Home Renovations for a Strong Return on Investment (ROI)

One of the perks of owning a home is the ability to personalize it to your liking.

While home renovations allow for customization, it’s vital to recognize that these changes can influence your home’s value, either positively or negatively.

Not everyone desires a sunroom at the cost of losing backyard space, or a bathroom without any partition between the shower and toilet (yes, we’ve seen it!).

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Several home improvements yield higher returns on investment (ROIs), and that’s where your focus should lie.

Before diving into renovations, consider the duration of your stay in your home.

If it’s short-term, ask:

  • Will these upgrades appeal to potential buyers?
  • Do these updates boost my home’s equity?
  • What’s the projected Return on Investment (ROI)?

For long-term stays, focus on personal needs:

  • What am I missing in my home?
  • What do I value most?
  • What creates a relaxing environment?

ROI Calculation

Though home renovations can be a smart investment, calculating their precise return on investment (ROI) isn’t feasible until you sell your house, which is a limitation of ROI. Upon sale, the project’s value determines your home’s resale price and net profit.

To compute ROI, subtract the final assessed value of the renovation from its initial value. This figure represents the ROI net. Then, divide the ROI net by the renovation’s total cost (inclusive of labor, materials, and associated expenses). This percentage-based ROI formula reveals the potential money recovered from your initial renovation investment.

Renovation Projects with Good ROIs

Remodeling.com compiles an excellent cost versus value report, offering insights into home improvement projects with the highest return on investment.

The following details national statistics about home renovations that significantly increase a home’s value:

Manufactured Stone Veneer

In 2022, this had the highest return on investment. It mimics natural stone, offering an upgraded look, and is easier and more cost-effective to install. This project involves adding manufactured stone veneer around your home’s perimeter and possibly above the door’s archway.

  • Cost: $11,066
  • Resale value: $10,109
  • ROI: 91.4%

Garage Door Replacement

Installing a new garage door can enhance curb appeal, safety, and energy efficiency. There’s a wide variety of designs and materials.

  • Cost: $4,041
  • Resale value: $3,769
  • ROI: 93.3%.

Minor Kitchen Remodel

Surprisingly, minor kitchen updates yield better ROI than major remodels. Replacing cabinet fronts, and appliances with energy-efficient models, and installing laminate countertops, a mid-priced sink, and new flooring can revamp the kitchen’s look.

  • Cost: $28,279
  • Resale value: $20,125
  • ROI: 71.2%.

Siding Replacement

Upgrading exterior siding with fiber-cement or vinyl can transform your home’s appearance and improve insulation, helping with energy efficiency and protection.

  • Cost: $22,093
  • Resale value: $15,090
  • ROI: 68.3%

Bathroom Remodel

Replacing the vanity, lighting, and adding new fixtures can significantly enhance the room’s aesthetics. Upgrading shower surroundings or flooring can further improve the space.

  • Cost: $27,164
  • Resale value: $15,990
  • ROI: 58.9%

Wood Deck Addition

Adding a wood deck expands outdoor living space, offering more versatility. Consider adding features like built-in benches, planters, stairs, and a complete railing system.

  • Cost: $19,248
  • Resale value: $12,464
  • ROI: 64.8%.

Next Step…

US Lending Company can guide you on leveraging your home equity for renovations.

Contact us for insights on maximizing your home’s potential.

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