Education Center » Renovation ROI: Best bets for adding value to your home

Renovation ROI: Best bets for adding value to your home

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En español | Thinking of upgrading your home? You’re not alone. In fact, homeowners spent $130 billion on home improvements in 2013 alone1—and it isn’t just the improving economy that’s triggered renewed interest in remodeling. Faced with a continual barrage of popular home design shows and magazines, it’s no wonder we’re eager to finish our basements, upgrade our bathrooms and renovate our kitchens.

But it’s not all glamorous. A sizeable investment, both in terms of money and time, a home renovation project can also be fraught with stress. The bottom line? You want to make sure that your project is time and money well spent.

So, how can you make sure that you get the most bang for your renovation bucks? The following guidelines can help you make smart moves that will increase your home’s value.

To renovate or not?

Before you decide to keep up with the Joneses, take a look at comparable homes in your area. How many bathrooms and bedrooms, on average? Do most have gourmet kitchens and finished basements? Doing a quick competitive scan is a great way to see where you stand before you commit.

Remember—over-the-top, expensive renovations don’t always translate to higher resale value.

Don’t sink too much into the kitchen sink. In other words, don’t price yourself out of your neighborhood. A high-end chef’s kitchen might land your house at the highest price point in your neighborhood, making it more difficult to sell. Remember, over-the-top, expensive renovations don’t always translate to higher resale value.

Do consider making a move if a renovation is too costly. After researching your renovation options, if the cost—and inconvenience—outweigh the gains, it might be time to consider moving to a house that already has all the amenities you want.

Renovation ROI2

Project

Cost

Resale Value

Cost Recouped

Entry door replacement (steel)

$1,230

$1,252

101.8%

Garage door replacement

$1,595

$1,410

88.4%

Siding replacement (vinyl)

$12,013

$9,694

80.7%

Window replacement (wood)

$11,341

$8,937

78.8%

Basement remodel

$65,442

$47,637

72.8%

Bathroom remodel

$16,724

$11,707

70.0%

Major kitchen remodel

$56,768

$38,485

67.8%

Two-story addition

$161,925

$103,848

64.1%

Master suite addition

$111,245

$68,596

61.7%

Tips for hiring a contractor

  • Make sure your contractor is licensed and insured. Request documentation.
  • Ask your contractor for references. Current clients can give fresh insights, while those whose renovations were completed years ago can let you know if the workmanship has held up over time.
  • Schedule a face-to-face meeting. A good contractor will listen to your ideas, but also make recommendations. Ask for a detailed project scope and estimate. Both parties should sign a contract before moving forward.
  • Don’t discount the likeability factor—you will be working closely with this person. Do you like him or her? Are you treated like a valued customer? Are your phone calls and emails promptly returned?
  • Pay in installments. A trustworthy contractor will typically ask for partial payment up front and the remainder when the job is completed.

DIY or hire a pro?

You can save money by tackling a renovation project—or part of it, like painting or spackling—yourself. With thousands of how-to videos online, it’s easier than ever to become a do-it-yourself expert. But know your limits. Remember, a project that has to be done twice is the most expensive project of all.

Don’t take on a project beyond your scope. To save money, it might seem like a good idea to take on costly tasks, like rewiring an outlet or retiling a bathroom, but some jobs are best left to the pros. Taking on a project for which you’re not qualified could lead to a DIY disaster. Hiring a seasoned professional, particularly for more complex tasks, is usually the best way to go.

Do your homework before hiring a professional. Though friends and relatives may make recommendations, it’s important that you hire the right painter, plumber or contractor for your job. With their customer reviews and recommendations, sites like angieslist.com and homeadvisor.com can be invaluable resources when you’re trying to decide whom to hire. Last, always ask for a face-to-face consultation and cost estimate before you hire someone for the job.

Decide between glam vs. must-have

What’s a better use of home improvement dollars, updating your 1990s kitchen or replacing old, drafty windows? Buyers will love a gorgeous kitchen but they may balk if the home has glaring structural issues.

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Don’t underestimate the value of quality structural upgrades. Investing in new vinyl siding may not be as sexy as adding a master bedroom suite, but the benefits are very attractive. According to Remodeling magazine, new siding can recoup 80% of the initial cost (on average).2 Plus, not only will your house get a visible facelift, you’ll reap the benefits of a warmer, more energy efficient home. Another advantage? Realtors love to tout the benefits of structural upgrades.

Do complete smaller projects that add immediate value. Want a quick pick-me-up? Consider replacing your front door with a high-grade steel or fiberglass door. First impressions matter and it’s the first thing friends, neighbors—and potential buyers—notice when they walk through your house. On a tight budget? Add a fresh coat of paint to the front door and buy a new welcome mat instead.

Adhere to good aesthetics

Remember to stay true to the design of your home by only undertaking renovations that make sense for your type of home. A slick, ultramodern kitchen in your turn-of-the-century Tudor might float your boat, but potential buyers might not agree.

renovation-roibest-bets-for-adding-value-to-your-home_remodelworker

Don’t choose ultra-trendy design elements. Modern conveniences and materials are great, but you may wish to keep ultra-trendy choices off the table. They can diminish the value of your renovation since they can quickly become dated.

Do invest in classic features that will outlast stylish trends. When it comes to aesthetics, it’s hard to go wrong with classic elements that will stand the test of time. For the best resale value, stay away from ornate backsplashes and cabinets and look to neutral color palettes, including grays, beiges and whites. Want to add a splash of color? Consider paint, throw pillows and area rugs that can be easily replaced as trends change.

Remember, finances first

With any renovation project, it’s easy to get caught up in fun decisions—selecting your fixtures, appliances, colors and décor—but before you get too carried away, be sure to get your finances in order.

Don’t start without a budget. You may have a ballpark idea, but it’s important to establish exactly how much you’re willing to spend. The all-too-common phenomenon known as “scope creep” can wreak havoc on your finances. Knowing (and sticking to) your budget will help you determine early on what you can afford—helping avoid disappointment and financial stress later on.

Do research financing options. Need money for your project? A home equity line of credit may be an attractive option. But, if you don’t want to borrow against your home, look into traditional bank loans or credit card promotions, including limited-time, 0% APR financing or reward programs that offer cash back. Visit bankofamerica.com for more information.

Learn more and take action

  • What’s your house worth? Before embarking on a renovation project, have a local realtor give you an appraisal of your house in its current condition. You can find a knowledgeable realtor by visiting realtor.com.
  • Click for inspiration. It’s helpful to have a sense of what you want before you embark on a renovation project. You can get cool design ideas and helpful renovation tips at sites like houzz.com, hgtv.com and pinterest.com.
  • Thinking of borrowing to pay for your next home project? You can run the numbers using the home equity loan and line of credit calculator at bankofamerica.com.
 
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1 Source: U.S. Census Bureau’s 2013 American Housing Survey.

2 Source: Remodeling magazine’s 2015 Cost vs. Value Survey, National Midrange Remodeling Projects.

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