The best home renovations to increase a house’s value are quite unexpected. It’s easy to get caught up in dreams of gourmet kitchens and extravagant master baths. But these typically only return about 10 to 15 percent.
That’s what Alan Ilyaich, owner of Eco Choice Windows & Doors, told us when we asked the question on most homeowners’ minds: Which home renovation is going to give me the biggest return on my investment?
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Who’s remodeling? Older and millennial homeowners compete
Take it as a sign of our times. Binge-worthy house flipping and home-improvement shows are popping up on almost every cable channel. Homeowners are interested in fixing up and renovating — not just for entertainment but for improving their homes’ values.
The Joint Center for Housing Studies of Harvard University (JCHS) recently examined how rising house prices and incomes may contribute to a stronger home improvement market in the face of our nation’s aging house stock. The report, Improving America’s Housing 2017, projected that home renovation demand is climbing, especially in coastal metro areas with high house values and incomes like the Northeast. Home improvement spending in the U.S. is expected to hit $270 billion by 2025.
While the JCHS report indicates that older homeowners are leading the remodeling craze, millennial renovation spending is also expected to rise. More millennials are buying homes. A 2017 Houzz & Home survey of its 107,000 registered users showed that millennial homeowners, from ages 25 to 34, increased their home improvement investments by 7 percent in 2016 compared to 2015. Average home improvement spend for millennials totaled at $26,200. All homeowners spent $60,400 on renovations on average.
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7 home renovations that are worth the cash
Here the old saying, “You have to spend money to make money,” holds true. Jett Hovell of Fantastic Handyman, who’s completed several successful renovating jobs, says that when it comes to increasing your home’s value, it’s important to remember that the market you’re selling in plays a big role in the price of your home. “What I would suggest is firstly you talk with an expert on the matter. They know the market, and they will help you best,” he says. Your loan officer can help answer any questions and refer you to a contractor they’ve worked with in the past.
When you’re ready to start your project, consider home renovations with the greatest ROI potential:
Simple and affordable, lawn maintenance/landscaping can increase property value and may be one of the few home upgrades that offer immediate satisfaction, Ty Jones, president and owner of the Florida lawn care company Deans Services, says. “Decor and design trends can go out of style. But well-maintained trees and shrubs grow fuller and more robust as time goes by.”
Jones estimates the annual cost of basic lawn maintenance at as little as $30 a month — though it can vary depending on location and lawn care program. “Tree and shrub care is typically an additional lawn maintenance service that will add to your annual cost. But shrubs can improve your overall home value. The actual value increase varies by state, but research has shown that on average, attractive landscaping (trees and shrubs) has a perceived value increase of about 15 percent when compared to homes without proper landscaping,” he says.
Average Cost: $330
Average Return: 303 percent
Can it really be as easy as slapping on a new coat of paint? “I live and work in Las Vegas,” William Margita, Las Vegas realtor, says. “Las Vegas, as you know, has more TV shows and media on flipping than any city in the U.S. After 22-plus years in the industry, it is always the same.” Margita considers paint the top upgrade a homeowner can make to invest in their home on the cheap. He recommends vacating the house and painting it from top to bottom in attractive, neutral colors.
Average Cost: $1,012
Average Return: 109 percent
For flooring, Margita also advises thinking cheap. “A home appraiser does not mark up for the Italian granite,” he says. “Now, they have to look at more longevity. If flooring looks worn and may not make it two years, the appraiser can make it an appraisal condition.” To stay on the safe side, Margita recommends picking flooring that is new and neutral.
Average Cost: Floor repair – $931
Average Return: 107 percent
Seeing as a new exterior door can return up to 100 percent, Ilyaich considers it a fantastic investment when accounting for the added energy savings. “Steel and fiberglass doors are durable, secure, energy-efficient, and dramatically boost curb appeal. So, it’s one of the most cost-efficient home upgrades you can do,” he says.
Average Cost*: $1,413
Average Return*: 90.7 percent
In almost all areas, exterior renovations have an excellent ROI. Ilyaich estimates that an outdoor kitchen can return 100 to 200 percent, while new patio stones or a new deck return about 60 to 75 percent.
Average Cost*: Wooden deck addition – $10,707
Average Return*: 71.5 percent
It’s one of the most important rooms, though we often overlook it. Hovell says, “The truth is that a badly done bathroom can ruin the whole house. Invest some money into making the bathroom look good. Not only will the house’s value go up, but it might also be the final selling point.”
Average Cost*: Remodel, non-upscale – $15,730-18,546
Average Return*: 64.8-68.4 percent
Travis Kennelty, Director of Lead Generation for KW Milwaukee North Shore and the Jay Schmidt Group of Keller Williams Realty, licensed agent in Wisconsin since 2006, and experienced home remodeler, agrees with Hovell that, when selling, the kitchen and bathrooms are the most important rooms of the house. The type of renovations you make can depend on how long you plan to stay in your home. “If you are considering selling a home in a relatively short period of time, and buyers will be quick to point out the outdated kitchen and bathrooms, these areas of the house should be addressed. But it is not always necessary to completely renovate these rooms,” Kennelty says.
Kennelty estimates a full bathroom and kitchen renovation may cost $40,000 to $60,000. “You need to ask yourself if you think you will be able to get that money back when it comes time to sell within the next five years,” he says. “You might consider, instead of remodeling, going through and refinishing these outdates spaces.” For buyers who aren’t in their forever home, i.e., planning to sell within the next five years, this option makes sense. Kennelty first recommends refinishing hardwood floors, cabinetry, windows, walls, woodwork, and countertops. After refinishing, if budget permits, replace fixtures and hardware to round out your finishes.
Average Cost*: Remodel, non-upscale – $20,830-$62,158
Average Return*: 65.3-80.2 percent
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For all you can do to increase the value of your home, there are plenty of things that will help you sell that do not traditionally increase value, Kennelty says. “When it comes time to sell your house, but you need a new roof that costs $10,000, the unfortunate reality is that you will need to do that work, but you won’t directly see your $10,000 back. Houses need properly functioning roofs, or they can’t be sold. Same goes for your boiler and all your home mechanicals. They are expected to work,” he says.
Kennelty reminds us that home value is a relative term.
In most situations, you want to get a dollar back any time you spend a dollar on your house. If you buy the right house for the right price, and you can get $1.50 for every dollar you put in, you’re in a good position.
To get the most out of your home reno budget, talk to your lender first. A reverse mortgage for retirees or a mortgage refinance could provide you with extra cash for necessary renovations. Homebuyers may also be eligible for the HomeStyle® Renovation mortgage, a loan program that covers renovation costs and is designed for buying fixer-uppers. Eligible buyers can use the HomeStyle® Renovation loan for interior and exterior upgrades, including fences, decks, landscaping, and pools, totaling up to 50 percent of the as-completed property value. Let your lender know what you’re looking for, and they may help you find a loan program that offsets the extra expense.
*Provided by the Remodeling 2016 Cost vs. Value Report.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.