If your house was recently appraised and you were a little disappointed with the results, there are a few reasonable option that will add a positive return for the investment. This is especially true for those who want to “flip” a house or for anyone who is interested in owning rental properties. You do not want to allocate funds to a project which will have low probability for return on the project. Here are the 3 top renovations and the 3 worst:
The Best Renovation Projects:
Installing a steel front door – There are many stylish steel door designs (many of which can be coated to appear as wood). The benefit of the door is that it provides added security, energy efficiency, and is easily maintained. Experts estimate that you will enjoy a return of about 101.8% of your initial investment.
Wooden decks – There’s no denying that people love to entertain at home. As buyer “want lists” evolve more to include outdoor living spaces, decks have seen a spike in home owner desirability. The installation of a desk not only adds visual appeal, but you also stand to gain around 80.5% return on the investment.
Floor renovation – Damaged floors bring down the value of a home quickly. Where a “cover up” job, such as vinyl, may temporarily cover any unsightly problems with the floor, you will not get much of anything out of the return. Eco-friendly, durable flooring choices will give you as much as a 200% return on the investment when you sell the home. If you already have hard floors, consider having them refinished, if possible.
The worst renovation returns:
Home offices – Home offices are generally created to meet the individual need of the person that is using the office at the time. However, for home buyers, home offices are typically not a “make or break” feature. Offices are seen as space which could have been allocated to another room. For example: if you have a 3 bedroom house which uses one of those rooms for an office you now have a 2 bedroom house. The return on investment is lower (possibly even a negative percentage), as you have just lowered your bedroom count.
Bathroom additions – At first glance you may think that a bathroom would be a great renovation on the home, and some designers will tell you that this is the way to go. However, on average, a homeowner can spend close to $40,000 or more on a bathroom renovation, which can be hard to recoup in the long run. Any renovation that takes a great deal of plumbing, tile (or hardwood), sheetrock, and major fixtures will not give you a great return. Additionally, if you are adding to the interior (as opposed to building onto the structure) the space is being reduced and something is being limited (such as the basement space, living room, or master bedroom space).
Adding a garage – Garages generally show a pretty poor return for homeowners: an average of about 54.7% of the initial investment. Garages are not versatile, and so there is really no reason why you would want to add such a limiting renovation to a house. If you are looking for extra storage room, invest in a separate storage shed. It will cost you less, increase the value of the property, and give you a higher return.
The bottom line
When you consider a renovation project conduct an ROI analysis on every aspect of the changes you plan to make. Projects that fall below the 50% margin should be avoided. Ideally, you want to have an ROI of at least 70% or greater.