When Does It Pay to Remodel Your House?

Projects and Trends for a Higher Return on Your Investment

When Does It Pay to Remodel Your House?
February 10, 2016

When you consider which home remodeling projects to tackle and which ones to shelve, it is wise to think about the payback potential. Which projects will increase the value of your home enough to recoup your investment potentially? Remodeling Magazine may be able to help you decide. They recently completed their 2015 lists of remodeling values, broken down by the type of project and geographic market. Thirty-six projects were compared in over one hundred markets, making this the most comprehensive remodeling payback guide available.

People tend to associate remodeling with kitchen or bath makeovers, but neither project provides the greatest return on investment. Upscale kitchen and bathroom remodeling recouped in the 59-60% range of costs, rising to 67-70% for midrange projects.

In general, to recover your costs on a project, smaller is better. Four of the thirty-six projects were estimated at less than $5,000 (for professionals), and three of those were in the top five for return on investment. Those were entry door replacement with a steel door (101.8% return), and midrange and upscale garage door replacements at 88.4% and 82.5% return, respectively.

The other two high-return projects were in the next tier of expense ($5,000-$25,000). The addition of a manufactured stone veneer returned 92.2% on a $7,150 cost while an upscale fiber-cement siding replacement returned 84.3% on a $14,014 investment.

Conversely, the poorest returns came from the addition of a sunroom with a 48.5% return on a $75,726 investment and a home-office remodeling with a 48.7% return on a project cost of $29,066. No project that cost more than $25,000 finished in the top ten, with the attic bedroom coming in twelfth with a 77.2% return on a $51,696 investment.

Higher-return projects had another common thread — most were exterior projects. Curb appeal is incredibly important to a home sale, and many exterior projects cost less than interior ones, thus providing a double benefit in value.

Replacement projects (doors, windows, siding, etc.) tend to have a better payoff than full remodeling projects, and this report reinforced the trend. The gap extended to a 12.4% higher payoff for replacements compared to remodeling (73.2% compared to 60.8%).

Where you live also plays a large factor. If you live in the San Francisco Bay area, you cannot go wrong with remodeling. San Francisco tops the list with a 103% expected return on any project and a 147% expected return on the addition of a wood deck.

How do you maximize the value with your geographic location and housing needs? First, there is no reason to embark on any of these projects just because you are trying to increase the value of your property. Replace as you need to, and remodel as you want to. Renovations should fit your vision and needs.

Assuming you have identified a project, try to time it to when local contractors are in a slow period, typically early spring or the late fall/early winter depending on the climate you live in. You can gain a bit more leverage that way. Avoid trendy picks — backup home generators skyrocketed after Superstorm Sandy, but plummeted to one of the lowest return investments in 2015. Of course, if you do live in a storm-prone area, a backup generator might be a good idea regardless of resale value.

Details and general trends may be found at the Remodeling website. Look them over for advice on the types of remodeling that give you the best return on investment — and then go ahead and do what you want. It is your house, and you should enjoy it and modify it in your own way.


Photo ©iStock.com/SolStock

  Conversation   |   25 Comments

Add a Comment

By submitting you agree to our Terms of Service
Apryl | 08.12.15 @ 23:58
I consider myself lucky to have found a newer home with the perfect floor plan for me so remodeling won't be something I need to think about.
Kamie | 08.14.15 @ 04:21
I had bought a lemon house a few year ago, and there was no way to make lemonade out of it. The people who lost the house in a foreclosure decided to gut it all (alleged) after signing and then we found out that the deed was not actually 1 acre it was .84 of an acre, many would not mind that small of a difference, except the water meter was not on our land, so we had to buy a water meter, and pay for it to be placed. It took a lot of money to get out of that agreement without having a black mark on me.. So, now I am hesitant on purchasing any house.
Kaila | 08.14.15 @ 04:31
I am lucky we have not had any major renovations of our house yet, but it is good to know which items we should attack right away and which we can wait on. I will admit I was one of those people who thought kitchen or bathroom when it comes to remodeling.
Nancy | 08.14.15 @ 04:34
Good information. As a homeowner it is always a good idea to keep in mind how different projects ultimately effect the value of your home. But, unless I have plans to sell in the foreseeable future, bottomline for me is what will make me happy until then.
Sarah | 08.14.15 @ 11:20
This is decent info, although a tad useless to me as I own a mobile home. I am quite convinced that any remodel is pointless and would just be for us to enjoy while we live here. More than likely this home will be scrapped when we're done with it. It's nearing 30 years old. In mobile home life, that's ancient.
Sara | 08.14.15 @ 11:21
We bought a brand new house a few years back.... However, there are some things that were already messed up within a few years. For the most part any upgrades we do are because we really want to do it not because its a have to. However, this is good information to keep in mind.
Steffanie | 08.14.15 @ 11:37
Having a husband in construction, we are very familiar with remodeling. Windows are always the best way to increase the home value and it helps with energy costs too. It's really a win-win for all. Very good information in this article!
Angie | 08.14.15 @ 11:46
I'm guilty as well for automatically thinking to remodel the kitchen as a way to increase a home's value. Ours will certainly need improvements in the event we ever sell, but I would keep those modest and concentrate more on the outside improvements then. I love some of the trendy remodels I've seen in magazines, but would probably stay away from most as it's quite pricey to update because a trend has gone by the wayside.
Crystal | 08.14.15 @ 12:05
We live in such a small house that remodeling is virtually impossible. Thankfully the layout works for us and we'll be looking to buy a larger home in the future.
Daniel Dohlstrom | 08.14.15 @ 12:30
Remodels can be a great way to make your house your home. but way too often overlooked is even if you do not see it now you may want to move at some point so try to make decisions that well not detract from the homes value and marketability.
Christina | 08.14.15 @ 15:04
We're currently in a rental that was remodeled hastily, and have had nothing but problems since moving in. Things look good on the surface, but the poor workmanship underneath has created such issues as the bathtub not being stabilized properly and leaking into the downstairs, and the French doors holding and retaining water and swelling to the point where they couldn't be opened. Make sure corners aren't being cut -- the value won't be there when you go to sell.
Casey | 08.14.15 @ 15:22
I am lucky to have actually have bought my home new, and the only remodels I'm doing are things that I want to change personally.
Beverly | 08.14.15 @ 16:01
I had always heard that bathroom and kitchen remodels were the ticket in getting the best return, so it's good to hear the little things can sometimes be the better option. Sometimes just updating light fixtures, bathrroom/kitchen faucets or refacing cabinets can make a big difference as well. You don't always have to do a big remodel to put new life into your house.
Elaine | 08.14.15 @ 16:24
Never would have thought that a kitchen or bath makeover don't provide the greatest return on your investment. I would have thought it would have been the most. Totally shocked it is the door and window replace that brings the most. I will have to remember this article once we start updating our home.
Britt | 08.14.15 @ 16:40
I would think that it would be smart to remodel your house because if you're doing something that adds to the look of it and upgrade certain aspects, you ultimately are bringing up the value.
Irene | 08.14.15 @ 17:05
The highest return in investment would be redoing the kitchen or the bathroom. Those are the most important as far as resale value. That and a good looking deck or patio adds a lot of curb appeal and the most value to your home
Erin | 08.14.15 @ 17:47
This is really useful information if I am ever in the market to sell my house. Right now any remodeling we do is just for our own benefit, but this is definitely something to pass along to others who could use it.
Zanna | 08.14.15 @ 17:55
I think remodeling should be done because you are making the house better suited for your family. It's rarely smart to do huge, costly projects to improve your potential earnings on a future sale. Better to spend what you need to, in order to make the house work for you, but working within budget.
Martin | 08.14.15 @ 18:02
If you watch any HGTV it becomes readily apparent what modern people are looking for in homes: open floor plan, hardwood floors, stainless steel appliances, and fancy kitchen and bathroom surfaces, floors, and fixtures. Having said that, I agree that smaller renovations probably have a better return on investment. However, depending on the house and other factors, both types of improvements can be both important and lucrative.
Elaine | 08.14.15 @ 19:03
Interesting article but I'm shocked that a kitchen or bath makeover don't provide the greatest return. I will have to remember this article once we start updating our home. |
Charles Berg | 08.14.15 @ 20:46
I'm a little surprised that external renovations are better than internal. It makes sense that curb appeal is a big deal for selling your home, but I still wouldn't have guessed that. I guess it just goes to show how big a deal first impressions are. They probably linger with the perspective buyers as they tour the interior of the home.
Alec | 08.14.15 @ 21:33
Unless I overlooked it, I don't think this mentions redoing the landscape! It does pay to keep your lawn, trees and bushes looking nice when you're trying to increase value but it also helps if you plant as well! I remember reading years ago that some landscaping can help deter robbers too. Planting small shrubs or bushes under windows, using gravel or mulch, repairing cracks in sidewalks and driveways. Relatively easy and inexpensive fixes that make the house look more inviting and well kept!
Meredith L | 08.15.15 @ 01:40
We're actually in the process of doing major renovation in our house. It was originally a little cabin with two, maybe three additions throughout the years. Right now we're focusing on floors and relocating our kitchen and then adding another full bathroom. I'm not worried about curb appeal at the moment because I'm hoping this is my forever home. My priorities are to fix the interior to make me happy, well before I worry if my neighbors don't like the chipped paint on the outside.
Heather | 08.15.15 @ 02:33
We are just in the middle of renovating our kitchen and it has not cost nearly what this article has and we even have quartz counters.
Chelsey | 08.18.15 @ 19:18
I always figured that remodeling a kitchen or bathroom would give you the most bang for your buck when it came to resale value. It's good to know that even just doing smaller projects contribute so much to the overall value of the house. You don't have to break the bank doing huge remodels.
$commenter.renderDisplayableName() | 12.08.16 @ 14:42
{comment}

  Our Professionals Are Available to Help!

  Can't find What You're Looking For?