Home Improvements That Pay Off

by Darwins Money on 28 July 2011 11 comments
Photo: eelke dekker

As a homeowner, I'm often mulling over various improvement projects. A key consideration for many people who want to spruce up their homes, but think they may be moving in the foreseeable future, is what the payback is on particular upgrades. For instance, if there's something that's going to make your home look nicer and add back most of the value you put into the job, why not do it? Conversely, if there's very little residual value from your project, perhaps it should go lower on the list. (See also: Five Tips to Sell Any Home Fast)

To help sort out the various options (and perhaps give you some new ideas), the most comprehensive resource I've seen is the Remodeling Magazine Cost vs. Value Report. The report compares the average cost for 35 popular updates and then estimates how much of that upfront cost those projects retain at resale. While the methodology to arrive at these calculations may be tough to validate in today's volatile housing market, I believe the estimates to at least be directionally correct and helpful in sorting options.

The Best-ROI Home Improvement Projects

The study lists the following as among the best projects from a return-on-investment standpoint.

Steel Entry Door Replacement

The study reveals that you can actually have a positive ROI on this one, with 102% recouped on a $1,200 door. While it may not sound like the sexiest home improvement project, first impressions are lasting, right? The front door is the first thing people see upon entering your house, and most builder-grade doors aren't as nice as newer models you can upgrade to now.

Wooden Deck

With an average installation price of $11,000, the study estimates that at resale, you can achieve a 73% payback. Not too shabby considering you'll get a lot of use out of a deck anyway.

Minor Kitchen Remodel

This is the one I always hear about (from my wife!). We actually ended up upgrading our kitchen and beat the $22,000 price tag by installing our own cabinets. This is another project that ranks high on the list with a 73% recoup ratio.

Windows and Siding

Replacing the windows or siding yields returns over 70% as well.

Poor-ROI Projects

Projects that didn't rank very high on the list and lost about half their value at resale included following additions and changes to the home:

  • Garage addition
  • Bathroom addition
  • Sunroom addition
  • Backup power generator
  • Roofing replacement

Since we're staying in our home for the long-term, we don't rank the recoup value as high as some people might, but it's always in the back of my mind. After all, even if we don't plan on moving, maybe I can use this list to help talk my wife out of the next big project she has in mind!

What has your experience been with home improvement upgrades? Do you feel these recoup rates are accurate?

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Andrea Karim's picture

I'm surprised that a bathroom addition wouldn't pay off, given that the price difference between homes with one bathroom and homes with more than one bathroom is significant; just going by what I see for homes listed on Redfin in my area.

Guest's picture
Debbie M

The data is probably based on houses that have more than one bathroom to start with. Most do nowadays.

If I were moving, I wouldn't make expensive home improvements. Since I'm not moving, I do what makes me happy, with only some attention given to making an update something that could be used in many ways rather than just one specific way.

Guest's picture
Andrew Clark

The description of the bathroom addition is misleading, as it actually says it is a master bathroom addition. This means that the tile, fixtures, trim, and tub and/or shower are nicer than a normal addition of a 3bd/1bh, or a 4bd/2bh. I imagine this addition would be along the 75% recoup' lines. Helpful but not necessarily beneficial.

Guest's picture
Pamela

It's always better to pay attention to local tastes than to an article by a national organization.

I can guarantee you that if I replaced my antique oak door with beveled glass with a steel door, potential buyers in my historic neighborhood would wonder what I was thinking.

Guest's picture
Kacie

I think it depends on how long you will have to recoup costs. We are buying a beautiful house and are paying less than the current owners did in 2009. And, they added a deck and replaced flooring.

Guest's picture
sokun

I think my room could do with a little refurbishing

Matt Bell's picture

I'm not sure this counts as "remodeling," but we've been putting in a lot of sweat equity on our landscaping this summer. It hasn't been very expensive to thin out some overgrown areas, add mulch, and generally clean up the landscaping, but it has made the curb appeal go up a lot!

Andrea Karim's picture

I think landscape improvements are one of the best investments, especially if you're not paying expensive contractors to do all the work! The only evidence that I have to back this up, though, is the fact that whenever I look at online home listings, I really love the ones with proper landscaping.

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Lisa

In this market, I'm not sure what is worth remodeling. With what we paid for the house plus home improvements ( new flooring at $1200, finished basement at $9500, new appliances at $1200, concrete deck at $800, landscaping at $2000), I'm not sure we can recoup any of it. Actually, we end up with - $15,000 (sale price - paid price). Maybe in a better market, you can recoup some of it . We recently had 2 realtors come in and tell us what our home could sell for. An appraiser came in as well. It was not good news at all. So we decided to stay another year.

Guest's picture
Rob O.

I've been itching to replace 5 very large 6' x 9' windows in our house for the energy efficiency boost. These are single-pane custom-built beasts that were part of the initial construction about 35 years ago.

But at nearly $10k for new double-pane, argon-filled, über-efficient replacements, I'm having a heckuva time convincing my wife that it's an improvement worth doing. I wish there was a way to project my energy savings to help quantify the value of this upgrade. With our routinely-triple-digit Summers here in Texas, I can't help but believe that these would pay off...

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Michelle

The kitchen remodel makes sense. When I was house hunting 2 years ago, the way the kitchen looked either made or break the house for me.