Renovating your home is a great way to bring new life to your living space and personalize the design in a way that works best for you.
However, if you’re planning to put your house on the market soon, your renovation strategy should consider projects that can provide a solid return on investment (ROI) and attract more potential buyers.
This means you’ll want to shift your focus from strictly personal preferences to aligning your renovations with current market demands.
Understanding Home Renovation ROI
Before starting a home renovation, it’s important to understand how it might impact your home’s value. While some upgrades can significantly increase your home’s attractiveness to buyers, other types of renovation work may not provide a good return on your investment.
Calculating the potential increase in your home’s value after the renovation, compared to the project’s cost, can help you determine your overall ROI. This can help you prioritize projects that bring you the best bang for your buck.
What are Some of the Things That Impact Home Improvement ROI
Renovations can be the perfect way to give you a significant bump in your property value, but it’s not a guaranteed success. Several factors influence how much of your investment you’ll recoup when you sell. Here are a few key things to consider:
Where Your Property is Located
Real estate markets are dynamic, and local trends heavily influence a property’s worth. For example, high-end kitchen renovations in some neighborhoods may not add as much value as they do in others.
By comparing your home to others nearby, you can gain insights into current market preferences and expectations.
Overall Spending
To get a good return on your home renovation, you need a solid budget in place. Your listing price will heavily influence how much you can spend on upgrades without dipping into your potential profit.
Overspending on renovations compared to your expected sale price could mean losing money, regardless of the improvements you make on the property.
Work Quality
The value your home gains after a finished renovation is directly related to the quality of the work performed. A do-it-yourself approach to renovation often results in a lower return on investment compared to hiring a skilled professional contractor to handle the project.
Types of Renovations That Often Bring Higher ROI
If you’re looking to add to your home’s value without breaking the bank, here are a few smart renovation projects that typically offer a strong return on investment:
Upgraded Kitchens
The kitchen is often considered a critical part of every home. Its functionality and appearance can significantly impact how it’s perceived by potential buyers. While complete kitchen renovations can be quite costly, there are less expensive ways to update this space.
For example, considering a kitchen “refresh” instead of a full remodeling project can allow for modernizing the space without putting too many resources into it. This could involve refacing cabinets, replacing countertops with modern materials, or upgrading to energy-efficient appliances. These smaller but impactful updates can make a big difference in your kitchen’s overall look and feel while also helping to improve its functionality.
Bathroom Remodels
A stylish and modern bathroom can greatly increase the appeal of a home. Older properties often have outdated designs or use older fixtures that can lead to fewer potential buyers. With a modest investment in bathroom renovations, you can dramatically increase your home’s value and attract more interest when selling.
External Improvements
Making a strong first impression is huge in real estate. If your home’s exterior looks dated or unkempt, it can quickly give potential buyers the wrong message about what the inside of the property looks like.
Think about putting certain resources into making some improvements outside of your to improve the property’s curb appeal. Depending on yard space, this could involve doing some landscaping, incorporating flower beds or potted plants, introducing a separate walkway, installing a gazebo, or redesigning your front porch.
Eco-Friendly Upgrades
Many of today’s home buyers are looking for properties that are environmentally friendly and help them save money. They want a home that is practical and sustainable, and energy-efficient properties are a great way to achieve this.
Take a walk through your house and look for potential upgrades that are good for the environment. This could include installing new lighting, solar panels, or modern HVAC systems with more energy-efficient features.
Renovations You May Want to Think Twice About
While certain upgrades can definitely improve your home’s appeal, others might not give you the return on investment you’re hoping for. Here are a few renovations you might want to reconsider if your main goal is to sell soon:
Putting in a New Addition
Increasing your living space might seem like a surefire way to get more interest in your home, such as when putting in a new addition or taking down walls to create open environments. However, additions often come with a large price tag and may not bring the return on investment you’re hoping for, particularly if you opt for high-end finishes and features.
Luxury Materials and Decorations
While updating specific rooms can significantly increase your home’s value, it’s important to be mindful of overspending on certain features. Investing in top-of-the-line materials, luxury fixtures, appliances, or finishes often offers a small return compared to their mid-range counterparts. If a potential buyer wants these types of features, chances are they have very specific tastes, and they’ll want to manage their own projects anyway.
New Pool
While an inground pool might seem like a fantastic addition to your dream home, they’re not for everyone. Pools are inherently expensive to install and come with needed maintenance and repairs, fencing for safety, and take up valuable backyard space. Potential buyers who aren’t keen on having a pool face the dilemma of either bearing the ongoing upkeep costs or undertaking the expensive removal process.
Get the Right Returns on Your Investments
When considering different home upgrades, consulting with a realtor or certified contractor is often the smartest move. They can provide you with professional insights into which improvements offer a good return on investment while giving you the necessary perspective you need to get the most out of your next renovation project.
About the Author
Michael Alladawi, CEO & Founder of Revive Real Estate, is a Southern California real estate veteran with a proven track record as a builder, investor, and respected home flipper. Michael created Revive Real Estate to share his industry knowledge and help homeowners maximize their profits when selling their homes. Michael’s passion for his work is as big as his desire to create lasting partnerships. For Michael, it all comes down to how much value one offers, both in business and life relationships.
