Home Renovations with the Best Return on Investment (2024)

It’s the fundamental question facing anyone who has ever embarked on a home renovation: How likely am I to get the money back when I sell my house? There’s no easy answer, because what a buyer might be willing to pay depends on many factors — everything from the choice of project to the materials you use to the value of other homes in your neighborhood.

But it’s important to have some idea of what your improvements might be worth. If you want to invest more than you can hope to recoup because you love your house and plan to live in it for a long while, that’s fine. But consider the following guidelines and you’ll avoid unpleasant surprises when it comes time to put up that For Sale sign on the lawn.

What Home Improvements Give the Best Return?

Not all remodeling projects are created equal. Kitchens, baths, family rooms or master suite add-ons will have the biggest return on investment.

Here’s a breakdown of the average ROI one year later after some common home improvement projects:

Home Improvement Return on Investment

ProjectAverage CostAverage Resale Value One Year Later% Return
Minor kitchen remodel$14,773$13,039.0087%
Two-story addition$67,743$56,770.0083%
Bathroom addition$14,216$11,704.0081%
Major kitchen remodel$38,769$31,344.0080%
Family-room addition$46,738$37,217.0078%
Deck$5,865$4,498.0075%
Master suite$63,275$47,699.0074%
Attic bedroom$31,366$23,232.0073%
Home office$10,526$5,723.0054%
ProjectAverage CostAverage Resale Value One Year Later% Return

Spending More, Doesn’t Always Mean Higher Return

“People buying a house look first at kitchens and baths,” says Kermit Baker, director of the remodeling futures program at the Joint Center for Housing Studies at Harvard University. So while these rooms can be the most costly to redo, they’re more likely to pay for themselves. Adding rooms, such as a family room or master suite, also tends to fare well at resale time: Bigger homes command higher prices.

At the other end of the spectrum, swimming pools hardly ever return their cost, because a lot of buyers aren’t willing to shell out more for a house just to acquire what they consider a maintenance bother. Home offices tend to be low-return for the same reason: Only a handful of buyers will want a room designed for working. (Think of it this way: How high a premium would you be willing to pay for a convertible if you were never going to put the top down?)

Kitchen Remodel ROI

And just because a project is expensive doesn’t mean it will pay back more. Often, minor improvements can yield major dividends. According to Remodeling magazine’s annual analysis of cost versus value, a kitchen “face-lift” — painting, refinishing surfaces, and upgrading appliances — will return more than a full redesign.

The key to spending less is spending it wisely. “If you take $20,000 and spend it judiciously on a kitchen, you can make it look a million times better,” says Remodeling senior editor Jim Cory, who supervises the survey. “The design and product selection are key.”

Is Remodeling A Good Investment?

Even when your remodeling job is an appealing improvement for most buyers, it adds little value if done to just your taste. “You might want a room in your house in the shape of a cat or a mouse, but can you find a buyer who wants it?” says Gopal Ahluwalia, director of research at the National Association of Home Builders. “You have to think in the back of your mind that you’re going to have to sell someday.”

If you’re living in a Craftsman gem and want to tack on a family-room addition, for instance, keep the design in harmony with the original look and feel. That goes for the height of the ceilings as well as the style of the windows and moldings. “You don’t want to lose the integrity of the house,” says Bobbi Chasin, a real estate agent in Evanston, Illinois. “Putting a big box on the back of the house will spoil the entire appearance.”

The same holds true for smaller projects, too. For example, when choosing kitchen cabinets, countertops, and flooring, aim for classic or neutral colors and styles. “Years ago, I had a client who wanted a purple kitchen, to match the purple grout on her fireplace,” says Mark Scott, a remodeler in Bethesda, Maryland. Scott argued strenuously against it, but the homeowner insisted that she was planning to stay in the house for the rest of her life. If you can’t make that kind of commitment, don’t expect somebody else to pay for your unique and funky choices.

5 Factors That Impact Resale Value and ROI

1. Neighborhood

Before Kevin and Julianne Warren spent $42,000 to remodel the kitchen in their nicely detailed 1950s ranch house, the home was probably worth about $150,000. But their location, the Forest Hills section of Grand Rapids, Michigan, gave them confidence that the improvements were a smart bet. “This is a high-end neighborhood for schools. Everyone tries to get into this area,” Kevin says.

Even better, the Warrens’ home is surrounded by properties worth $200,000 or so. That means they haven’t priced themselves out of the local market, a very important consideration with any remodeling project. “Are you going to do work that makes your house worth $300,000 when it’s sitting in a $100,000 neighborhood?” asks Israel Ramos, a real estate agent in Phoenix, Arizona.

“Don’t exceed the ceiling for the neighborhood, or you won’t get your money back.” Just as your home’s cost should be in line with your neighborhood, your improvements should be in line with the value of your home. In Seattle, real estate agent Kay Rigley recently discovered that a former client spent $90,000 on remodeling two bathrooms, complete with heated floors and Italian tile. “I said, ‘I wish you had talked to me first,'” she says. Between what they paid for the property and other improvements, the owners spent more than half a million dollars on a home that Rigley estimates is worth $450,000 at most.

2. Region

What part of the country you live in affects several remodeling decisions. Labor tends to be cheaper in the South than the Northeast, for example — enough so that Remodeling’s annual survey prices the same master bedroom suite at $59,401 in Louisville, Kentucky, and $73,814 in Westchester, New York.

Local factors also influence demand. Buyers everywhere will probably like a new, well-appointed family room. But fireplaces sell better in the North than in the South, and decks add more value in warmer climes. There are no hard-and-fast rules, but keeping an eye on local trends is a good way to ensure that your choices will appeal to house-hunters.

3. Market

Where regional differences really come into play is in the real estate market. If housing is in great demand, buyers are likely to be willing to pay more for your improvements. Bethesda builder Scott says he billed $300,000 recently for an expanded kitchen, breakfast room, and study — the most expensive renovation per square foot he’s ever done. But the couple got the money back when they bought an even bigger house last year. “Around the Washington, D.C., area, it’s way different than Missouri,” Scott observes. “People are paid an awful lot of money to be here.”

Be careful, however. Even in a strong market, you can over-renovate. Brett Weinstein, a real estate broker in Oakland, California, has lived through the Bay Area housing boom. While prices remain high, he says, “if someone paid $200,000 over the asking price last year, they bought when the market was red hot. So if they want to spend $60,000 for a kitchen remodeling, they’re going to have to live there a little longer to see that money back.”

4. Timeline

As Weinstein points out, the longer you stay in your house, the more likely you are to recoup your costs. With home prices rising about 5 percent a year, your outlay will eventually be absorbed into the increase in the property’s value. (Plus, you’ll be able to enjoy your renovations for those years.) A few caveats: There is no natural law that says prices must go up, so don’t depend too heavily on that annual bump. And remember that sometimes life can throw a curve, and you might have to put your house on the market sooner than expected.

For some projects, time also works against you. “There’s stylistic depreciation,” says Harvard’s Baker. “All the fads now are for knocking down walls and making big rooms. But ten years from now, that might not necessarily be the case.” Kitchens and bathrooms are especially prone to looking dated, as anyone who has blanched at discovering avocado-green appliances in their dream house can tell you.

5. Hidden Expenses and Issues

If you think a project will pay for itself, but just barely, be prepared for something to tip the balance against you. Home renovation is rife with “hidden” expenses: the extra costs when a project takes longer than planned; the experts’ fees for asbestos testing or heat-loss calculations; the monthly interest payments for a home-equity loan. Not to mention the higher property taxes you may have to pay when your new-and-improved home is reassessed.

When all is said and done, most experts counsel against home improvement as an investment. Be smart about what you spend, sure. But a new deck isn’t a mutual fund. Real estate agent Chasin suggests that once you’ve done your homework, make your decisions based on what you want and what you can afford. “I had a listing where the husband had taken an early retirement, so his wife convinced him to put in a very expensive home office for $50,000. Ultimately they moved to Florida, and they didn’t get the money out of that home office,” Chasin says. “But she didn’t care. It made him happy.”

Payback by the Project

Since the mid-1980s, Remodeling magazine has done an annual analysis of cost versus value for residential remodeling projects around the country. By polling real estate agents and appraisers in various regions, the editors determine about how much projects cost to complete and how much those improvements might add to a house’s selling price one year later. The report is widely considered the most authoritative study of the subject. But even Jim Cory, the editor in charge of the survey, admits it only goes so far. “We provide a benchmark with our study,” he says. “Cases have to be decided on an individual basis.”

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Home Renovations with the Best Return on Investment (2024)

FAQs

Home Renovations with the Best Return on Investment? ›

Remodeling can boost the return on investment (ROI) of a house. Electric HVAC conversions, garage door replacements, manufactured stone veneers, steel entry door replacements tend to generate the highest ROIs.

What renovations have the highest ROI? ›

Home renovation projects with the best returns on investment in the U.S.
  • HVAC electrificationChange traditional furnace to electrified heat pump. ...
  • Garage door replacement. ...
  • Replace house siding with stone veneer. ...
  • Entry door replacementWith a steel door. ...
  • Vinyl siding replacement. ...
  • Fiber-cement siding replacement.
Mar 27, 2023

What renovations add the most value to a home? ›

Best home improvement projects for return on investment
  • Converting a basem*nt to a living area: 86%
  • Closet renovation: 83%
  • Converting an attic to living area: 75%
  • Complete kitchen renovation: 75%
  • Bathroom renovation: 71%
  • Kitchen upgrade: 67%
  • New bathroom addition: 63%
  • New primary bedroom addition: 56%
Apr 7, 2022

What is the 30% rule in home renovation? ›

Home renovation is a huge undertaking, and almost invariably takes more time and costs more money than homeowners expect. Rasekh says it's a good idea to set 20 to 30 percent of the total cost of your project aside for the unexpected — that's up to 30 percent on top of the project's original cost estimate.

What room has the highest ROI? ›

Focus on the Kitchen

If your kitchen has good bones, work with what you already have and add a few upgrades. “Updated kitchens and bathrooms provide the highest ROI when considering home projects.

What is the most in demand home improvement? ›

Kitchen Remodels – 43% of homeowners remodeled their kitchen, with the average cost being $25,544 or $150 per square foot, according to HomeAdvisor. Living Rooms – 38% of homeowners made improvements to their living rooms, including refurnishing their living space.

What can you remodel with 100k? ›

Location plays a significant role, as does the choice of materials. You can your $100k budget towards a kitchen remodel, bathroom renovations, bedroom makeovers, or exterior upgrades. To maximize your return on investment, prioritize projects that add value to your home.

What does not add value to a home? ›

Extensive landscaping, solar panels, and luxury touches like heated floors are among the items that won't increase your home's resale value much. If you're hoping to increase home value, highly customized upgrades or improvements that do not have universal appeal probably won't help.

What parts of the house add most value? ›

8 Home Improvements That Add the Most Value
  • Redo your kitchen.
  • Refinish or install hardwood flooring.
  • Upgrade your insulation.
  • Convert a basem*nt or attic to a living area.
  • Buy new siding.
  • Get new roofing.
  • Replace your garage door.
  • Install new vinyl or wood windows.
Nov 6, 2022

Will renovation costs go down in 2024? ›

Home renovation spending is expected to decrease from $481 billion in 2023 to $450 billion in 2024.

What I wish I knew before I renovated? ›

I wish I'd known that every task takes twice as long as you think, especially when you're self-renovating. I found that most of the time is spent on moving things out of the way, prepping the area and tidying, rather than on the task itself.

Is 50k enough to renovate a house? ›

A more realistic budget would be around $50,000 – this allows you to do more than make changes in only one space. For under $50,000, you can make several renovations to a home and increase its value significantly, especially if you know how to cut costs without compromising on quality.

What are the 5 stages of home renovation? ›

Whether it's a full home addition or remodeling a room in your home, there are five distinct stages you can expect to go through: planning, budgeting, demolition, construction and cleanup.

What property makes the most money? ›

Commercial properties are considered one of the best types of real estate investments because of their potential for higher cash flow. If you decide to invest in a commercial property, you could enjoy these attractive benefits: Higher-income potential.

How to increase home value by $50,000? ›

Home improvements that improve value can include:
  1. Landscape Layout. Landscaping should be welcoming, well-kept, and easy to maintain. ...
  2. Front Door Updates. A fresh coat of paint or modern door style elevates the entryway.
  3. Outdoor Lighting. ...
  4. Driveways and Walkways. ...
  5. Replace the Garage Doors.
Jan 9, 2024

What gives the highest ROI? ›

Key Takeaways. The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices.

What is the average ROI for renovations? ›

On average, home renovations provide a 70% ROI. Home renovations are one of the only investments that can improve the quality of life in your living space and increase the value of your home for the future.

Which bathroom upgrades have the highest ROI? ›

Bathroom additions, walk-in showers, bathtub refinishing, luxury vanities and countertops, flooring, and cabinets are the best bathroom updates for your ROI. Making strategic choices about repairs, budgeting, and neutral designs can further increase your return.

What type of real estate investment has the highest ROI? ›

The Best Real Estate Investments to Consider for the Highest Returns
  1. Apartment Buildings. Apartment buildings are the most popular type of real estate investment. ...
  2. Tiny Homes. ...
  3. Vacation Rentals. ...
  4. Retail Stores. ...
  5. Self-Storage Units.
Jun 1, 2023

Is 100k enough for a renovation? ›

A $100,000 renovation budget can go a long way in transforming your living space and enhancing your home's functionality and value. By partnering with Multigroup Contracting, you can make the most of your budget and create a beautiful, custom home that meets your needs and exceeds your expectations.

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