Is your house getting a little frayed around the edges? Does it feel like it’s shrinking as your family grows, or is cooking even one more meal in your outdated kitchen so depressing you’d rather just go out to dinner? Maybe more pressing matters need to be addressed, such as replacing a leaky roof or a warped garage door.
Home renovation projects not only help to transform your home into your castle; they can be smart financial moves as well. If you choose wisely, you may be able to earn a significant return on improvements by increasing the resale value of your home.
Whether a project ranks among the best-value home improvements depends on a number of factors, though. For starters, the popularity of different types of upgrades varies depending on geographic area. For example, installing an in-ground swimming pool might be more in demand in warmer climates than in regions that would be too cold for much of the year to swim.
Additionally, project desirability tends to follow trends that change significantly over time, according to Remodeling magazine's 2016 Cost vs. Value Report. This means the amount you recoup at resale depends not just on the type of renovation done, but also on the specific years involved.
While return on investment merits serious thought, it’s not the only factor to consider when planning a home renovation. Getting lasting enjoyment from your living space matters, too. A project that includes both best-value home improvements and those that bring you the most joy is a win-win endeavor.
Because improving your home can require a sizable investment, it pays to try to keep costs under control. Choosing affordable, locally sourced materials and, if you have the skills, doing some of the labor yourself can go a long way to hold down expenses. Then, if you still come up short, financing options become much more affordable. Whatever your needs, tastes and budget, here’s how to improve home value as well as ownership satisfaction without going broke.
Delicious Kitchen Upgrades
For many people, the kitchen is the heart of home. Just about everyone loves a sparkling, modern kitchen with stylish cabinetry, fixtures and countertops as well as the latest appliances. Sprucing up your kitchen can transform the most routine meals at home into a celebration, and even cleaning up afterward becomes less of a chore. If you take on a kitchen remodel project this year, you expect that if you decide to sell in the not-too-distant future, you’ll likely get back a decent chunk of your investment.
In the mid-price range, whether you spend about $60,000 for a major kitchen remodel that involves gutting and replacing just about everything, or opt for a minor renovation such as cabinet re-facing, countertop replacements and new flooring at about $20,000, you can expect to recoup about 64% of your costs at resale, according to Remodeling magazine's assessment. A luxury, upscale major kitchen renovation costing around $120,000 nets slightly less, with an average return of about 61%.
The latest trends in bathroom design strive to create a personal sanctuary and spa-like atmosphere with touches like vessel sinks, towel warmers, rain showerheads, steam saunas and body jets. When it comes to getting a return on bathroom home improvements, though, less seems to be more. A mid-price range bathroom remodel averaging just under $18,000 returns almost 66% of your investments at resale, according to Remodeling’s 2016 study. Splurging on an upscale bathroom remodel with all high-end fixtures instead will set you back almost $60,000, but you’ll see about 57% of that cost reflected in your home’s resale value.
If you need to add a completely new bathroom to your home, you’ll recoup slightly less. Whether you opt for a midrange bathroom addition for about $42,000 or a new, high-end bathroom costing just under $80,000, you can expect about a 56% return on investment. But if your family is fighting over a single bathroom every morning, the benefit of a bathroom addition is priceless in terms of life quality.
Giving your bedrooms a minor facelift is fairly inexpensive and can only help make your home more appealing to future prospective buyers. The caveat here, as with all home renovations, is to stick with neutral colors and textures that won’t clash with other decorating styles. This type of remodel might include new paint, carpet, bedding and wall art.
A more concrete way to get a return on home improvements is by adding a completely new master bedroom suite to your home. Keep in mind, though, that less is often more in terms of returns. Adding a new mid-range master bedroom suite from scratch should cost just a little less than $116,000 and return about 64% of your investment. If you spend about $245,000 on an upscale master suite addition, though, your return on investment falls to about 57% at resale.
Creating a pleasant atmosphere outdoors on your property means you and your family can enjoy nature right at home while barbecuing, eating under the stars or even just reading a book in the afternoon sunshine. When your house looks attractive and secure on the outside, it also improves curb appeal to boost resale price.
Some of the very best increased-value home improvements you can undertake involve exterior remodel projects, according to Remodeling’s calculations. For example, you may want to:
- Replace the bottom third of your home’s siding with manufactured stone veneer to recoup just under 93% of your $7,500 investment.
- Replace your siding altogether for a cost of about $14,000 and get about 77% of that back when you sell.
- Add a wooden deck for just under $10,500 and enjoy a 75% return.
- Install a mid-priced steel entry door for about $1,300 and recoup approximately 91% of your costs at resale.
- Replace your old roof at an average cost of just over $20,000 for a return of just under 72%.
- Spend less than $15,000 for upscale vinyl replacement windows (which also reduce utility costs) to receive about a 73% return at resale.
Great Garages and Attics
When finalizing your home improvement plan, don’t forget to include garage and attic renovations. Remodeling’s research indicates that adding proper insulation to your attic costs under $1,300 on average and should actually return almost 117% of your investment. Replacing your garage door with either a midrange or upscale model returns over 90% of costs and can vastly improve the curb appeal of your home.
Lovely Living Areas
Living areas like the parlor, family room, media room and dining room are classified this way for a reason: Most of us spend a lot of time living in these spaces. Because we spend so much time in these rooms, it’s fun to make them as inviting as possible. One way to beautify these spaces that’s also a sound investment is to install new wood flooring. This project returns an impressive 91% of the approximate $5,500 you’ll spend, according to the National Association of Realtors and National Association of the Remodeling Industry. Better yet, if you already have hardwood floors, consider investing about $2,500 to refinish them. You should be able to recoup 100% of your costs at resale.
Making Energy Efficiency Pay Off Big
Reliable, energy-efficient climate control helps homeowners feel comfortable in their living areas and buyers to feel confident about a house. For this reason, a complete HVAC replacement that runs about $7,000 should return as much as 71% of that cost at resale, according to the NAR/NARI calculations.
Another energy-saving project -- installing solar panels -- can both increase the value of your home and save you money month by month. The U.S. Department of Energy’s Lawrence Berkeley Laboratory found that home buyers consistently have been willing to pay more for homes with solar photovoltaic (PV) energy systems, to the tune of about $15,000 for a home with a typical system. The abundant sunshine in Texas, coupled with the high cost of electricity, makes it a natural place for solar: The Solar Action Alliance estimates that homeowners in the Austin area can save $200 to $1,000 a year simply by installing a solar system. The cost of installation, meanwhile, is reduced by incentives including a 30% federal tax credit and a rebate from Austin Power of $1,000 per kilowatt hour -- along with a property tax exemption for the increase in the value of your home.
When you’re ready to remodel but just don’t have enough cash to get started, there’s no need to put your dream renovations on hold. Financial institutions offer a range of financing plans, including home equity loans and personal home improvement loans and lines of credit.
Home Equity Loans allow you to put the money you’ve already paid on your home to work for you in making improvements. You put your house up as collateral to secure the loan, which lowers your credit union’s risk and results in your getting a low rate of interest.
The combination of solid planning and affordable financing is your ticket to the very best of both worlds: a home you and your family will love today and the satisfaction of knowing you’ve got a nice return on your investment coming in the future.
Roberta Pescow, NerdWallet
Produced exclusively for Amplify Credit Union by NerdWallet
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Considering some home improvements? Click here to read on about what home equity loans are and how they work. Or if you're thinking about some small-scale home improvements, check out our list of Tiny Home Improvements That Really Make a Difference, which are projects you can do in a weekend for a few hundred dollars on average.