Is it time for some home renovations or upgrades? Whether you’re performing maintenance work like replacing your roof or plumbing, or you’re going for cosmetic upgrades like on-trend kitchen cabinets or new flooring, updating your home is an exciting prospect.
Whatever your goal is, home renovations can make your home feel like new – even if you’re working with a small budget. However, not all the money you put into renovations will pay off in the long-term value of your home. If you’re planning to sell in the future, it’s important to focus your budget and efforts into home renovations that will offer a positive return on investment (ROI).
How Does ROI Work in Home Renovation?
It’s common to think that any home renovation will make your home more valuable, but that’s not always the case. Some renovations will make your home more appealing and earn a higher sale price, but some could actually result in a loss – or may even turn off prospective buyers.
Your home’s ROI can be calculated by determining the costs associated with a renovation project and comparing it to the amount you expect it to increase your home’s value if you sell.
Of course, there are other variables like the current housing market and comparable homes in the area, but you can estimate the returns for common renovations to get an idea of how to allocate your budget.
Though the location and age of your home, the real estate market in your area, and the interests of prospective buyers factored in, here are some renovations that generally offer positive ROI:
Kitchen Renovations
The kitchen is one of the most important features in a home. Renovating your kitchen will almost always bring a return, even if prospective buyers aren’t big on cooking or entertaining. Virtually all buyers want a safe, functional, and updated kitchen.
To get the best ROI for your kitchen upgrades, it’s important to focus on functional upgrades more than luxury additions. Kitchen renovations can be minor, such as refinishing cabinets and fixing minor wear and tear, or major, such as gutting the whole thing and putting in new cabinets, countertops, appliances, and flooring.
If you just want to refresh the space, new cabinets or countertops are a great decision. Upgrading to energy-efficient or modern stainless-steel appliances typically add value to your home and attract more buyers as well.
Bathroom Upgrades
Bathrooms are an essential area of the home and a good choice for renovation projects. Outdated, inefficient, or poorly maintained bathrooms can be a turnoff for buyers, especially if they know they have to invest into fixing them up.
Like the kitchen, you should focus your bathroom remodel on functionality, storage space, and aesthetics without going overboard on luxury. Depending on how old your bathroom is, you may need to update the plumbing, fix any problems with the tile or walls, and upgrade to energy-efficient fixtures that conserve water and save money on utilities.
Exterior Improvements
The front of your home may not be at the forefront of your mind for renovations, but it’s your home’s “first impression” to your neighbors, passersby, and prospective buyers. It can have a huge effect on the perceived value of your home, and by extension, whether buyers are interested in seeing what’s inside.
Exterior renovation projects can offer a high ROI, especially if they’re focused on simple, attractive features. For example, sprucing up the landscaping in the front can make your home feel more welcoming without turning off buyers who don’t want high-maintenance lawn care.
Your roof is another expensive renovation that’s worth the investment. Buyers like to see homes with new roofs – which means they won’t be looking at a replacement for a long period of time. If you need to replace your roof, talk to a contractor about your options. While a new roof is a good investment, splurging on high-end materials may not be.
Other Valuable Renovations
The bigger projects aren’t the only ones that can increase your home’s value. Some other renovations to consider include:
- Finishing your basement: Finished basements are appealing because they offer additional living space and increase the square footage of your home. Consider making the basement another common area or turn it into a game room or home theater for a unique feature.
- Deck or patios: Having entertainment space outdoors can be a big advantage for home buyers, especially in warmer areas. Consider adding a deck or patio that can accommodate a grill and outdoor seating.
- Energy-efficient upgrades: Sustainability has become an important consideration for prospective home buyers. Investing in energy-efficient upgrades like new insulation, high-efficiency HVAC systems, and new windows can reduce your utility bills and reduce your carbon footprint while you’re living in the home and appeal to prospective buyers when you sell.
Renovations to Skip
While buyer taste can vary, there are some renovations that generally don’t offer a return – or may even decrease the value of your home. These include:
- Wall-to-wall carpeting: if you have hardwood floors, don’t cover them with wall-to-wall carpeting. Carpets don’t appeal to many buyers, so if you need new floors, put that money toward refinishing or installing hardwood floors.
- Swimming pools: Unless you live in an area that’s hot year round, a swimming pool won’t add much value to your home. Pools are expensive to install and maintain, which can be a turnoff for prospective buyers. There’s also liability to consider, and if the buyer doesn’t want a pool, it’s expensive to fill in. Even if you get lucky and find a buyer looking for a pool, it’s unlikely to increase the value that much.
- Sunrooms: Sunrooms are expensive to install – among the most expensive home renovation projects – but they don’t add to your home’s square footage or home value. Buyers may appreciate the sunroom, but it likely won’t give back what you put in.
Make Strategic Renovations for ROI
Renovating your home can make the space your own, but you have to make smart renovation choices to get the most out of your investment when it comes time to sell. It’s important to research your renovation projects and plan ahead to ensure you’re devoting your budget to upgrades that will help your home attract buyers and get higher offers in the future.
Written by Michael Alladawi
About the Author
Michael Alladawi, CEO & Founder of Revive Real Estate, is a Southern California real estate veteran with a proven track record as a builder, investor, and respected home flipper. Michael created Revive Real Estate to share his industry knowledge and help homeowners maximize their profits when selling their homes. Michael's passion for his work is as big as his desire to create lasting partnerships. For Michael, it all comes down to how much value one offers, both in business and life relationships.
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