Well-executed home renovations and home remodels can enhance your satisfaction with your home as well as increase its resale value.
If you’re thinking of making home improvements, you might wonder what the return on your investment will be. While some home improvement projects garner a ROI of well over 100%, Remodeling magazine’s 36th annual Cost vs. Value report estimates indicate that the average ROI for popular renovating or remodeling projects is 60% or 60 cents on every dollar spent.
During the pandemic, when people were suddenly spending more time at home, popular home improvements with high ROIs upon resale were home offices and outdoor kitchens. Post-pandemic, homeowners are focusing on minor renovation projects that increase functionality of kitchens, baths, and other living spaces. Another focus is major remodeling projects such as room additions and Accessory Dwelling Units (ADUs) that increase square footage and functional space.
While the terms “Home Renovation” and “Home Remodeling” are often used interchangeably, there is a difference. Some examples follow.
What is a Home Renovation?
A home renovation updates the home, giving it a face-lift and making it more attractive and more functional for the occupants. The first priority in renovating a home should be to make repairs that will keep the existing structure sound. Repair projects include eliminating mold, musty odors, peeling paint, termite damage, poor drainage, and plumbing, roof and basement leaks.
In addition to repairs, common exterior and interior renovation and upgrade projects include the following:
- Replacing the entry door
- Replacing the garage door
- Painting the exterior
- Beautifying the landscaping
- Adding a garden irrigation system
- Adding low voltage pathway lighting
- Removing “popcorn” ceilings
- Painting the interior
- Repairing or replacing old window sills
- Replacing outdated light fixtures
- Renovating out-of-date bathrooms
- Renovating closets
- Refinishing kitchen cabinets
- Replacing cabinet hardware
- Replacing kitchen countertops and appliances
- Adding a water filtration system
- Upgrading insulation
- Refinishing wood floors
- Replacing carpet with hardwood
Some of the renovation projects listed above can be done by the ambitious homeowner and do not require a city permit or an HOA permit. More complicated projects often require both city and HOA permits and are best handled by an experienced, licensed general contractor or remodeling contractor, especially if a warranty is involved or inspections are required.
Exterior Renovation Projects with High ROIs
According to the 2023 Cost vs Value Report, exterior renovation projects with the highest ROI are those that increase “curb appeal.” In addition to grooming the hedge, pruning trees, and planting flowering perennials or drought-tolerant succulents that complement the style and color of your home, exterior renovation projects with a large ROI include:
- Replacing the entry door with a steel door – 100.9%
- Replacing the garage door – 102.7%
- Replacing the siding with vinyl (94.7%), fiber-cement (88.5%), or manufactured stone veneer (102.3%)
- Replacing windows – vinyl 68.5%, wood (61.2%)
Interior Renovation Projects with High ROIs
Interior renovation projects with a high ROI are those that create a favorable impression when people enter the home. According to the 2022 Remodeling Impact Report National Association of REALTORS® Research Group, interior renovation projects had the following ROIs:
- Refinishing hardwood floors – 147%
- Installing new wood flooring – 118%
- Upgrading insulation – 100%
- Upgrading a bathroom with new countertops, vanity, and fixtures in styles and colors with wide appeal – about 60%
What is Home Remodeling?
Home remodeling is more extensive than home renovation. A remodel often includes modifying the layout and upgrading the functionality. A remodel can significantly change the form, the feeling, and the use of the home. If done well, a home remodel can significantly increase your satisfaction in and the resale value of your home.
Remodeling takes longer and costs more than renovating and generally requires obtaining local building permits, hiring licensed professionals – such as architects, interior designers and remodeling contractors or building contractors.
Remodeling projects include:
- Installing a heating, ventilation, and air conditioning (HVAC) system
- Redesigning the layout of the home
- Removing walls and merging rooms
- Creating an open concept kitchen connected to a family room
- Creating kitchens with an island, a walk-in pantry, expanded prep space, and plenty of storage space
- Converting unused space into functional space
- Raising ceilings
- Enlarging bathrooms
- Adding a bedroom, bathroom, sunroom, or walk-in closet
- Converting a bedroom or other room into a home office
- Converting an attic to a living area
- Finishing an unfinished basement
- Creating a grand entryway
- Adding a deck or patio
- Redesigning the roof
- Adding a second story
- Modifying the home for aging in place or for intergenerational living
- Adding an ADU
Home Remodeling Projects with High ROIs
HVAC Conversions, kitchen remodels and bathroom remodels or additions are among the best investments you can make in your home. Other remodeling projects with high ROIs include refinishing an unfinished basement, adding a deck, creating a grand entryway, and building an accessory dwelling unit (ADU).
HVAC Conversion / Electrification – While the initial investment might exceed $17,000 for a 2,000-square-foot home, having an electric energy-efficient heating and cooling system can increase your home’s value by 10 to 20 percent and yield an ROI of 103.5%. With unpredictable changes in climate and the California effort to require replacement of gas appliances with electric, an HVAC conversion is a timely investment.
Kitchen Remodel – A kitchen remodel that expands countertops, adds functional storage space, and incorporates high-quality fixtures, appliances, and countertops that blend with the size of the home and are in line with local standards yields an ROI of 79% to 110%. Popular additions in larger kitchens are islands and walk-in pantries (some with room for a small office inside).
Bathroom Addition or Remodel – A bathroom addition can yield an ROI of 86% to 100% and remodeling small, cramped bathrooms into more luxurious spaces can yield a return of 66.7%. Adding more square footage or creating the illusion of more space by reconfiguring the floor plan, strategically placing mirrors, and adding efficient storage solutions are great ways to improve a small bathroom.
Basement Refinish – With the recent heavy rains in the Bay Area, many basements that stayed dry during the years of drought suddenly sprang leaks. Now is a good time to hire a pro to shore up your basement by repairing leaks, eliminating any mold and sources of excess moisture, and adding drywall, insulation, flooring, and perhaps a bar, sink and bathroom in a style and materials that blend with the rest of your home. A basement remodel yields an ROI of 50% to 100%.
Wooden Deck Addition – A deck addition creates a seamless transition between the interior and exterior of your home and expands your space for relaxation and entertainment. Decks constructed of natural wood rather than composite and that are maintained in good condition recoup 62% – 72% of costs at resale.
Accessory Dwelling Unit (ADU) – An ADU provides multi-generational living or a source of rental income. Even if you don’t plan to use an ADU as housing you can use the space as a home office suite, an exercise room, or a room dedicated to hobbies and crafts. According to a study by the National Association of Realtors, an ADU can add up to 35% to the value of a home.
Room Additions – The addition of attic bedrooms, family rooms and sunrooms returns anywhere from 70% to 80% of the money spent. Every 1,000 square feet added to a home boosts the sale price by more than 30 percent, according to the National Association of Realtors. Don’t add on so much that you price your house right out of the neighborhood. “You don’t want to be the leading value for the neighborhood,” warns realtor Phipps. “Although you can be at the upper end.”
While there is no guarantee that renovating or remodeling will bring a high monetary return on your investment when you decide to sell, improving the functionality, look and space of your home can greatly enhance your enjoyment.
Working with an experienced remodeling contractor or building contractor such as Bay Area Design & Construction can make your dreams come true.
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