Your home is one of your most significant investments, and if you take care of it the right way, it could earn you a positive return over time. Though it’s not a guarantee that home prices always rise, in most attractive neighborhoods, you can count on your home’s sale price to increase gradually all on its own, so long as you maintain it with the basics.
However, it’s also possible to increase the value of your home more dramatically with renovations and additions—all while increasing your own quality of life for as long as you live there.
On the Nature of ROI
Every project’s profitability can be thought of in terms of your return on investment, or ROI. In most cases, any permanent improvement to your home will cost a fixed amount of money; for the sake of this example, let’s say it costs $1,000. After the improvement is made, the home will be intrinsically more valuable; for this example, let’s say the value of the home increases by $800. This represents an ROI of 80 percent, since 80 percent of your investment has been added to the value of your home.
Projects with an ROI of 100 percent or greater are rare, but these projects often add more value to your life than just the total sale price of the home. For example, replacing your old windows will help you save energy costs, will reduce noise in your surroundings, and may add to your comfort throughout the time you live there.
High-ROI Home Improvement Projects
These projects all have a reasonable to high ROI, making them ideal for increasing your home value:
- Build an outdoor shed. Building an outdoor shed can greatly increase the value of your home. Any homeowner would be grateful for the extra storage space, especially on a property with lots of outdoor space and tools to maintain it. As long as the shed was built by professionals, it will add to the aesthetics of the property as well.
- Add or upgrade a garage. Similarly, you could increase your home’s value by adding a garage, expanding a garage, or simply improving it. Replacing a questionable garage door with a stronger, cleaner, and more functional one can make it much more attractive to potential homebuyers.
- Renovate the kitchen. The kitchen is one of the most important rooms of the home, since it’s responsible for many first impressions and is the central location for food preparation (and in many cases, consumption). There are many ways to renovate a kitchen, from simple replacements of appliances or countertops to top-to-bottom overhauls of the entire room. Any improvement you make can be valuable.
- Renovate the bathroom. The bathroom works in much the same way. You can replace a toilet, a shower, or a vanity with relative ease, or you can fundamentally restructure the room. As with kitchens, full-scale remodeling can get expensive, but it also has a high ROI.
- Replace the windows. If your windows are older than a decade or two, it may be time to replace them. Modern windows are easier to open and shut, are more attractive, and are much more energy efficient. Newer windows will almost certainly increase the value of your home, while saving you money on heating and cooling for as long as you continue living there.
- Rewire the electrical. If your home’s electrical wiring is based on older standards, upgrading it may not only increase the value of your home—but it may also help you stay safer. Knob and tube wiring, for example, is more likely to start an electric fire than modern approaches to wiring. It will likely cost a few thousand dollars to replace all the wiring in your home, but depending on your current setup, it may be worth it.
- Replace the floors. Floors make a big impression on new homebuyers, so it may be worth investing in them. Hardwood and other hard flooring tends to be popular because it’s low maintenance. Any upgrade you make will likely come with a solid return on investment.
- Clean and paint. Sometimes, even simple changes can make a big impression on prospective homebuyers. Cleaning the house professionally, from top to bottom, can make a much better impression on people touring your home, and a fresh coat of paint can make any room look newer, cleaner, and more inviting.
Which projects you choose to take on should depend on some independent factors, including how long you want to stay in the home, your interest in each project, and how much the project will cost for your specific home. Do your research and plan your goals carefully; you’ll end up making a much smarter decision.