Home improvement is a way of life for many homeowners. It might be a new bathroom, a kitchen update or an energy-efficient roof. Or, it could be as simple as painting the house or fixing a leaky faucet. Whatever the project, many homeowners are interested in recouping the costs of a renovation by boosting their home’s resale value.
Some projects offer excellent return on investment when it comes time to sell a home, according to the American Housing Survey (AHS). Others, however, don’t. The reason for the difference in ROI between different types of home improvement projects can be a matter of taste or style, local real estate market conditions and more. But, even a minor home improvement project can have a major impact on resale value if the right decisions are made during the planning stage.
To maximize the chances that a renovation will pay off, it’s best to choose the most cost-effective improvements that will produce an immediate return when it’s time to put a home on the market. This includes focusing on updates that can be performed quickly and inexpensively, like refreshing shower areas or laying new tile. It’s also best to avoid expensive enhancements with a purely personal appeal, such as that water feature and koi pond you’ve always wanted. These types of features are unlikely to appeal to prospective buyers, and may actually cause a potential sale to fall through.
When choosing a contractor for a major home improvement, it’s important to establish a payment schedule and specify as much of the work that will be done as possible, including specific brands or types of materials to be used. It’s also a good idea to withhold final payment until the work is complete and all inspections, certificates of occupancy and other requirements have been satisfied. Lastly, homeowners should be wary of the temptation to take on too many improvements that will be out of sync with the local market and property values.
A good rule of thumb is to compare your plans to the average cost and ROI of similar improvements in your neighborhood. Adding a home theater or a custom wine cellar, for example, may not be worth the extra expense since these amenities are not in high demand in many neighborhoods and will likely detract from the resale value of the home.
If you have a specific renovation in mind, it’s a good idea to invite a designer over for an hour or so to see what the project will look like once it’s completed. Most designers charge less than $100 for an hour’s consultation and can save you money by avoiding costly design mistakes.
As more people spend time at home during the pandemic, more are taking on DIY home improvement projects to keep their living spaces up-to-date and comfortable. While most of the projects NerdWallet surveyed homeowners were taking on in 2020 were not costly, it’s still wise to make sure a project is worth the cost before beginning.