Aside from waiting for home prices to rise and interest rates to fall, there may be no better way to increase the value of your house than investing in a few home improvement projects. The question is, which projects will provide the best return on investment (ROI).
A landscape makeover or a fresh coat of paint on the exterior can make your home more attractive and increase its curb appeal, however, it will not increase its value with much significance. So the big question is, which home improvement projects will radically boost the value of your home?
The first question you have to ask is how long will you remain in your home after the improvement is complete. If the answer is between one and five years, you may want to keep the improvements simple, clean, bright and organized, as this typically gets the most attention from home buyers. Go too extravagant or too custom to your taste and the project may not provide the return you were looking for.
If you are planning on staying in your home for more than five years, you may want to consider projects that add comfort and convenience to fit your family’s lifestyle. Although it is always good to keep the future sale of your home in mind, when planning a home improvement for the long term, part of the ROI is the enjoyment of the newly renovated space.
So which home improvement projects should you invest in, and which projects should you avoid? Below are some helpful tips.
Remodeling your kitchen, especially one that is 20 years or older, can be considered the best investment. A kitchen is the heart of a home and the most used communal space. According to HGTV, you can expect to recoup somewhere between 60%-100% of your investment when you sell your home. The variance depends on the features you choose, how much you spend on the remodel and whether your priority is to create a dream kitchen for yourself or a kitchen that appeals to potential buyers and conforms to the style of your home.
For example, a quaint Arts and Crafts style home built in early 1900’s should not be renovated with an over-sized modern kitchen. The style, size, and quality of the kitchen should fit in with the rest of the house.
When it comes to how much you should spend on a kitchen remodel, prices can run the gamut, from $10,000 to $75,000, or more. Get the biggest bang for your buck on a kitchen remodel by looking at function over flare. While you may love your $10,000 commercial stove, and top-of-the-line backsplash, these costly additions don’t pay off when you list your home for sale. If you plan on moving within five years, invest in quality, serviceable appliances that appeal to the mass. In general, too much customization in a home can turn buyers away.
Renovating or increasing the size of a bathroom can increase the value of your home as well, however, may not have as big of an impact on your home’s value as other projects. The ROI depends largely on the style, furnishings and fixtures, and the overall cost of the bathroom remodel.
However, adding a second bathroom to a home with only one, can provide a greater ROI. Just keep in mind that projects that include renovations to electrical, plumbing or building structure, do require an Architect and the filing of building permits.
Adding more square footage to your home with a new room can be an incredibly expensive project. Although you can recoup some of your investment, anywhere from 50%-83%, this project’s costs can quickly spin wildly out of control. Projects that start off with a $20,000 budget can quickly turn into $30,000 or more when homeowners and contractors run into unexpected problems.
To save money, reinvent the existing space in your home. Finish a basement, or convert the attic to a bedroom. However, before you demolish walls and rafters, try to think about the ways that you, and potential buyers, can use the space.
Unfinished basements are a good start as they can be used as a family room, guest bedroom, a home office, gym or game room. Many people also turn this space into a small apartment for an aging relative or a tenant, however, like adding a room, would require review by an Architect to identify whether it is permissible and in line with your home’s zoning regulations.
If large enough and access is easy, attic spaces often work well for craft rooms and game rooms, especially if they have high ceilings. This bonus space not only offers you and your family extra room now, it also can increase your home’s appeal to potential buyers.
When considering home improvement projects like these, consider hiring a contractor. Make sure you get at least three quotes, with the details of the project, from the contractors you interview. Thoroughly check references for the contractors before you agree to a contract or work order, and watch out for home improvement repair scams. Visit www.hicofsi.org to ensure you hire a local contractor that you can trust.
Stay on par with your neighborhood, as too many high-end renovations or an addition to your home can make yours the most expensive home on the block. You can recoup a fair amount of money on a kitchen remodel, but expensive, fancy gourmet kitchens won’t help you attract that perfect buyer.
Of course, if you have a high-end home in an upscale neighborhood, then upgrading your kitchen to “gourmet” status may increase its value, since buyers expect to see a gourmet kitchen in a high-end home. But even in a high-end home, you may not recoup your entire investment in an expensive kitchen remodel when you sell your home.
While you want to improve your property and increase the value, you also want to be cautious that you do not over-improve your property. You don’t want to spend an amount of money on a renovation where you will not see a return on your investment. For example, putting high-end Viking appliances in a home in a middle-class neighborhood would be an over-improvement.
Before you renovate, do some research on your area to find out how much the property will be worth after the renovations, also known as the After-Repair-Value or ARV.
The ARV is the market value of the property after all necessary repairs have been completed to bring it up to marketable condition. Market value is the selling price the property could be expected to achieve in its current condition.
Jeff Troost, President Troost Bros. Inc. Home Renovations