My husband and I have owned three homes. In each place we’ve lived, soon after buying the house, we’ve ended up doing renovations or repairs. We made these changes to the home not only to fix problems or to make the house more like what we want in a home, but also with an eye towards resale.
Wait, what? You just bought a house, you’ve started renovating it and now you’re talking about selling it? What, are you flippers, you may be asking yourself?
No, we are not house flippers but we are pragmatic homeowners. In the throes of most of our renovation projects, we had no intention of moving or selling our house in the near future. But we knew that we might sell one day and that there were certain amenities that homebuyers look for in houses. We decided upfront that we’d rather make a decision now on a flooring choice or kitchen countertops that had long-term value rather than having to go back at a later date and upgrade any renovations we’d made previously to our liking only to make the home more saleable.
This topic of return of investment on home projects came up when writing the 2016 True Cost Report for HomeAdvisor. While crunching data from the National Association of Realtors, Remodeling Magazine’s Cost Vs. Value Report and HomeAdvisor’s own True Cost Guide, certain projects kept coming up repeatedly as not only being popular for homeowners to pursue but also popular on the must-have list of homebuyers. Plus, these projects were also some of the ones that had the highest return on value. Interestingly, some of these popular projects were the very ones that my husband and I had pursued in each of the homes we owned.
For example, renovating and updating a kitchen is hot across all three measures. From the 2016 True Cost Report:
* “[T]he National Association of Realtors (NAR) says kitchen and bathroom remodels and new garage doors are among the five top projects on homebuyers’ wish lists.”
* “HomeAdvisor users submitted service requests for a variety of home projects in 2015… Remodeling projects – specifically kitchen, bathroom, garage and swimming pool remodels – were also popular.”
According to Remodeling Magazine’s Cost Vs. Value Report, which is quoted in the 2016 True Cost Report, a minor kitchen remodel offers an 83.1 percent return on investment; a major kitchen renovation provides a 64.9 percent return on investment.
This is one of the reasons that when renovating the kitchens in all three houses we’ve owned, we’ve done the minimum amount possible to get the maximum effect. That is, we tried to embark on what would be described as a minor kitchen renovation that would make the kitchen look brand new without replacing everything in it and depleting our renovation budget.
We’re taking that same approach with our current home’s kitchen. As I mentioned in my previous blog post Renovations and Home Ownership, this minor kitchen remodel involves having the current cabinets refaced to look brand new and new granite countertops installed. That’s what the contractors are doing for us and where most of the money is going. We’ve also replaced the sink and the cabinet hardware. But that’s it. The layout stayed the same. The appliances stayed the same. The paint on the wall stayed the same. Given those Remodeling Magazine stats, should we ever go to sell this house, we should be able to get an 83.1 percent return on our investment of a few thousand dollars–maybe even more of a return since we did some of the improvements ourselves.
All of that is to say that if/when you decide to embark on home remodeling projects, keep the following in mind: before you start getting bids from those HomeAdvisor-referred contractors, make sure the project you want to pursue has a return on investment that you can justify.