Home renovation projects are great when you want to refresh your home and reflect your personal style. Whether you hire professional remodeling services or prefer to DIY, you can make your home feel brand new.
If you’re listing your home, however, you want to focus your renovations on projects that will bring a return on investment (ROI) and attract home buyers. It’s less about what you like and more about what appeals to the current buyer demand. Fortunately, some small changes can make a huge impact.
What Is Renovation ROI?
Before you take on a renovation project, make sure you understand the potential ROI and the profit you stand to gain from your home sale compared to the costs you put into a renovation project. Not all renovations affect your home’s resale value – some may even hurt it.
You can determine the ROI by calculating the value before and after a project is completed. This helps you avoid taking on a remodel that suits your style without boosting your home’s value.
Factors That Affect ROI
Not all renovations offer great returns. Here are some factors that impact renovation ROI:
Location
The real estate market is dynamic – sometimes volatile – and the local area dictates a property’s value. To an extent, some renovations won’t translate to returns.
For example, high-end kitchen remodels in some areas will need to be in line with comparable listings. In other areas, energy-efficient appliances or upgrades will be more appropriate. By comparing your home to others in the area, you can understand the preferences and expectations of the current market.
Cost vs. Sales Prices
A big part of ensuring positive ROI for your home renovation project is setting a budget. Depending on how much you plan to list your home for, you may or may not have the funds left over to invest in expensive repairs without losing money.
Quality of the Work
Your home’s increase in value after a renovation project depends on the quality of the work. If you DIY your renovations, you’re likely to see less of a return on your investment than if you had a professional contractor complete the project.
Renovations That Offer Strong Returns
Wondering what renovations offer the best ROI? Here are some options that have good returns in most markets:
Kitchen Remodels
Kitchens are one of the most important functional rooms in a home. They’re also among the most involved if you want to make changes, so making sure the kitchen is updated is essential if you’re trying to receive the highest value for your property.
Fortunately, if you don’t want to do a complete remodel, you can do a refresh. Refacing your cabinets, installing new, modern countertops, or updating appliances to energy-efficient models can make a big difference.
Bathroom Remodel
Another major selling point for modern homes is a functional, well-maintained, and attractive bathroom. Older homes have outdated layouts with older fixtures that aren’t appealing to home buyers. For a small investment, you can revamp your bathroom and earn a great return on your home value.
Enhanced Curb Appeal
First impressions mean everything in real estate. If the outside of your home doesn’t look appealing, you may not get many buyers looking for a tour.
Consider investing in exterior improvements to enhance your home’s curb appeal. Depending on the current condition, this could mean cleaning up the lawn and landscaping, adding some flower beds or potted plants, adding a walkway, installing a gazebo, or sprucing up your front porch.
Energy-Efficient Upgrades
Modern home buyers are seeking properties that offer more energy efficiency and sustainability. They’re focused on practicality, and energy-efficient homes greatly reduce long-term spending on energy bills.
Evaluate your home and look for opportunities to make eco-conscious upgrades, such as new lighting, solar panels, modern HVAC systems, or other additions that are cost-effective for new buyers.
Renovations to Skip
Some renovations may seem like a great choice for ROI, but they end up being a bust. Here are some renovations you should skip if you’re trying to sell your home:
New Additions
If you have a smaller home, an addition may seem like a great way to attract more buyers. However, these renovations are costly and offer minimal returns, especially if you choose an elaborate, upscale addition.
Top-of-the-Line Materials
Remodeling certain rooms can bring robust returns, but be careful how much you splurge on the details. High-end details, such as luxury light fixtures, appliances, and materials, offer very little return compared to quality mid-tier options.
A Pool
Inground pools are a good idea for your forever home but a bad idea if you want to get the most for your investment. Pools are expensive to maintain and repair, require fencing, and take up backyard space. If a buyer doesn’t want a pool, they have to either pay for the upkeep or get it removed, which can be extremely expensive.
Room Conversions
If you turned an essential room into a space that suits your needs, such as a small bedroom renovated into a walk-in closet or a home office, or knocked down walls to expand rooms, that may limit the functionality for the buyer. More bedrooms add more value, so make sure you leave them as is.
Should I Sell My Home As-Is?
Renovations can improve your home’s value, but not all renovation projects are worth the investment. With low inventory, the demand for homes is high. You may not need to do a lot of renovations to attract buyers – especially if the major work, like your roof and structure, is sound.
Some properties have historical value or unique architectural features that are sought by buyers. For example, decades- or century-old homes with original architecture are best left alone. Buyers may want to keep the home in as close to original condition as possible, only renovating what they choose.
Understanding Renovation ROI
If you’re on the fence about different renovations, make sure to speak to your real estate agent. They can offer advice about renovations with good ROI and the current market trends and buyer expectations you should consider.
Author Bio:
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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