ROI on Home Renovations: The Good, the Bad, and the Ugly
It’s no secret that home renovations can be a hit or miss when it comes to ROID (return on interior design). After all, a simple siding overhaul could help net more on resale while owners might not break even on a sparkling new bathroom. So, whether you’re selling a buyer on a home that needs a new kitchen or advising a seller on pre-market property updates, you’ll want to know your stuff when it comes to returns on home renovations.
Home Improvements That Pay Off
While the specifics will vary depending on the property and market, these four home renovations offer the best ROI, according to the National Association of REALTORSⓇ’ (NAR) 2019 Remodeling Impact Report:
New Garage Door
While it may not be as sexy as a full-on kitchen remodel, a brand new garage door could nearly pay for itself. The average garage door opens hundreds of times each year, stands up to wear and tear courtesy of local weather, and, if the garage happens to be at the front of the home, can significantly impact curb appeal. In fact, 16% of seller’s agents report suggesting clients complete this project before going to market.
The most common updates include replacing worn-out surfaces, finishes, and materials since garage doors can quickly look dated. As a result, NAR reports a 31% improvement in beauty and aesthetics from the buyer’s perspective.
Upon completion, 66% of owners who have undergone a new garage door installation report a greater desire to spend time at home, 52% enjoy their space more, and 66% feel accomplished in terms of the project.
While a new and improved garage door may lead to significantly more enjoyment of the space, sellers can also recoup most of their costs at resale. The National Association of the Remodeling Industry (NARI) estimates that the average garage door installation costs approximately $2,100, and NAR estimates approximately $2,000 will be recouped at sale for a total of 95% of the value recovered from the project.
If current or potential owners are looking for a significant increase in aesthetics and a robust ROI, a garage door overhaul could fit the bill.
Hardwood Floor Refinish
The impact of flooring simply can’t be overstated. The right flooring can maximize space and light, add character, and wow guests. Dull or neglected wood floors, on the other hand, can date the home and unconsciously deter buyers. As such, refinishing existing hardwood flooring is one of the savviest home improvements your clients could tackle.
The primary reasons behind refinishing wood floors include modernizing the space and replacing worn-out surfaces, finishes, and materials. As a result, 26% of owners report better functionality, livability, beauty, and aesthetics in their space.
Furthermore, a sizable 68% of homeowners have a greater desire to spend time at home, 65% report greater enjoyment of the space, and 78% feel a sense of accomplishment when they consider the renovation.
The average wood floor refinishing costs approximately $2,600 and the return on investment is also $2,600, equating to 100% of the value recovered. While this project may not necessarily make money, clients are likely to experience improved enjoyment of the space while breaking even.
27% of seller’s agents report suggesting their clients refinish their wood floors before going to market, and 5% said that the update even helped close a sale.
New Wood Flooring
If the existing flooring is beyond repair or otherwise needs to be replaced, new wood flooring may be the way to go. Hardwood floors are considered the gold standard of home flooring as they’re classic, durable, and beautiful. It can be refinished over and over again, and it doesn’t retain pollen, dust, and other debris in the same way that carpet does.
Owners often choose to install wood flooring in order to bring about change as well as update worn-out surfaces, finishes, and materials. Once their new floors are successfully installed, nearly a quarter of consumers report better functionality and livability.
In the same vein, a staggering 78% of consumers have a greater desire to spend time at home, 67% report greater enjoyment of the space, and 78% feel accomplished when considering the project.
On average, new hardwood floors will cost clients approximately $4,700. That said, they’ll likely make $5,000 on resale for 106% of the value recovered.
While only 16% of agents suggested their clients install new wood floors, 5% reported that the renovation helped close a sale.
A well-maintained roof may be one of the most important and overlooked aspects of a home. A healthy roof provides protection, cuts energy costs, prevents damaging leaks, and even adds curb appeal. It also just so happens to be a great investment.
The most common reasons for new roofing installations include bringing about change and taking the opportunity to upgrade run-down surfaces, finishes, and materials. As a result, 50% of owners report durable and long-lasting results.
Furthermore, 65% of consumers have a greater desire to spend time at home after the project’s completion, 49% report greater enjoyment of the space, and a whopping 75% feel a sense of accomplishment when they consider the renovation.
The average roof replacement will cost approximately $7,500, but the expected return is $8,000. That means clients can recoup an impressive 107% of their investment. So, while this project may be the most expensive on our list, clients have the greatest potential ROI in biting the bullet and replacing that dilapidated roof.
A sizable 39% of REALTORSⓇ suggested their clients complete this project before listing the home, and 33% report that it helped close a sale.
Home Improvements That May Not Be Worth the Expense
Despite what you may have heard, updating a bathroom or the kitchen simply might not be worth it. While it’s true that these rooms are two of the primary drivers in making a sale and among the most commonly renovated spaces, upgrades here tend to cost a pretty penny without significant ROI.
For example, NARI estimates that the average primary suite remodel costs approximately $150,000 while NAR estimates approximately $75,000 will be recouped at sale for a total of only 50% of the value recovered from the project.
In the same vein, the average kitchen renovation costs approximately $38,300, and the return on investment is roughly $20,000, for 52% of the value recovered.
Renovations in these rooms may lead to improved enjoyment of the space, but current and potential owners shouldn’t necessarily expect these projects to pay for themselves. Instead, steer your clients toward the upgrades that offer better ROIs and less upfront investment. After all, everyone has a different preference when it comes to the kitchen backsplash and cabinet color — so stick with what pays off!
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