Only Certain Home Improvement Projects Will Pay You Back

by Hank Coleman

Home Improvement Return on InvestmentIn many markets and today’s economy, most of your home improvement projects and remodeling projects are not going to make you money. You won’t see a good home improvement return on investment for all your remodeling projects. The money that you spend remodeling your bathroom, adding a deck, or finishing a basement will unfortunately not translate dollar for dollar in new home equity.

If you spend $10,000 remodeling your master bathroom, that rarely converts to $10,000 in added home equity if you were to put your home on the market immediately afterward.

Some projects have a higher impact or rate of return. One great rule of thumb is that anything with running water, such as bathrooms and kitchens, have a high correlation when it comes to increasing your home’s value relative to the money you spend. Many recent studies have shown that you can only expect a 70% to 80% return on your investment in a kitchen remodel should you decide to sell your home.

And, The Survey Says…

USAAUSAA, the bank and financial services giant, conducted a poll on its website asking which projects the site’s visitors feel will get them the most bang for their buck. Over 75% of the respondents overwhelming chose to remodel the kitchen with improving their bathroom running a very distant second place. Save Up To $1,200 on Rates, Points, & Lenders Fees with USAA Bank MortgagesUSAA mortgages.

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And, replacing your windows was also next on the list of the bank’s customers as they listed their favorite remodeling projects.

Don’t Bet The Farm On Remodeling

One thing that many professionals and real estate agents caution against is spending too much money upgrading your home. Many experts recommend that you do not invest more than approximately 20% of your home’s value on remodeling projects.

One of the last things that you want to do is to have the most expensive home in your neighborhood. That is a way to quickly price yourself out of the resale market if you are not careful.

There has to be a specific and wealthier buyer who will want to spend the extra money on upgrades that you have added instead of going down the street and saving a bundle in a home with fewer features.

Other Home Improvement Projects To Consider

There are also several other remodeling projects that can add to your home’s resale value as well. Adding a bathroom or completing a major update to an existing one could add 60% to 80% of the money you spent to your home’s value.

Add an additional bathroom

No one has ever said they have too many bathrooms. Adding an additional bathroom to your home has been shown to increase its value by as much as 20% and 10% for a half bath. Of course, it can cost a large amount of money to add an entire room into your home and connect it to the existing systems.

So, the cost must be evaluated. If it will pay for itself in the long run, go for it.

Landscape, landscape, landscape

The curb appeal of your home plays a major part in its perceived value to buyers. So, if your yard is looking particularly scraggly, it might be time to invest in landscaping. By keeping the grass cut, the leaves raked up, and having well manicured flowerbeds, a home’s value can greatly increase. The home would actually be the same value, but the perceived wealth of those within plays a role.

By keeping the grass cut, the leaves raked up, and having well-manicured flowerbeds, a home’s value can greatly increase. The home would actually be the same value, but the perceived wealth of those within plays a role.

Upgrade your appliances

A shiny chrome kitchen appeals to everyone. By upgrading appliances like your refrigerator, microwave, and dishwasher, you can add several thousand dollars worth of value to your home – in addition to increasing the perceived value because of the appearance.

Refurbish the basement and attic

Usually considered ‘secondary’ aspects of a home, refurbishing the attic and the basement can add a great deal of value, whether you turn the attic into a bedroom and the basement into a game room or a man cave. Storage areas also help, but make sure the rooms are appropriate for storage; seal any moisture leaks or ways that stored items could be damaged.

Invest in home security

A home security adds two major things to your household: value and peace of mind – two things that can’t be measured in dollars. A home with a full, state of the art security system appeals to buyers much more than one without, because they see the home as being ‘safe.’ While you still live there, you will appreciate that you can rest easy at night knowing your home is being monitored by a security company that will alert the police should anything trigger it.

These security systems also cover things such as fire and carbon monoxide detection, another added benefit of upgrading. Check in with your local expert instead of dialing national help numbers. For instance, even when working with a company as big as ADT, look up their local presence in your area.

Put some storage in there

Some older homes lack proper storage like linen or shoe closets, so upgrading this part of your home will add more value to it. Finding unused space in your home can be difficult, but if you know of gaps in the walls that can be used for more closet space, use them – take advantage of what is at hand. Using what square footage you already have will save money.

Other significant value-adding improvements include adding a deck, building a fence, adding siding, or installing energy-efficient windows in your home. A couple of things that do not add much value if any are installing a swimming pool, irrigation systems, ponds, or manicured lawns.

It’s Not All About The Benjamins Though

You don’t have to always think about the return on your investment, though. If you are going to continue living in your home for several years after you make the home improvement, whatever it is, then you will obviously enjoy the benefits of your upgrades.

While adding granite countertops may not pay you completely back in home equity, you can surely get a lot of pleasure out of it in the meantime before you sell your house.

Do you know how to get a home improvement return on investment? Have you ever completed a home improvement project despite knowing that you were not going to get all of your money back if you sold your house?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 591 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 8 comments… read them below or add one }

Money Beagle

You have to look at it in one of two ways. First, if you have no intention of moving in the next few years, then this shouldn’t really be important because the ‘value’ is in what you personally get out of it. If you get that time to enjoy your wonderful kitchen or updated bathroom, then it is worth it. Second, doing a remodel might not increase your value, but not doing it may decrease it in terms of eventual offers you might get. If your neighbor is also selling, they could get an offer and you wouldn’t based on them having more updates. So, it might be more of an indirect payback.

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Jai Catalano

I am in a tricky situation. I have a house in Newark NJ. I haven’t lived there in years but I rent it out. For the most part I break even or pull a couple dollars out of my pocket. By the end of the year if all goes well I will be making a buck or 2 on it but it’s not easy to sell nor is the neighborhood desirable by media standards. The improvement in the area is AMAZING but still no love for Newark. I might be sitting on a gold mine that my kids kids get to tap.

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Matthew Doyle

We added a patio cover to home last summer. It may add a little value to the home, but I didn’t do it for that reason. Our house faces west and would get blasted by the afternoon sun. It has saved a lot on air conditioning bills and it basically adds another room to our house because we can enjoy the backyard during the summer. We are also planning to replace our counter-tops with silestone and replace the flooring throughout the house. We are not doing it for an increase in value, but for our enjoyment. We also don’t have any intention of moving anytime soon.

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Kurt @ Money Counselor

Yeah, I think the main motivation, by far, for doing a home remodeling has to be you’re really going to enjoy and benefit from the result. Think of any boost in your home’s value as gravy, and you’ll be good.

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Marissa @ Thirty Six Months

I watch a ton of home improvement shows so that clearly makes me an expert. We have redone 2 bathrooms and will be starting on the kitchen soon. Apparently those pay off when/if we decide to sell.

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Brent Pittman

Does remodeling mean you hired a contractor or did it yourself? That could be a big price difference.

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Elizabeth @ Simple Finance

This is a tough pill to swallow, but I’m learning it’s true. We put on an $18k addition four years ago; now we’re trying to sell our house. We’ll be LUCKY if we get 60% of what we put into it. Our addition is nice, but the market (and our neighborhood) just don’t really support it as a smart financial decision.

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Mr Hairy

The best ROI for a renovation usually involves adding an additional bedroom or, occasionally living areas. Going from a two to a three, or even for bedder can add significant value, if done correctly.

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