Will Your Renovation Make Its Money Back?
If you're considering a renovation, there's one question that's probably at the top of your list: "How much should I spend?" Well, the answer is, it depends.
If you plan to stay in your home for five years or more, invest what you can afford for the look and upgrades you want. If you’re planning to sell, take a different approach. Focus on getting back the maximum return on your investment. U.S. homeowners spend more than $400 billion each year on renovations and repairs, according to the 2019 Remodeling Impact Report by the National Association of Realtors® Research Group, so it only makes sense you want to get that money back—and then some.
"If you’re remodeling for resale, we always suggest for the homeowner to first have a home inspection and be proactive to find issues," says Joanne Theunissen, CGP, CGR, 2018 chair of the National Association of Home Builders (NAHB) Remodelers and owner of Howling Hammer Builders Inc. "The home inspector can identify issues that may come up later to bite you. You don’t want to put money into cosmetic fixes, then find out when you go to sell that you have major problem. Identify any structural issues first, then deal with cosmetic improvements."
Here's a breakdown of the most popular areas to upgrade—and what's really worth the effort.
The Kitchen
People say kitchens sell houses. "It’s the center of the home," explains Elle H-Millard, CKD, industry relations manager and resident designer for the National Kitchen & Bath Association (NKBA). "People want to be relaxed in this space. People congregate here, and you want a good feeling in this environment."
An average kitchen remodel will pay off more than a high-end renovation. According to Remodeling magazine’s Cost Vs. Value Report, a major kitchen remodel costs $68,490 and homeowners recoup $40,127, which is 58.6 percent. An upscale kitchen remodel costs $135,547, with a 53.9 percent ROI.
The materials you choose make a huge difference in how quickly your home sells—and for how much. The NKBA 2020 Kitchen & Bath Market Outlook reveals that cabinets and faucets are the first to be outdated. With new cabinets come new countertops. Countertops are the second most popular upgrade in a kitchen remodel—only painting is more popular—and homeowners are increasingly favoring trendy quartz options.
"Quartz is going to give more ROI because it won’t date itself as quickly," H-Millard says.
For backsplashes, ceramic and porcelain tile are preferred over glass, stone, and quartz. And if you're considering changing out the flooring, go for hardwood. It's way more popular than tile or engineered wood.
Something as basic as splurging on a high-end faucet can make a big difference, too. "Selecting a faucet that makes a statement and looks different can add value, offer a customized approach, and give that sense of attention to detail," H-Millard says. "These are the luxury moments you can add to your space and make your home feel special that give you the ROI."
Bottom Line: You’ll recoup 54 to 77 percent of what you spend, depending on size of the project.
The Bathroom
Thinking of replacing the tub with a traditional shower? Hold up. You don’t want to take a bath on your investment. Large bathroom projects like countertops and cabinets, and labor-intensive upgrades like tilework, are more popular with high-end projects, according to NKBA’s report. Master bath projects costing over $4,500 had 90 percent more countertop upgrades and 70 percent more tile than projects costing less.
In some cases, it’s less expensive to add a new bath than to remodel your current one. Remodeling magazine’s report says a midrange bathroom addition costs $49,598, with a 54 percent ROI. An upscale remodel costs $67,106 — but you'll get a slightly better return for going all out: 56.6 percent is the average. If you're looking to flip your house, stick to midrange materials. That kind of remodel typically costs $21,377, but it nets a higher return at 64 percent.
Pay attention to the particular features people go wide-eyed over: "Gone are the days of small showers and tubs with jet streams. Now, it’s luxury and streamlined designs, like a wider shower, additional body sprayers, customized tile on the floor with inlays for specialized details," H-Millard says. "You get the spa-like experience in your home."
A Home Addition
Adding a new master suite? You won’t sleep easy knowing it costs $150,000 with only a 50 percent ROI, according to the NAR 2019 Remodeling Impact Report. However, remodelers have seen it much higher—if you're strategic about your expansions.
"We just finished an addition for a client in a two-story traditional home. We added a master bed and bath, and brought the laundry room to the main floor," Theunissen says. "It ended up with an 89 percent ROI and made the house attractive to Baby Boomers who didn’t want to climb stairs as often. The project opened up a market."
The Refinished Basement
Transforming unused space into livable space is one way to maximize your home’s footprint, but don’t expect a high return when it’s time to sell. The 2019 Remodeling Impact Report says you’ll see a 64 percent ROI. However, Theunissen points out that what’s added in the basement influences just how worthwhile the investment is if you're looking to sell.
"This issue is, why are you adding the space? If it’s turning the basement into rec space, it might not be different from another room you already have. Maybe if it’s adding a home office or bedroom, then there’s more value in that," Theunissen points out. "One of the biggest trends we’re seeing is that people want dedicated office space. Using a corner of the kitchen or bedroom for an office isn’t good for anyone."
Fair warning: Adding a bathroom may sound like a good idea—Isn't the number of bedrooms and baths the first thing people want to know when they see a house listing?!—but if it requires running new plumbing, it'll jack up the remodeling price and lower your overall ROI.
The Living Room
Upgrading or expanding the living room—or knocking down interior walls to create an open floor plan—are common renovations. These projects create the open spaces that are popular in newly constructed homes.
"Entertaining in the home drives a demand for open space," Theunissen says. "If you have a nice house but have isolated spaces, it’s not terribly marketable."
The Deck
Remodeling magazine says new wood decks are one of the best projects for ROI at 72.1 percent. They also add value to a home for resale, according to NAR’s 2018 Remodeling Impact Report: Outdoor Features. That’s no surprise to Michael Beaudry, executive vice president for the North American Deck and Railing Association (NADRA).
"Outdoor living is booming right now, and you’re seeing people building larger decks, using low-maintenance materials, using hidden fastener systems so there are almost no screw or nail holes, and they’re getting 100 percent on that investment," Beaudry says. "If you spend $20,000 or $50,000 on a deck, you’re going to get it back. There’s no overstating the return you can expect.”
His advice for deck makeovers? "Before you resurface or dress up the deck, make sure you have a stable structure," he points out. "Putting new materials on a deck that’s 20 years old and doesn’t have a stable foundation is asking for trouble. Improving the structure is one of the most inexpensive improvements, and then you can spend your money on materials, lighting, stairs, and other improvements." He says whether homeowners build a new deck or repair and upgrade an existing one, they can expect to see a nearly dollar-for-dollar return.
The Front Yard
Fact: First impressions matter, even when it comes to houses. Projects that spruce up your exterior can really run the gamut in pricing. Common upgrades include landscaping, lawn care, replacing the garage door or front door, and cutting back shrubs—and those enhancements are worth it. Roughly 94 percent of Realtors encourage sellers to improve their curb people before listing their home. NAR says projects such as landscape maintenance, which includes pruning shrubs and planting 60 perennials or annuals, costs $3,000 — and homeowners recover every penny when they sell.
Remodeling magazine’s report says manufactured stone veneer returns 95.5 percent the job cost, while a garage door replacement pays back 94.5 percent of the cost. "Beautifying the outdoor space is going to do more for your home than almost any other project," Beaudry says. "This is what people look at when buying a home. They want attractive outdoor space. They might want to personalize their kitchen or bath, but nice-looking outdoor living space is something everyone can agree on."
Curb appeal pays off: You’ll make back 94.5% of the cost of a new garage door.
The Pool
A new pool is the most desired outdoor project for homeowners, according to NAR’s report, with 92 percent of consumers saying they want one. “If you’re spending money outside, you’re going to get a nice return on it,” Beaudry says. “People don’t see the nice kitchens and baths inside the house when they drive by. What they see is the nice deck leading to the pool or outdoor fireplace. Outdoor space is a big category, and that includes the pool.”
While most outdoor projects have a high ROI, and people say they want pools, the ROI throws cold water on the investment. Before diving in, know that ROI is only 43 percent, according to NAR, with homeowners getting back $25,000 on a $57,500 pool.
The Roof
As much as one-third of your home’s exterior is roofing. That means it not only has to keep out the rain, it also has to look good. Boring, 3-tab shingles aren’t going to wow anyone. There are now more colors and styles available than ever. Nearly half, 45 percent, of realtors have suggested that homeowners add a new roof before selling, according to NAR’s 2019 Remodeling Impact Report. Many realtors have said the project helped them close a deal. A new roof is a rare project that actually makes you money. It costs $7,500 with an ROI of $8,000.
"It’s one of those peace-of-mind improvements you can add to the house," Theunissen says. "People are afraid to buy a house when the roof is older."
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