- Home improvement projects that homeowners are interested in, such as flashy new kitchens and bathrooms, rarely deliver the return on investment they expect.
- The top projects with the highest returns in resale value are often associated with the attractiveness of a home.
Most homeowners plan to remodel at some point down the road, but not everyone will get their money’s worth in an improved home value.
Of all the home improvement projects, the most popular are flashy bathroom fixes, according to newly released data from Contractor Growth Networkfollowed by renovations to the kitchen and basement.
In some cases, homeowners may get that money back when it’s time to sell, but more often than not, these home renovations rarely yield a great return.
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Overall, homeowners only get a 60% return on their renovation investment, according to separate sources Cost vs value report From Zonda Media, a housing market research and analytics company.
And the projects that offer the greatest returns in resale value are not new kitchens and bathrooms, but projects that are about the home’s curb appeal.
“You have to get rid of everything you see on HGTV,” Todd Tomalak, director of building product research at Zonda, told CNBC recently.
Homeowners can expect a 100% return on investment on just a few renovations or additions, such as converting an HVAC system to an electric system; Replacing garage doors, installing stone veneers, or upgrading to a steel front door.
The Zonda survey found that small kitchen remodels—such as painting and updating the backsplash—provided high returns, but major kitchen and bathroom renovations did not.
With home prices rising and units for sale in short supply, more people are choosing to fix up their existing homes rather than looking for something new, according to Tomalak.
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Despite the high costs of construction and financing, Tomalak said this decade could be the “golden age of rebuilding.”
He added that cost remained a “crucial issue”.
Furthermore, financing renovations or improvements will only become more expensive as long as the Federal Reserve keeps interest rates high to curb inflation.
About 95% of homeowners said they plan to take on a major home improvement project in the next five years, according to the latest Report from Real Estate Witch. However, only 50% said they could afford it at the moment.
They are also likely to spend more than they initially expected. The report found that the average homeowner paid $3,890 on renovations and remodeling in the last year alone.
To budget wisely, talk to a realtor in your area about what specific renovations can increase your home’s value and which ones to skip. Sofia Pera DaigleCEO and Founder gen r planningAn Austin, Texas-based financial planning firm for millennials.
Always get competitive bids on any project and add 10% to that estimate as a “reserve,” she says, since additional expenses “are likely to crop up.”
If you are going to finance a project, look into getting a home equity loan or a home equity line of credit and factor in your interest rate and potential monthly payment. “Be sure you can factor these monthly payments into your budget before you begin,” Daigle said.
It might make sense to hold off on a major renovation until you can save money, pay off debt, and see if interest rates come down, added Daigle, a certified financial planner and member of CNBC’s board of advisors.
Finally, consider how long you’ll be in your current home and how the renovation will affect your life, Tomalac said. “If people are moving around less, that shifts the issue of rebuilding from an investment to a quality of living.”
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