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Home Renovations with the Best Return on Investment

One of the great things about owning a home is that you can truly make it yours, which is hard to do in a rental.


Don’t like the carpet? Rip it out. Hate the tan walls? Paint them any color. Don’t like the wall between the living room and kitchen? Tear it down…as long as it’s not a load-bearing wall!


Questions to Ask Yourself


As much as it’s great to tailor your space through home renovations, you have to keep in mind that these “improvements” can impact the value of your home. This can actually be positive or negative. Not everyone wants, say, a sunroom at the sacrifice of their backyard space. Or a bathroom where there’s no separation between the toilet and shower (yes, we’ve seen it!).

Your personal tastes may not translate to the open market—something that’s important if you’re planning to sell one day. There are, of course, tons of home renovations that can produce a good ROI for the money spent. That’s where you want to focus your time and attention.

Before you get that sledgehammer out, think about how long you plan to keep your home. If the answer is one to three years, you have these questions to answer before you start any home renovations.

  • Will these home improvements be attractive to prospective buyers?

  • Will these updates increase the equity in my home?

  • What will my return on investment (ROI) be?

If you plan to stay in your home for more than three years, the questions become a little different:

  • What do I wish my home had?

  • What do I value most in my home?

  • What makes me feel relaxed in my home?

  • Would these home renovations meet my personal needs?

The ROI Calculation

While home renovations can be a good investment, you can’t calculate their exact ROI—aka ROI net—until you actually sell your house. It’s one of the limitations of ROI. At that time, the value of the project will help determine the home’s resale price and your net profit.

To calculate return on investment, take the final assessed value of the home renovation and subtract it from the initial value of that space. This number is the ROI net.

The ROI net is then divided by the cost of the home renovation, including labor, materials, and any other activities associated with it. That number is expressed as a percentage. This ROI formula will ultimately tell you how much money you can recoup from your initial home renovation investment.


Renovation Projects with Higher ROIs


Remodeling.com puts together a fantastic cost vs. value report that provides a breakdown of the home improvement projects that will yield the highest return on investment.

It’s always good to know what projects add the most value to your home. While the information below is national data, the link above allows you to find data on job cost, resale value, and cost recouped for home renovations in your region.


Manufactured stone veneer


The project with the highest rate of return in 2022 is manufactured stone veneer. Manufactured stone veneer emulates natural stone, but it’s easier and more cost-effective to install.

For this project, you’ll remove the bottom third of your siding and add manufactured stone veneer around the perimeter of your home (and archway above your door if you have one). This really upgrades the entire look of your home.

Even better, stone veneer is hardy and virtually maintenance-free.

  • Job cost: $11,066

  • Resale value: $10,109

  • Return on investment: 91.4%

Garage door replacement

Installing a new garage door can increase your home’s curb appeal, keep your house safe, and even increase its energy efficiency. The number of garage door designs and materials is nearly endless!

When you pick out a new door, consider how much insulation you want, whether you want windows or hardware, and what style and materials you like. A garage door should match the home’s architectural style, in addition to the windows, doors, and other exterior details of the home.

  • Job cost: $4,041

  • Resale value: $3,769

  • Return on investment: 93.3%

Minor kitchen remodel


You might be surprised to learn that a minor kitchen remodel has a better ROI net than a major kitchen remodel. It can make a huge difference in how your kitchen looks.

For this project, you’ll replace the cabinet and drawer fronts and hardware but keep the cabinet boxes. Appliances can be replaced with energy-efficient models.

You’ll also install laminate countertops, a mid-priced sink and faucet, and new resilient flooring. This can include vinyl tile and planks, cork, rubber, or polymer floors. Finish off your kitchen by painting the walls, ceiling, and trim.

  • Job cost: $28,279

  • Resale value: $20,125

  • Return on investment: 71.2%

Siding replacement


Want to upgrade your curb appeal? Think about replacing your exterior siding with either fiber-cement or vinyl siding. New siding can completely change the look of your home.

You’ll also benefit from better insulation. Modern siding materials have insulation incorporated into their design, helping your home retain heat in the winter and reflect heat in the summer, which will save money. Siding also plays an important role in protecting your home from the elements and little critters.

  • Job cost: $22,093

  • Resale value: $15,090

  • Return on investment: 68.3%

Bathroom Remodel


A new vanity and sink, complete with fixtures you love, can change the look of the room.

If you have a standard builder-grade mirror, swap it out for something framed, and add some updated lighting on either side. If you’re in the market for a bigger upgrade, consider surrounding the shower with tile, or even installing a free-standing soaking tub if space and money allow. Floors are also a great upgrade—and there are tons of options available!

  • Job cost: $27,164

  • Resale value: $15,990

  • Return on investment: 58.9%

Wood deck addition


Everyone uses their outdoor living space a little differently. You have to keep this in mind when you’re looking at the cost of investing. Something like a wood deck adds diversity, giving you many more options in your backyard!

Consider adding a built-in bench, a planter, and stairs (made out of the same planking as the deck), as well as a complete railing system to make your deck as versatile as possible.

  • Job cost: $19,248

  • Resale value: $12,464

  • Return on investment: 64.8%


Paint


Paint is so simple, yet it makes the largest impact on your home’s exterior and interior. Plus, it’s one of the least expensive changes you can make! Many people opt for neutral colors to give their home a timeless look or to have the freedom of switching up the décor. Neutral colors are also highly recommended if you’ll be selling your home soon.

Flooring

It can be hard to feel comfortable in your home if you don’t love your flooring. Hardwood floors are an upgrade that always looks fantastic and are great for resale. Maple, oak, and hickory are durable choices, in addition to bamboo, cork, and other eco-friendly options. Luxury vinyl tile and wood-look tile are also durable—especially if you have pets or a swimming pool—as they’re nearly indestructible and waterproof.

If you have small children, you may want to consider upgrading the carpet instead (with a cushy pad underneath), to keep little crawlers and walkers comfortable and safe. If you can, keep carpets in the bedrooms only.


Making Your Home Stand Out


Of course, there are many other home renovations that can spruce up your home and act as an investment gain when the time comes to sell.

In a changing market, a home chock-full of upgrades can really stand out in the market. Plus, you can use the equity in your home to finance or partially finance these investments. APM is happy to help. Reach out to us today to find out how you can put your hard-earned equity to work for you.

This blog has been updated from its original posting date of May 6, 2020.

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