Most homeowners get an itch to remodel their homes, whether it’s immediately after purchase or 20 years into ownership. Before beginning a DIY project or hiring a contractor, homeowners want to know what the return on their remodel investment (ROI) will be upon resale of their homes. A helpful starting point is to understand that the cost of materials and professional labor for a home upgrade is more expensive than the value that upgrade adds to the home. For instance, a $50,000 kitchen remodel may add $30,000 to the value of the home. Therefore, homeowners have to ask themselves if a new kitchen is worth $20,000 of value over the time they’ll remain in their homes.
Here are a few tips to get the most value from a home remodel.
1. Be Decisive
Homeowners need to understand exactly what they want before jumping into a remodel. Consider lifestyle, functionality, family size and hobbies. Think about precisely which features would improve daily life and which are included in the dream remodel. Collect example photographs and pinpoint specifically which items are non-negotiable. When homeowners understand exactly what they want, it’s easier to translate to the contractor, who can then create an accurate bid for the remodel. One expensive dilemma that arises often is when homeowners add features or change their minds halfway through a project. To keep remodel costs low and ROI high, homeowners need to be realistic about their needs and the functionality of the remodel, while being clear about their visions.
2. Research Resale Value
The next important step to getting the most value out of a home remodel is to research trends and prices for each feature of the remodel. Appliances, finishes and some home features are dramatically more expensive than others. In fact, price-checking each upgrade such as windows, cabinets and hardware may cause homeowners to adjust their remodel vision to something slightly more affordable but equally as functional. Of course consider personal preference, but take time to do homework on features that appeal to the general public. If the goal is higher resale value, stick to classic upgrades rather than distinctive or unique designs. Funky paint or artwork can easily be painted over or removed when selling the home, but built-in eccentricities are more challenging.
Then, take a step back from the project details and evaluate the cost of the home remodel in comparison to the typical value increase in the home. Consider local trends such as added sunrooms or installation of backup power generators, as some upgrades are of higher value in specific locations.
Review this list of midrange-priced remodel projects with the highest costs recouped at resale, according to the Remodeling Magazine 2012-13 Cost vs. Value Report. They are listed below in order of highest ROI.
- Steel Entry Door Replacement: costs $1,137 – 85.6 percent return
- Wood Deck Addition: costs $9,327 – 77.3 percent return
- Garage Door Replacement: costs $1,496 –75.7 percent return
- Minor Kitchen Remodel: costs $18,527 – 75.4 percent return
- Wood Window Installation: costs $10,708 – 73.3 percent return
- Finished Attic Bedroom: costs $47,919 – 72.9 percent return
- Vinyl Siding: costs $11,192 –72.9 percent return
- Vinyl Window Installation: costs $9,770 –71.2 percent return
- Basement Remodel: costs $61,303 –70.3 percent return
- Major Kitchen Remodel: costs $53,931 – 68.9 percent return
- Composite Deck Addition: costs $15,084 –67.5 percent return
- Fiberglass Entry Door Addition: costs $2,753 – 65.9 percent return
- Two-Story Addition: costs $152,470 – 65.4 percent return
- Bathroom Remodel: costs $15,782 – 65.2 percent return
- Garage Addition: costs $48,806 – 63.7 percent return
3. Dream Remodel vs. Resale Value
Lastly, it’s time to weigh the options. If a homeowner has a grand and distinctive vision of adding a second level or an additional bedroom to the property, but the costs dramatically outweigh the resale value, is it worth it? Only individual homeowners can answer this question. Maybe the neighborhood, public schools or family in the area are strong enough benefits to keep a homeowner in the home. The alternative is to find a home better-suited to the homeowner’s needs. Begin by exploring homes for sale on Zillow, and seek out a home with all of the ideal upgrades already completed, possibly even in the same neighborhood.
When homeowners enter into the world of remodeling or DIY, healthy expectations of the return on their investments are invaluable. Home remodeling projects with the highest ROI typically occur when homeowners have done their cost and local research, solidified a remodel strategy and considered their alternative options. If the homeowner is clear about the cost of the remodel and has accepted the potential for lesser recouped costs at resale, then somehow that added family room tends to become even cozier.