If you’re like most homeowners, you’ve either thought about or already made some home improvements. For some, this was part of the plan all along. They bought a house that was in need of some improvements so they were able to purchase at a bit of a discount and then put money into the upgrades they wanted. For others, the idea of home improvements came up as a way to increase the value of their home upon resale.
Whatever your desire for home improvements, there is a common misconception that you’ll get most or all of your investment back when it comes time to sell. Unfortunately, this is rarely the case and you’re more likely to get only some of that money back at resale. That being said, there are still some home improvements that retain value better than others so if you prioritize your projects you can get the most for your money.
Payback Values Vary
Upgrading your kitchen in your neighborhood may yield a completely different return compared to a similar upgrade across town. In addition, certain parts of the country may value some upgrades more than others, so there’s no single rule of thumb that applies equally across all properties. And don’t forget about the underlying real estate market. In a weak market you’ll often get less of a return on your improvements than in a hot market, but at the same time there may be cases where some improvements in a weak market make your property look better than similar houses in the same area.
The Best and the Worst
One of the most popular home improvements is finishing a basement. These are often turned into recreation rooms, home theaters, or simply provide added living space. But, did you know that finishing a basement is often one of the lowest returning home improvements? In many cases, you’ll only receive about 50% of what you put into the cost of the project when it comes time to sell. If you’re thinking about finishing your basement, do it because you want the added space and amenities. Don’t do it expecting to boost the value of your home.
On the other hand, two of the best improvements you can make to your home come from remodeling kitchens and baths. It makes sense because these rooms see the most activity. High quality appliances, spacious bathrooms, and quality construction will go a long way in helping attract buyers. In many cases you can expect to receive about 75-90% of the cost of updating one of these rooms.
A list of good home improvements to make:
- Adding or remodeling a bathroom
- Kitchen improvements
- Adding a room
- Adding a bedroom
- Adding a garage
Update Your Home for the Right Reasons
The bottom line is that you should go into any home improvement project with the mindset that you’re doing this for your own enjoyment, and not as a way to make money. So often people dump a lot of money into a major renovation and then price their home so that they recover all of the costs only to find their home sits on the market for months without any buyers. It is reasonable to expect that improvements do increase the value of your home, but make sure you’re realistic with your expectations.
It’s also worth noting that you don’t want to price your home out of the neighborhood. Having the most expensive home on the block can make it difficult to sell when the time comes as buyers compare your home’s price with the value of neighboring homes. You want your home to stand out and be attractive, but you can go too far and actually make too many improvements. So, choose your upgrades wisely or it could cost you in the long run.