Home improvements can be a worthwhile investment simply for the space and comfort they bring to your lifestyle. Still, your home is one of your biggest financial assets. Chances are, you’re also thinking about your project’s return on investment (ROI), which is realized when you sell your home in the future.
If you’re investing in home improvements, how much money can you expect to make back in the future? Well, it depends.
You’ll likely find the most success with upgrades that add functionality, square footage or curb appeal. Except in the hottest housing markets, it’s unlikely that you’ll see a 100% ROI, but certain projects can create more value than others.
5 Solid-ROI Home Improvements
These are some of the best renovations for return on investment:
- Kitchen renovation. A bright, spacious kitchen with plenty of storage and working space is a big plus for homebuyers. You can modernize this room with a new sink, appliances and countertops, as well as by refacing, repainting or replacing cabinets. In the future, you may be able to reclaim more than 70% of your kitchen remodel cost.
- Bathroom addition or remodel. Building another bathroom is a proven way to add value. So is improving an outdated bathroom with quality fixtures, tiles and cabinets. Keep in mind that major changes – such as moving plumbing or walls – will drive up your costs unless you’re planning a DIY renovation (and know what you’re doing).
- New deck. Building a deck is a simpler, more affordable way to create extra space for your family and guests (at least in good weather). Be sure to budget for related expenses, like adding a sliding glass door to connect it to your home, plus deck furniture.
- Exterior improvements. In addition to their cosmetic benefits, some exterior updates add important functional benefits like increasing energy efficiency and protecting against the elements. Popular updates include replacing a home’s siding or adding a stone veneer, painting, door and window replacement, and the sometimes-essential task of roof replacement. For certain jobs, you may recoup 70 cents or more for every dollar spent.
- Primary bedroom suite. If you need a sanctuary from the noise and activity in the rest of your household, adding a bedroom suite – complete with a primary bath, walk-in closets and other amenities – can work wonders. Some homeowners see an ROI of more than 60%.
Timing & Location
Are you looking for short- or long-term value? Adding space and making certain functional upgrades like new appliances and fixtures may provide more long-term value than mainly aesthetic updates. After all, styles and tastes change over time.
If you think you will move sometime soon, getting a solid ROI from your project is especially important.
Also, note that home prices and renovation costs vary by region and neighborhood, which can affect how much money you make back. For example, the average cost of upgrades for Texas homes is less than for homes in New England.
Because a home’s sale price can be influenced by comparable local home prices, very large or lavish updates may have a lower ROI if they are far beyond what other homes have in your area.
Projects With the Lowest ROI
You’re unlikely to boost your home’s value greatly with specialized or luxury-oriented updates that don’t appeal to all buyers, such as a swimming pool, backyard tennis court or wine cellar. This also goes for highly expensive materials like marble countertops or top-of-the-line appliances. Spending more doesn’t necessarily lead to a higher ROI.
In fact, based on data from Remodeling Magazine, the project with the highest ROI is quite modest: garage door replacement, which offers an ROI close to 100%.
ROI Isn’t Everything
Unless you’re fixing and flipping a property, don’t think of home improvements as an “investment” in the traditional sense. There are much better ways to earn a yield on your money. With that said, your home is still an appreciating asset, and making smart improvements is an important way to enhance and protect its value.
If you plan to stay in your home for years to come, the happiness you get from that new kitchen, entertainment room or swimming pool may be well worth the price tag.
Ready to Get Started?
Amegy Bank’s Home Equity Line of Credit offers a flexible way to pay for larger home projects. See if this option is right for you, then easily apply online.