Renovating your home can add value and bring personal joy. Before listing it on the market, a renovation can increase its curb appeal. Annually, $400 billion is spent on remodeling. However, most homeowners don't understand cost recovery from those projects. If you put X amount in remodeling, that does NOT mean that cost recovery will equal to same amount at sale. For example, according to the National Association of Realtors (NAR), a kitchen remodel of $68,000 will recover $40,000 of that sale. In other words, 59% of of value is recovered from the sale. The NAR also estimates that only 50% of value is recovered in a sale when adding a new bathroom. So what's the point of remodeling a home if the return on investment (ROI) can be low?
Homes may require replacement or remodeling for certain home features. Reasons for kitchen remodel - upgrade worn-out surfaces, finishes and materials (41%), and reasons for bathroom upgrades - to add features and improve livability (62%). A potential home buyer looks at the aesthetic and functional features of a home to decide its value. Buyers envision the sellers home as theirs. Home buying is very emotional. 35% of homeowners would rather go into a move-in ready remodeled home than perform the work themselves. Remodeling while possibly getting a lower ROI increases exposure to potential buyers. Finally, remodeling increases the desirability of the current homeowner not looking to sell. Kitchen and closet renovations, along with full interior paint jobs bring the most joy when remodeling a home. Again, desirability is the key.
So, which projects bring the greatest return on investment when selling? The National Association of the Remodeling Industry (NARI) provides the average national pricing written in this report. In my professional experience, national pricing varies. Here in the Midwest, input costs are higher than other parts of the country. My point of this article is to not explain the reasoning, but just to point this out with the following national averages by NARI. Hardwood floor replacement jobs on average cost $4,700 (in my professional experience, this is for fewer than 600 square feet). Hardwood flooring refinishing is $2,600 (in my professional experience, this is for fewer than 1500 square feet). Roof replacement is at $7,500.
Hardwood flooring and roofing projects on average bring a more than 100% ROI. New roofing brings in 107%, new hardwood floors 106% and hardwood flooring refinishing 100% percent of value recovered.
So based on these NARI numbers, would you consider these remodeling jobs for your home? Would you take on these projects to bring more personal joy or add functional and financial value to your home? Use this information to look at the top 3 value added projects for your return on investment. If you value your personal joy in the result of a project, you might take on the highest added joy renovations: kitchen remodel, closet renovation or full interior paint job. If you would like a quote on a home project, visit our list of vendors on the website.
- 2019 Remodeling Impact Report, National Association of REALTORS Research Group.