How to Calculate the ROI on a Remodel or Update

One of the easiest ways to talk yourself into a home remodel, renovation or update is to tell yourself that you are improving the value through the return on investment (ROI) your home will experience when it is done. After all, a home is often someone’s biggest asset and making upgrades is like investing more in that asset. Initially, it makes a lot of sense, but as is the case with so many things in life, not all such remodel or update projects translate the same in terms of ROI.

Any remodel or update project you do in your home should have an ROI or Return on the Investment. But some improvements may be more valuable to you than they are to others. For instance, painting the bathroom a trendy color and dolling it up with the accessories and fixtures you like may not have a direct financial return, but it does have a happiness or contentedness return.

Therefore, don’t hesitate to do some decorating or redecorating if you think it will keep you happier in your home, but don’t tell yourself that things like a fancier toilet seat or glass door knobs have a measurable ROI. Also, remember (as one financial expert explained) “You don’t have to worry about the return on investment of every dollar you put in your house.  There is nothing wrong with modifying your home to suit your own needs, even if it doesn’t add to the value.

Determining ROI

You can go online and find all kinds of remodel ROI calculators that indicate they can tell you how much a project increases the value of the home, but few take all of the important factors into consideration.

As an example, many say you can anticipate a 75% to 100% ROI in a bathroom remodel. That same calculator doesn’t ask if the renovation is brand new or what sort of materials were replaced. These are relevant details.

As a simple example, you remove relatively new and attractive laminate countertops when doing a kitchen remodel. Those countertops cost you around $1000 less than five years earlier. That could mean the new granite countertops that cost about $2500 have to be reduced to a $1500 value because of the loss on the countertops removed for the project.

You also have to realize that “value” is relative. You can spend $20k on a family room upgrade, but a buyer or appraiser puts a $9k value on it because they believe that is what it would cost to do on their own, that is the value they assign.

Projects with ROIs

However, there are some updates and remodel work that will always give your home more ROI over the long-run. For instance, outdoor improvements are some of the most valuable! For example, fences where none existed before usually have a high ROI as do decks. Updates to garage doors can come in at almost 100% ROI, and repairing/replacing siding also usually has a higher than average ROI, with manufactured stone veneer at the highest. Pools and patios, on the other hand, are entirely subjective and may mean a loss.

Inside, a minor kitchen remodel (not a top to bottom overhaul) usually has an 80% ROI in most cases. By minor, we mean swapping out cabinet doors and drawer fronts, updating countertops and replacing outdated appliances to energy efficient units. You can also upgrade the sink and faucet, do some painting or wall coverings and replace vinyl floors with new vinyl and expect a good return.

Similarly, a minor bathroom update will yield a good ROI, and entry door upgrades can bring as much as 90% ROI, but the rest of your interior spaces may not generate substantial returns.

Are you eager to make some improvements with high ROI? Hire experts to do the work if you want the high returns on these investments. You can find an array of professional services at ServiceLive.com.

Sources

http://www.moneysmartsblog.com/how-to-determine-the-value-of-a-house-renovation/

https://www.bankrate.com/finance/real-estate/best-home-fixes-for-the-money-1.aspx

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