ROI. It’s the three-letter acronym that home buyers and renovators learn PDQ when looking to cash in on their TME (Time, Money, and Energy).
Renters interested in buying a home aren’t going to scour the web for home mortgages and agree to a 30-year-loan if they think they’ll end up with a 1,200 square-foot lemon.
So, if it’s finally time to bid adieu to the shag rug and in-bath Jacuzzi that’s so 2005, here’s a quick rundown of renovations that offer the best returns. Before we start, though, it’s good to remember a cardinal rule of renovation:
“It’s better to replace or repair than add and remodel.” In other words, a new refrigerator or front door are generally smarter options than a fully updated kitchen or an entirely new front porch to your home.
MAINTENANCE MATTERS MOST
If the words “musty,” “rusted,” or “sagging” can be applied anywhere in your home, that’s where you want to first focus your money.
No matter how awesome your new granite counters are or how many roses are blooming in your new landscaping, if the roof leaks or the A/C is barely functional, buyers are going to pass.
FIRST IMPRESSIONS = BETTER RETURNS
After you’ve taken care of basic maintenance, the next place you want to put your money is into curb appeal. Every potential buyer that drives by your home but doesn’t stop is one more lost offer.
A new garage door offers a 98% payback on your money while replacing your old vinyl siding with stone veneer is just slightly under that at 97%.
(Interestingly, new vinyl siding is almost twice as expensive, but only offers about a 76% ROI. This is still above average, so if you hate stone veneer and your siding is older, upgrading to new vinyl is a good choice.)
Another cost-effective improvement to your front façade: a new steel-core front door. It not only spruces up the public face of your home, but it also offers a 91% ROI.
MINOR UPGRADES = MAJOR IMPACT
On average, minor kitchen remodels (< $20,000) returned 81% of their investment, new vinyl windows recouped 74%, and new roofs 80%.
But you don’t even have to spend that much to see strong returns.
New paint, or a power-washed exterior. Reseeding your lawn. Replacing old fixtures and appliances. Swapping out your old, standard kitchen cabinet drawer pulls for something funky and eclectic.
What all of these things have in common is their low (relative) cost and higher-than-average returns for investors.
UPGRADE YOUR BACKYARD
Backyards are one of the great advantages homeowners have over their apartment-dwelling cousins. But even a lush, well-tended backyard can benefit from a newly installed wooden deck with a railing system—especially considering decks retain better than 82% of their value when the home sells.
THE ONE-TWO PUNCH
As anyone who’s watched even a single home-improvement show knows, upgraded kitchens and bathrooms are two of the best investments a homeowner can make.
Depending on whether you’re springing for major or minor remodels, bathrooms and kitchens return on average between 59 and 70% percent of your money.
And importantly, while older homes may be long on charm, they’re too often short on bathrooms! Instead of spending big on remodeling your one bathroom, add a second one instead. A second bathroom typically offers twice the ROI of an upgraded single bathroom.
If you’ve already got a second bathroom—or you’ve still got room in your budget—adding square footage in the form of another bedroom, sunroom, even craft/hobby rooms or an office continues to be a good investment.
On average, they’ll boost sale prices by over 30% for every 1,000 additional square feet.
Two final thoughts:
- Don’t put so much into your house that you price yourself out of your neighborhood. Remember: you never want to have the most expensive home on your street.
- Unless you’re an ardent property flipper, or you’re looking to move ASAP, you’ll still have to live in your home after you upgrade it. With that in mind, make the changes to your home that you’ll get the most out of.
Want to learn more about the best renovations for maximizing your ROI when you sell? Answer a few questions here, and a home lending expert will contact you!