Anyone who has undertaken home renovation projects inevitably ask the question: How much return on investment (ROI) can I expect on the outlay?” When it comes to renovations, some home improvements make good investments others will cut into your your equity when its time to resale.
For home owners, a variety of factors have a bearing on your decision, such as the value of homes in the neighborhood; the quality of materials used in the project; how long you intend to live in the home and the size of your budget.
Ultimately, the ROI depends on what buyers expect and what they are willing to pay at the time you put your home on the market. To help you make a decision on where to invest your renovation dollars, here are four home renovation projects that return the most on the initial investment at resale.
1. Attic bedroom
An attic renovation project consists of converting unfinished attic space into a finished bedroom and bath. The brand new living space will typically include a new shed dormer, windows and closet space. The project adds precious square footage to your home. Remodeling Magazine and the National Association of Realtors Remodeling Cost vs. Value Report estimate a return of about 73 percent on your investment.
2. Update bathroom
When buyers look for a home, the bathroom runs neck and neck with the kitchen as the most important rooms. Outdated bathrooms require a major overhaul and are a turnoff to potential buyers. Today, home buyers want a master bathroom with double sinks, custom showers and excellent lighting. . A three-bedroom home should have a minimum of two-full baths.
Often, you can update a bathroom with fresh paint, installation of a new toilet and new shower fixtures if the rest of the space—walls, floor and tub, are in good condition. When possible, consider expanding the square footage of the bathroom. Choose neutral tones and colors and finishes to appeal to the tastes of most people. Making an investment in a bathroom renovation returns 62 percent on the dollar.
3. Kitchen remodeling
A kitchen makes cooking, dining and entertaining easier. Like the bathroom, you can expect to get a substantial return of around 85 percent. You can do a complete overhaul, including new walls, flooring, cabinets, countertops appliance light fixtures and more or a simple facelift. If you do not have the budget to gut the space and make everything new, you can replace cabinet fronts, add new hardware, install new appliances and fixture.
4. Replacement vinyl siding
The best way to clean up the exterior of a home and improve its curb appeal is to install new vinyl siding. Replacing about 1,250 square feet of siding and trim can cost about $9,000. When you are ready to sale, you can expect an estimated 89 percent return on investment. In neighborhoods that required a more upscale material, wood siding or fiber cement makes a better choice and offers an even higher ROI.
The quality of material you select for your renovation project must make financial sense. For example, you can spend $2,300 for a high-end fiberglass door to improve the appeal of the front entrance and receive an ROI of 56.3 percent. In contrast, a steel door cost about $1,200 and yields a 73 percent ROI at resale.
Remember, these numbers vary significantly depending on the state, city or neighborhood. Use the figures to provide a point of reference to consider along with information gathered from a local contractor, real estate broker and other sources before you make a final decision on home renovation projects.