Don't expect a big return on most home improvement investments.
When setting out to improve your home, you’re usually motivated by making the space more comfortable for your family. You justify the expense by saying that the project will inevitably add value to your home. But most home improvements don't add as much value to your home as you spend on the project, at least if you’re going to sell soon. Remodeling magazine’s 2017 Cost vs. Value report, which analyzed 29 projects in 99 U.S. markets, found the only improvement that added more value than it cost, using a national average, was adding insulation to the attic. Smaller, less expensive projects like adding a new steel door tended to bring a better rate of return than large, high-priced projects like a master suite addition.ROI varies by project and location.
ROI varies by project and location.
Exactly which renovations will add value depends on where you live – not just your city or region but your neighborhood. Installing a feature that people in your neighborhood expect (and need) is more likely to pay off than adding high-end features not found in most other homes. And adding square footage to a small home in a neighborhood of larger homes is more likely to pay dividends than making your home the largest in the neighborhood. The Cost vs. Value report also estimates costs on the high end, so in some cases a more modest version of projects may yield as much or more value than going all out.Adding an in-ground pool.
Adding an in-ground pool.
The average cost for homeowners to add a pool was $41,975, according to reports by HomeAdvisor.com customers. In most markets, you’re unlikely to be adding nearly that much to your home’s value. While a pool is more likely to be prized in an area where the weather is warm and most nearby homes have pools, even in those neighborhoods it typically doesn't boost the value anywhere near what it cost to install it. The Cost vs. Value report does not include pools.Gourmet kitchen renovation
Gourmet kitchen renovation
Redoing your kitchen with high-end finishes and professional appliances might look great, but it won’t yield nearly what you spent when you go to sell. According to the Cost vs. Value report, a major kitchen remodel added 65.3 percent of its $62,158 cost to a midrange home and 61.9 percent of its $122,991 cost to an upscale home. A minor kitchen remodeling project – replacing some appliances, laminate countertops and cabinet doors – had a much better return on investment, returning 80.2 percent of its cost in value to a midrange home.Patio or deck
Patio or deck
You might think that adding a patio would significantly boost a home’s value. But the Cost vs. Value report calculated that adding a 20-by-20-foot flagstone patio, with new sliding-glass doors, a fire pit, pergola and outdoor kitchen, would return only 54.9 percent of its $51,985 cost for a midrange home. A more modest 16-by-20-foot deck addition fared better, returning 65.2 percent of the $17,249 cost of a composite deck and 71.5 percent of the cost of a $10,707 wood deck, both for a midrange house.Master suite addition
Master suite addition
In general, it’s hard to get your money back from an addition because the project is so costly. Remodeling magazine estimates the cost of a midrange master bedroom addition at $119,533 and predicts that it will add only $77,506 to the home’s value, or 64.8 percent of its cost. On an upscale home, the project would return 59.9 percent of its $250,687 cost.Adding a bathroom.
Adding a bathroom.
Another bathroom would really increase your home's value, right? Well, the Cost vs. Value report found that a bathroom addition added only 64.8 percent of its $43,232 cost to a midrange home and 57.1 percent of its $81,515 cost to an upscale home. Adding a bathroom within your home’s existing footprint, which has a much lower cost, is likely to yield more value versus its cost, especially if you’re adding a second bathroom to a one-bath house.Installing new windows.
Installing new windows.
Many homeowners mistakenly believe that installing new windows will cut costs for heating and air conditioning, but it usually takes many years to get back the cost in energy savings. While new windows may improve your home’s look and feel with more natural lighting, they rarely add as much value as they cost. A 2015 survey by the National Association of Realtors estimated that installing new vinyl windows would recoup 80 percent of the $15,000 cost when the home sells, but only installing wood windows would reap 58 percent of the $26,000 cost. Remodeling magazine's Cost vs. Value report estimated that new windows would regain about 70 percent of their cost in an upscale home, whether the windows were wood or vinyl.
Devon Thorsby | June 5, 2019
Homeowners should not fret, as long as they're prepared for the possibility of a downturn.