracting for every member of the family, especially if one or more of you works from home. Depending on how invasive the renovations are, you might even need to pack up the family and head to a hotel or relative's house to get away from the organized chaos that ensues.
So, whenever you are considering renovating your home, there are two things you should honestly ask yourself. A surprise to no one, the two questions are direct extensions of the two main reasons we listed above:
- Is the total cost of the renovation worth what it will add to my quality of life?
- Is the renovation worth it in terms of the value it will add to my home?
Of course, some renovations might be necessary beyond the basics of the question of quality of life. If your roof is damaged during a storm, and you have water dripping from the ceiling, you might need to get it fixed without ROI being a factor. Conversely, you might decide to add a feature to your home that you just really want, one that may not add any measurable resell value, but is there merely for your own enjoyment. The two questions listed here are the beginning of the thought process, but certainly not the end of it.
Running the numbers
For our purposes, when we talk about 'value' in the following sections, we are talking about the measurable impact in terms of dollars or ROI. Obviously, the overall value can be considered quite differently in each situation by personal tastes and judgment, but for this discussion, we're really talking about 'monetary value' for the following figures.
To that end, let's take a look at Remodeling magazine's yearly release of their Cost vs. Value report.1 Based off of that report, here are some of the most common renovation projects and their corresponding ROI rates. And if you’re interested in undertaking one of these projects, get in touch with one of our renovation loan experts and we can help with the financing.
- Cost: $17,747
- Value added: $18,366
- ROI: 103.5%
Coming in at the top of the list, we have an overhaul of your HVAC system to an electrical base from fossil fuels, and a general update of the ductwork, wiring, and the replacement of the HVAC unit itself. While the sticker shock of the renovation can be a little unnerving, this type of upgrade is in sufficient demand by homebuyers that you actually get more back from the renovation than you put into it with an ROI of 103.5%. As we move through the list, you'll see that that's not always the case.
Garage Door Replacement:
- Cost: $4,302
- Value added: $4,418
- ROI: 102.7%
Consistently one of the best renovations in terms of ROI value, replacing or modernizing your garage door and its workings has the potential to add more to your home's value than you put into it. Last year, the ROI was 93.3%, so you can see that this feature has actually grown in popularity. Plus, as far as renovations go, this one is far less expensive than the other, more resource-intensive items on this list.
Manufactured Stone Veneer:
- Cost: $10,925
- Value added: $11,177
- ROI: 102.3%
A stone veneer can add a touch of class to your home in addition to an estimated ROI that's an incredible 102.3%. The demand for this kind of home feature might stem from an increase in homebuyer interest, a relaxing of the materials shortages during the pandemic, or perhaps a combination of both. This renovation caps off the last of those on this list with an ROI of 100% or higher.
Minor Kitchen Remodel - Midrange:
- Cost: $26,790
- Value added: $22,963
- ROI: 85.7%
Major Kitchen Remodel - Midrange:
- Cost: $77,939
- Value added: $32,574
- ROI: 41.8%
Major Kitchen Remodel - Upscale:
- Cost: $154,483
- Value added: $48,913
- ROI: 31.7%
When potential buyers see your home for the first time, perhaps without furniture or furnishings, the kitchen is naturally going to stand out. This can be a 'make-or-break' moment for the buyer, since it's one of the only spaces where they can truly picture themselves living in the home. So, a refresh of the kitchen space can be a great draw for buyers.
As you can see, however, there is a significant drop-off in ROI from a minor remodel to a major remodel. The upscale model is worth careful consideration beforehand since, currently, it is delivering less than a third of its renovation cost in ROI.
- Cost: $19,361
- Value added: $17,129
- ROI: 88.5%
- Cost: $16,348
- Value added: $15,485
- ROI: 94.7%
There's no substitute for curb appeal. Ideally, you want your potential buyer to fall in love with your house before they ever step foot inside of it. Adding siding to your home can beautify what is already there and make that great first impression. It doesn't hurt that vinyl and fiber cement (also called "hardie board" in places) both have incredible ROI potential.
- Cost: $20,091
- Value added: $13,766
- ROI: 68.5%
- Cost: $24,376
- Value added: $14,912
- ROI: 61.2%
As we said, the love-at-first-sight kind of curbside appeal is definitely something you'll want when it comes time to sell. In addition to siding, new windows are the icing on the cake. Besides just the aesthetics of the exterior, new windows are great while you're still in residence. Solar screens, new weatherproofing techniques and weather insulation, or "storm" windows, can improve the overall heating and cooling efficiency of your home.
- Cost: $17,051
- Value added: $8,553
- ROI: 50.2%
- Cost: $23,430
- Value added: $9,325
- ROI: 39.8%
Considered a must-have during the pandemic, outdoor living spaces continue to be popular with new homebuyers. Since the height of the selling season is in the warmer months, this is another way that sellers can draw in potential buyers by having them envision themselves living in the space.
Curiously though, the ROI for both wooden and composite decks has dropped off sharply from last year, possibly due to the country opening up where more venues are available for fun and leisure time. Wood decking dropped from 64.8% to the current 50.2%. The difference was even more notable for composite decking, however, dropping from 62.1% ROI to 39.8%.
- Cost: $24,606
- Value added: $16,413
- ROI: 66.7%
- Cost: $39,710
- Value added: $18,270
- ROI: 46%
- Cost: $76,827
- Value added: $28,203
- ROI: 36.7%
There are two sides of the coin when it comes to a bathroom remodel. On the upside, average costs have come down for all three categories, and who doesn't like to spend less to get more, right? On the flip side, the ROI for higher-end bathroom renovations has also come down. Midrange renovations are the exception, and they've have actually improved from a 58.9% ROI from last year to 66.7% now.
For universal design, current ROI percentages are down by a little over 10%. The upscale renovation once again has the lowest ROI, moving from 51.5% from last year down to 36.7%. This continues something of a trend in high-end renovations dropping off in ROI compared to their more modest counterparts.
Primary Suite Addition
- Cost: $157,855
- Value added: $47,343
- ROI: 30%
- Cost: $325,504
- Value added: $73,875
- ROI: 22.7%
It's safe to say that the primary suite of the house will be one of the biggest draws in a potential resell, so it's only natural to want to make it as inviting as possible. As with the bath remodel, there are two sides to a major renovation in this department, and they follow along the same lines. The average prices for this kind of home improvement project are much lower than last year, but (once again), so are the ROI rates.
For example, midrange renovations cost approximately $175,473 last year, dropping by $17,000, however the ROI went from 53.4% to 30%. The highest-end renovation once again performed lower still. The price tag for such a princely renovation came down by $31,000, but the calculated ROI is now less than half of the 46.3% ROI rate that it enjoyed just last year.
In closing, our goal with this look at the numbers is to help you make better informed decisions when it comes to home renovations. Also keep in mind that just because the ROI percentages have changed from where they were last year doesn't mean they will stay there. The housing market has a way of surprising you, so the bottom line is that if you think a particular renovation is needed or necessary, do it. The numbers we presented here are merely to put them in context.
Should you decide to move forward with a specific renovation, or a series of them, we're also happy to help you find the solution that works best for you, your family, and your specific needs. That said, if you are contemplating a renovation in the foreseeable future, we recommend that you talk to one of our expert loan officers to find the options and type of renovation loan that will fit you as perfectly as the renovated home you dream of having.
1 © 2023 Hanley Wood Media Inc. Complete data from the Remodeling 2022 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.
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