Which home improvements give the best payback?
If you’re thinking about remodeling your kitchen, or finishing your basement, you probably want to get your investment back
when you sell your home. But when it comes to payback value of home improvements, some are definitely more profitable than others.
As a general rule, kitchen and bathroom projects usually get a nice return on investment, possibly 70% - 90%, depending of the level of update and location of home. Things like adding
rooms or finishing basements tend to pay back the least. Finishing a basement usually returns less than 50%, so it’s not a project
likely to show profit at selling time.
There are a number of factors that go into determining how well a project will pay back. Payback value depends a lot on the current
market conditions in your area. If the market is hot and homes are selling fast, you can expect a higher payback value than you would get
in a slow market.
The type of project you do and how it fits in with other homes in the area can have a big influence on payback too.
If you put your money into the wrong type of improvement, you likely won’t get your money back. But if you're smart about what you do, you might make money.
The payback will be better on improvements that are in demand and conform to neighborhood standards. Adding a second bathroom in a neighborhood where most
homes have two bathrooms will give a high return on investment. Building a large addition that makes your home twice as big as the other homes on the block
will likely cause the home not to sell as quickly and the price will likely not pay back very well. Likewise, the popularity of a project will factor into how much it pays back. An improvement heavily customized to your
wants and needs won’t pay back as well as something more common to other homes in the neighborhood.
Another factor to consider is the cost of the improvements. If you can do the work yourself, you can save significantly on the cost of the project and
greatly improve the chances of getting a good return on the investment. Doing your own work, doesn't mean you don't have to get permits. We are required to state whether additions/improvements were permitted (meaning they are per code). If not, these could cost more to get permitted (if possible) or cause house to sell at a lower price due to the unknown issues resulting from not being permitted. Permits are for all owners safety, current and future. Though not getting permits might save money in permit charges and annual taxes, the lace of them may cost more from lack of money in the sale of the property at a later date.
The list below is compiled from several published surveys and shows typical payback for some popular remodeling projects:
- Kitchen remodeling – 80%
- Add a bathroom – 80%
- Bathroom remodeling – 75%
- Install central heating – 85%
- Install central air – 75%
- Add a deck – 65%
- Replace windows – 70%
- Add a room – 50%
- Build a pool – 25% or less
- Finish a basement – 40%
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