When you’re renovating or flipping a house it’s important to know which updates provide the most bang for your buck. It’s very easy to sink a lot of money into a renovation that seems like it will have a good return only to find that you won’t come close to making that money back. And there are renovations that have a surprisingly good return.
Which fixes fall into the high ROI category? Let’s take a look at what Remodel Magazine’s annual study and other industry experts have to say.
Replacing the Front Door
If you only do one renovation, make it a new front door that’s steel. It’s an immediate curb appeal booster and improves security - two things that appeal to all home buyers.
Remodel Magazine’s research revealed that installing a new steel door has a return of 91.3% on average. Given that it’s a relatively low-cost update, a new front door is something that fits even a tight reno budget.
Garage Door Replacement
Another door you’ll want to replace is the garage door -- especially if it isn’t motorized or doesn’t work. In most cases, it has an almost dollar for dollar return, and it goes a long way towards improving the curb appeal as well.
Add a Few Coats of Fresh Paint
One of the most cost-effective renovation projects is painting. The cost of materials is low, it’s easy to do yourself and painting makes a huge impact. Agents agree a fresh coat of paint can make a home look a lot better. A 2012 Home Gain survey backed this up by estimating that DIY interior paint had a 107% ROI. Painting the exterior can also be a good investment but the return isn’t as good because the project is usually handled by pros.
Insulate the Attic
It may not be obvious at first glance, but insulation is an improvement worth making. Energy efficiency is a big deal to today’s buyers. It’s not only good for the earth, but it’s also good for the wallet - especially your wallet. In 2017, Remodel Magazine estimated that adding attic insulation had a return of 108%. If you’re flipping, the insulation will also reduce utility costs for a few months, which improves the gross profit.
Add Manufactured Stone to the Exterior
Real stone can get very pricey real quick. But the new manufactured stone veneer siding looks just as good, is a fraction of the price and has a 97.1% return. It can be used around the exterior walls, porches and retainer walls. You can also use it to give a fireplace a facelift.
Roof Repairs or Replacement
If the roof is leaking it’s definitely worth it to repair or replace. A leaky roof is a structural concern that’s going to bring down the value of the home and can lead to more costly problems down the road. Real estate experts agree with Remodel Magazine that a roof replacement is a good investment with an ROI above major kitchen remodels.
Minor Kitchen Remodel
If you are going to spruce up the kitchen you don’t have to go all out with a complete tear down to the studs. You’ll recoup more of the cost from a minor kitchen remodel that involves things like replacing the countertops, painting the cabinets and adding new hardware. Sure, everyone wants a big beautiful island, but adding one may not boost the value enough to justify the cost.
Some Things to Keep in Mind . . .
How big of a return certain renovations bring in can vary depending on location . Remodel Magazine has broken their research down by region because of this variable. For example, a midrange wood deck addition may have an 82.8% return nationally, but in the warm South Atlantic region the project has an 88.4% ROI.
There’s also a difference in terms of the materials that are used. While it may seem like you’ll recoup more of the cost by doing a high-end renovation that doesn’t appear to be the case according to Remodel Magazine. On a whole, mid-range renovations have a better return than upscale renovations . Moral of the study - choose quality materials, but don’t think you have to go top-dollar to get ROI.
Sweat equity makes a big difference for ROI . The Remodel Magazine report is based on what contractors charge for a renovation. DIYing part or all of the project significantly reduces the cost and boosts the return.
Return on renovations can also be impacted by the surrounding homes . If all the other homes in the neighborhood have two bathrooms but yours only has one, then the return on a bathroom addition will be higher than the average. It’s about making your home comparable without overdoing it.
For flippers, the right renovations can have another direct benefit -- they reduce time on the market . In many cases, renovating is a must for a house flip. The fact a home needs work is usually why it’s a good deal to begin with. Flippers have to understand what buyers want in their market and focus on those updates in order to get an offer as quickly as possible since the longer you hold onto a house the less profit you make.
As Realtor.com experts points out, replace and repair is going to generally have a better return than add and remodel. So before you start making additions and knocking down walls, consider less involved renovations first if you want to maximize return.