ROI and renovations
You’ve heard all the common wisdom about home renovations: Increased curb appeal attracts more home buyers. Improvements to home systems, such as upgrading the HVAC or replacing doors and windows, make a home more comfortable. Expensive home upgrades increase the value of your home and earn more money when you sell.
Famous Canadian residential home improvement expert and TV show host Mike Holmes advises renovators to understand why they are renovating, and says that doing it for profit may not be the best idea. Focusing on profit over adding true value can lead to superficial repairs and replacements that improve appearance while leaving basics like plumbing, heating and electrical problems unaddressed.
Practical Renovations Vs. Cosmetic Renovations
Holmes counsels homeowners to invest in practical renovations first, and not to focus on cosmetic improvements. He reminds people that they won’t have the same return on investment, but practical renovations will last longer and improve the comfort and safety of a home. He also points out that renovations will earn back more at sale when the work is done well by experienced contractors using quality materials and workmanship. On the other hand, poor quality work may actually cost you money when it comes time to sell.
What the Realtors Say
Homeowners often ask realtors for advice about which renovation projects are the best value. Columbus real-estate agent Joe Jackson says homeowners must be careful not to over-improve for their neighborhoods.
When you price your renovations out of the neighborhood, you won’t get your money back. Re/Max Premier Choice real estate agent Milt Lustnauer says homeowners can avoid over-improving by looking at home sales in the area and noting the price per square foot. If there’s a big range in price per square foot in your area, you may have a better chance at recovering higher costs of renovation than in a neighborhood where sales are relatively close in price.
Cost vs. Value
Although Mike Holmes feels strongly that homeowners should focus on practical renovations over cosmetic renovations, it’s hard to pass on quick and cost-effective improvements that produce a high return. But do you know how much that reno job will really return when you sell?
Remodeling Magazine’s annual Cost vs. Value Report for 2013 reveals that on a national average, smaller renovations get the best returns. Topping the list is steel entry door replacement, costing less than $1200 and returning 85.6 percent. A wood deck addition that costs just under $10,000 returns 77.3 percent. A close third is a $1496 garage door replacement returning 75.7 percent.
Upscale remodeling projects that return between 70 and 80 percent include fiber-cement siding replacements, fiberglass entrance upgrades and vinyl or wood window replacements. While you may really like the looks of the fiberglass entrance, the steel entry door replacement will probably put more back in your pocket when you sign the closing papers at sale. Replacing windows returns more than almost 10 percent more than a major kitchen remodel. Many companies, like Champion Home Exteriors, offer free in-home consultations so you can see and feel the products before you buy—a smart way to make sure your investment will be beneficial.
Author: Tracey C.