Home Improvements That Add Value
As the real estate market continues to evolve, homeowners are constantly seeking ways to increase the value of their properties. While the value of a home is influenced by various factors, such as location and market trends, certain home improvements have consistently shown to provide a significant return on investment (ROI). This comprehensive guide will explore some of the most effective home improvements that add value, based on expert opinions and reliable sources.
However, the guide will split improvements into two categories. Those with the greatest return when selling a home, and those with the highest payback in terms of ongoing operating cost of a home.
What improvements have the highest selling ROI?
Here’s the rub. Like a new car, home improvements often aren’t valued by homebuyers at their cost.
Kitchen Remodel
The kitchen has long been considered the heart of a home, making it a focal point for potential buyers. A well-executed kitchen remodel can yield a high ROI. Opening up the space to an open-concept kitchen, upgrading appliances to energy-efficient models, installing new countertops made from durable materials like granite or quartz, and modernising cabinetry can transform an outdated kitchen into a desirable space.
A remodel may involve obtaining permits or changing the layout of a room. It often involves plumbing and electrical work, making it more complex and labour-intensive. A remodel is more than a refresh (i.e., new paint and cabinet doors) and includes work beyond cosmetic updates.
For a kitchen, some elements of a remodel project include:
Building or removing an island
Opening up a galley kitchen to make an open-concept kitchen
Changing the layout of the cabinets or appliances
Adding or removing windows or doors
Replacing cabinets
Updating the flooring
Replacing the kitchen countertops
Updating the backsplash
Installing new appliances
Updating fixtures
According to Curbio, the average ROI for a kitchen refresh is 377 per cent but the National Association of Realtors (NAR) estimates the payback is 75 per cent. This means that for every $1,000 you spend on your kitchen, you can expect to recoup between $3,770 and $750 when you sell your home.
That’s a huge range in terms of covering your costs, and it might make sense to place an emphasis on flooring, and the next improvement recommendation might shed some light on this.
Replace or refinish flooring
It's hard to overstate the importance of flooring when it comes to making a positive impression on potential homebuyers. As they step through the front door and begin touring your home, their eyes will inevitably scan across the expanse of your floors. Any imperfections, whether it's cracked tiles, carpet stains, or scuffed hardwood floors, can significantly impact their perception and ultimately influence their decision to purchase your home.
Investing time and resources into repairing or replacing damaged flooring can result in significant returns when it comes to selling your home. Oftentimes, potential buyers are looking for a turnkey property, a place where they can envision themselves immediately settling in without the hassle of immediate renovations. Presenting them with flawless flooring accomplishes just that.
According to estimates by the NAR, buyers pay around $6,500 for new wood flooring and $5,000 for refinished hardwood flooring. On average, the cost of installing new hardwood floors is estimated to be around $5,500, and the cost of refinishing hardwood is $3,500. However, engineered hardwood can be a much better value. Consider that buyers are more interested in the look and functionality than whether the home has new hardwood flooring. The NAR estimates the payback on refinishing flooring is 147 per cent while the payback on new hardwood is 118%.
Look carefully at the cost of the project before proceeding. If your floors are already in great condition, you might not get much lift in value from a flooring project.
Also, consider, that the new flooring in the kitchen might be adding more return on investment than a lot of the other remodelling details. That’s not to say the other improvements aren’t adding value to the home. It just means that their cost is much higher than the value they create. Flooring improvements appear to have a lot of bang for their buck.
Minor fixes
The average ROI for minor fixes is 297 per cent, according to Curbio. This means that for every $1,000 you spend on minor repairs, you can expect to recoup $2,970 when you sell your home.
Roof replacement
A new roof can definitely increase both the appeal and value of your home, so long as that new roof is installed professionally and matches the period and style of your property. The average ROI for a roof replacement is between 100% and 288%. This means that for every $1,000 you spend on your roof, you can expect to recoup between $1,000 and $2,880 when you sell your home.
While it is a lower-risk investment, it isn’t guaranteed to add value.
Bathroom refresh
The average ROI for a bathroom refresh is between 71 and 256 per cent. This means that for every $1,000 you spend on your bathroom, you can expect to recoup $710 to $2,560 when you sell your home.
Recovering your investment in a bathroom refresh is not guaranteed, and requires collaboration between your real estate agent and contractor.
Other improvements
Other improvements might bring you joy or reduce your heating/cooling bills, but typically they will cost you more than a buyer will be willing to pay. They aren’t improvements you should make unless you will get to enjoy them yourself for a few years.
Improvements that take time to pay for themselves or “bring joy”
Which Home Improvements Bring the Most Joy,
National Association of Realtors® 2022 Remodeling Impact Report
Interior Paint Refresh: Colours that make a room feel happy
Colour has the powerful ability to influence our mood and raise our spirits. Some colours are more likely to make us feel happy than others, depending on our personal preferences and associations.
Safe shades and neutrals when decorating a home are best when preparing to sell your home because they appeal to the broadest audience of buyers. Improving the resale value of your home creates value after the home is sold, but being adventurous with colour can make us happier while we are living in the home.
Bright, bold colours are often associated with happiness and energy. Yellow, orange, and red are all bright colours that can create a cheerful and optimistic atmosphere. Nature-inspired shades, such as green and blue, can also be calming and uplifting.
If you're looking to create a happy and inviting space, choose colours that you personally find appealing. You can also experiment with different colour combinations to find a palette that works well for you.
No matter what colours you choose, be sure to use them in a way that creates a space that you find comfortable and inviting. The most important thing is to choose colours that make you happy!
New Home Office: Adapting to the Hybrid Working World
A well-designed home office can have many benefits, including:
Increased productivity: When you have a dedicated workspace that has an ergonomic setup, a well-positioned camera and microphone and is free from distractions, you are more likely to be productive. Depending on your needs, an extra blue-light-filtered monitor can also help with productivity, so you can have your video call on one monitor and relevant emails/documents open on another.
Improved focus: A well-designed home office with adequate soundproofing can help you focus on your work and avoid distractions. Particularly if you have pets and children in your home.
Reduced stress: A home office that is comfortable and inviting can help you reduce stress and improve your overall well-being. According to Healthline, an adjustable standing desk can help reduce back pain and also helps combat the negative effects of the more sedentary work-from-home lifestyle.
Improved work-life balance: A home office can help you create a clear separation between your work and personal life, which is critical for work-life balance. It helps prevent work from bleeding into your personal “recharge & reconnect” time so you can maintain connections with your friends, partner, and family.
Increased creativity: A well-designed home office can inspire creativity and innovation.
If you are considering building a home office, there are a few things you should keep in mind:
Choose the right location: The location of your home office is important. You want to choose a space that is quiet and free from distractions.
Consider your needs: When designing your home office, consider your specific needs. What type of work do you do? How much space do you need? What office equipment will make your work easier?
Choose the right furniture: The furniture in your home office should be comfortable and ergonomic. You want to choose furniture that will support your body and help you avoid pain.
Add personal touches: Your home office should be a space you enjoy working in. Add personal touches to make the space your own.
By following these tips, you can create a well-designed home office that will help you be more productive, focused, and creative.
A well-designed home office can help you increase your satisfaction with your work and the overall quality of your work life.
If you are considering building a home office, take the time to design a space that will meet your needs and help you achieve your goals.
Wood Flooring: Proven to Have a Calming Effect
Wood is a familiar natural material that has been used in houses and furniture for a long time, and it is scientifically known to have a relaxing effect on humans.
Compared with other materials (e.g., marble, tile and stainless steel), studies have shown that touching wood significantly increases physiological relaxation and smelling wood has a relaxing effect too.
Another study shows that people prefer a wooden floor and would accept more deficiencies or defects in natural wooden floors than in a laminate floor. The results further show that wood was perceived to improve psychological well-being significantly more than laminate. In particular, the wooden floor was considered more stable, resistant, natural, modern, and exclusive than the laminate floor. Wood was also rated as significantly warmer and cosier than laminate and tended to be given attributes like stress-reducing and able to raise well-being.
All of this suggests that choosing natural or engineered wood can improve your happiness at home, and the care you take in looking after your wood floors to enhance their natural feel and smell will provide dividends.
Closet Remodel: Decluttering Your Space
Good closet organisation has many benefits. One of the biggest health benefits is reduced stress. When you’re organised, you can find everything easily, and there’s no visual clutter in your room and closet; you experience less frustration and stress.
Also, when your closet is cluttered, clothes are cramped, and there is more room for dust and allergens to collect. This means your clothes are less likely to be ready to wear, and you’ll have to clean, steam, or use a lint roller on them.
Insulation Upgrade: Improve Comfort and Reduce Expenses
Improving the quality of insulation in your home can significantly enhance its energy efficiency and your personal comfort.
When insulation is poor or starts to underperform, it can cause various issues that affect the entire home, but recognising these signs may not always be straightforward.
Here are some key indicators that suggest it's time to upgrade or replace your home insulation:
High or Rising Energy Bills: If you notice a consistent increase in energy bills, it's likely due to inadequate or absent insulation in the attic or crawl spaces. You can also ask your utility company what the typical cost of heating/cooling a home your size should be.
In the winter, poor insulation allows heat to escape and cold air to seep into the house - to compensate, you have to turn up your heating. The opposite is true in the summer when your air conditioner struggles to cool your home. Wasted warmth in the winter and leaking cool air in the summer result in significantly higher energy bills.Fluctuating Indoor Temperatures: When your heating and cooling systems cannot keep up because of poor insulation, you will notice unusual fluctuations in indoor temperatures. Improperly insulated homes experience frequent temperature shifts because they allow excessive hot or cold air to enter. For example, you will find that some rooms are much cooler or warmer than others, or that one side of a room has a different temperature. If your house already has some insulation, but temperature variations persist, consider replacing the insulation or adding extra layers to maintain a consistent and pleasant indoor environment.
Nobody likes to come home from work to find a freezing or sweltering home, the comfort and joy you get from good insulation isn’t just a cosier feeling; it also pays for itself over time by reducing your monthly expenses. This will become even more evident as we experience more frequent heatwaves and polar vortexes due to climate change.
Making energy-efficient improvements, such as adding proper insulation, upgrading windows to double or triple-glazed, and installing a programmable thermostat, not only reduces utility bills but also enhances a home's appeal. According to the U.S. Department of Energy, energy-efficient upgrades can save homeowners 5% to 30% on energy costs annually.
Bathroom Remodel: Enhancing Comfort and Luxury
Next to the kitchen, bathrooms play a crucial role in influencing a home's value. Modernising bathrooms by upgrading fixtures, adding stylish vanities, and enhancing the shower or bathtub area can make a significant impact. According to a study conducted by Remodeling Magazine, a mid-range bathroom remodel can recover approximately 60% to 65% of its cost, while an upscale bathroom remodel may recoup about 55% to 60%.
A remodel will improve your enjoyment of your home, and if you eventually sell the home, you’ll recover roughly $600 for every $1,000 you spend on the renovation.
Attic or Basement Finishing: Expanding Livable Space
An unfinished attic or basement can be a valuable untapped resource for homeowners. Converting an unfinished space into a livable space, such as an additional bedroom, family room, or home office, can significantly increase the home's square footage and appeal to potential buyers. According to a report by the Appraisal Institute, basement finishing can yield an ROI of around 75% to 85%.
For every $1,000 spent, a buyer will pay you between $750 and $850.
Curb Appeal Enhancements: First Impressions Matter
The exterior appearance of a home is the first thing potential buyers see. Improving curb appeal through landscaping, adding a fresh coat of paint, or upgrading the front door can create a positive first impression and entice potential buyers. According to a study by the National Association of Realtors (NAR), investments in landscaping can recover 100% to 200% of their cost upon resale.
Conclusion
Strategic home improvements can significantly enhance a property's value and attract potential buyers in a competitive real estate market. While the value added by each improvement may vary based on location and buyer preferences, carefully planned improvements can provide significant ROI when selling your home. However, it is not guaranteed that buyers will value all of the improvements you might make.
A different approach to improvements is needed, depending on whether you plan to sell soon or in the medium term. Many improvements don’t cover their costs but are worthwhile if you get to enjoy them for a few years. Use the estimated payback in this article to help guide you.
For example, if you spend $5,000 on bathroom remodelling and know you will sell the home in 5 years and recover roughly $3,000 (i.e., 60% ) of your cost. That means you will not recover $2,000 of the cost of the renovation. The unrecovered cost of the improvement works out to roughly $33 per month, or 6 lattes. If the joy of using a modern and improved bathroom outweighs the unrecoverable cost, go ahead and remodel. Remember, if you plan to sell in 10 years, the cost recoverability of a 10 year old bathroom is much less than that of a 5 year old bathroom. Cost recoverability diminishes over time.
Before embarking on any major home improvement project with the intention of selling, consult with a local real estate appraiser or a trusted real estate agent can provide valuable insights tailored to the specific market conditions and trends.
