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2007 ROI for Home Improvements

And a few words on the lowest ROI

Bathroom Remodel

If you’re planning to embark on a few home improvements, it's best to know which of them are likely to pay off if you sell your home and which won’t. Whether you're calculating a corporate merger or just selling your home, ROI—that is, return on investment—should play a part in your plan. In a nutshell, it's how much money you could recoup when you sell. Will that minor bathroom remodeling job be a good investment or not? Should you spend the extra money to fix up the kitchen? What about upgrading the siding?

There are many factors to consider when making the decision to give your house a face-lift. Location is always a key issue—not only the neighborhood, but which part of the country. Some improvements are popular with buyers regardless of the region, while others seem to be in higher demand in certain areas of the U.S. More often than not, sellers can get back a substantial percentage of their outlay for a variety of well-executed improvements in different parts of the country if they keep the market in mind.

According to the 2007 Cost vs. Value Report (a combined effort by Remodeling magazine and REALTOR® Magazine), adding a wood deck or doing a mid- to high-end siding replacement is the least expensive, but most lucrative, way to increase the selling price for many homes. Also, doing a mid-range bathroom remodel is one of the more popular home improvements. Homeowners can recoup an average of 83% for a vinyl siding replacement and 78% of their investment for a mid-range bathroom renovation. A "minor" kitchen remodel (in home improvement speak that's about $20K) is also usually a good investment. The national average for cost returned is also about 83%. Cost returned is slightly below than of 2006 in percentage of ROI, while the cost of work and materials has risen.

Keep in mind that spending more doesn't necessarily mean you'll get back a higher percentage later. In the last year, an upscale kitchen makeover, which might involve installing custom cherry cabinets and other luxurious amenities, the average recouped value is lower (about 78%) than for a minor kitchen remodeling project (83%) that is much less extensive or expensive.

Top Ten Best Midrange Projects

Project
Job Cost
Resale Value
Average
ROI
Wood deck addition
$10,347
$8,835
85.4%
Siding replacement
$9,910
$8,245
83.2%
Minor Kitchen Remodel
$21,185
$17,576
83%
Window Replacement (wood slightly higher)
$10,750
$8,750
80% avg
Bathroom Remodel
$15,789
$12,366
78.3%
Major Kitchen Remodel
$55,503
$43,363
78.1%
Attic Bedroom Remodel
$46,691
$35,771
76.6%
Basement Remodel
$59,435
$44,661
75.1%
Two-Story Addition
$139,297
$103,010
73.9%
Garage addition
$53,897
$37,467
69.5%

Marginal ROI Improvements

If you're looking to get your money back when you sell, it's a good idea to avoid designs that are very avant garde or unusual. Buyers look for a place they can move right into and call their own. When you detour too far from the values of the mythical home buyer, you shrink the pool of potential buyers. Features that are really customized to the homeowners (i.e. home theater, wine cellars, etc.) may not appeal to as wide an audience. Depending on the neighborhood, most buyers may see these fancy add-ons as unnecessary and be unwilling to pay a premium for them, especially in less upscale areas.

If you want to make the following improvements for yourself and don't expect to see a big return for your investment, these can be enormously useful and satisfying:

Project
ROI (national average)
Home Office Remodel
57%
Sunroom Addition
59%
Family Room Addition
68.6%
Master Suite Addition
69%

Regional Differences in ROI

Each part of the country has its hot improvements. Where a kitchen or bath remodel can accrue a nifty ROI in the West, note that the hot ticket on the East Coast were improvements that would save energy or maintenance.

Region Return On Investment (Average %)
Highest Midrange Lowest
West Coast Minor Kitchen Remodel=103.5 Bathroom Remodel=96.6 Deck addition=108
Window replacement=100
East Coast Vinyl Siding Replacement=85.5
Window Replacement=77.8		 Bathroom Addition=55.4 Home Office Remodel=52.8
Midwest Minor Kitchen Remodel=74.2
Bathroom Remodel=68.6		 Deck Addition=75.2 Home Office Remodel=48.1
South Fiber Cement Siding Replacement=89.6
Minor Kitchen Remodel=85		 Family Room Addition=74.4 Home Office Remodel=62.8

Homeowners should definitely look around at other houses in the neighborhood to see what is popular. If the average home in your neighborhood has 2.5 baths and your house has 1.5, adding another bathroom could net you a better return than the average when selling. While updating and renovating your house is something many do to attract more buyers, you should definitely remember that you’re not always going to get back what you spend.

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