Adding value to your home isn't as difficult as it appears. Homeowners across the country make alterations and upgrades to their homes yearly that add return on investment.
While some people think that home additions are more for the short-term -- a means to enjoyment for the current owners -- any changes that you make to your home are also great for your ROI (return on investment).
ROI, as is defined in the business world, is as follows:
A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment's cost.
ROI is a way for you as a homeowner, and as your home's main investor, to calculate whether things like home additions are worth your time and money.
For example, for a true estimate based on hard facts and statistics, all one has to do is look closely at a website like remodeling.net whose annual outline on which home additions yield the greatest return gives a visual representation as to how to spend your money.
In their most recent copy of "cost versus value" for 2014, remodeling.net compares 36 of the most common and popular home additions.
Among the top 5 for midrange costs recouped, are:
- Entry Door 96.6%
- Deck Addition 87.4%
- Attic Bedroom 84.3%
- Garage Door Replacement 83.7%
- Minor Kitchen Remodel 82.7%
Among the top 5 for upscale costs recouped, are:
- Siding Replacement (fiber) 87.0%
- Garage Door Replacement 82.9%
- Siding Replacement (foam) 78.1%
- Windows (vinyl) 76.6%
- Windows (wood) 74.0%
As you can see, some of the most basic improvements will recoup the greatest cost. Numbers and figures like this are peace of mind for those looking to invest in their homes. The ability to see that the money that you'll invest will eventually pay itself back makes a home improvement project well worth the time.
Time to sell or time to wait?
An improvement on your home doesn't have to have short-term sights. While some improvements should be about how you will use them now, it doesn't hurt to do some research before you build.
The worst possible choice you can make is to simply do what you want without any reference.
For example, as we pointed out, a new front door will yield you a 96.6% recoup on your investment. What we didn't say is that choosing the wrong door will reduce this amount. Choose the wrong front door and you may end up replacing it before you sell to satisfy buyers.
Similarly, there are many home additions that will hurt your ROI. According to an article from Realtytoday.com, some investments will do little to aid you in your home remodeling efforts.
For example, if your sole purpose is to increase your ROI, avoid things like mid-range bathroom remodels, master suite additions, family room revamps, and bathroom additions. All of the aforementioned do not bring with them a large recoup in terms of cost versus value. So only go for them if it is what you want and nothing else.
What is too much?
Other important considerations are home cost, market area, home age, and value.
For example, unlike a new or painted front door, would it be even worth your time to outfit your home with a $50,000 bathroom upgrade if your home is only worth $75,000? The answer is likely "no."
Further, if homes in your neighborhood mostly go for $100,000, don't think just because you added a $45,000 kitchen upgrade that your home can easily be sold for $145,000. It simply doesn't work that way.
Last, if your home is a lovely, classic 125-year-old Victorian, you have to consider greatly if something ultra-modern will even work in classic style architecture. Most buyers see something like a brand new bathroom in an old home and think that it looks out-of-place and odd, which might decrease your home's value instead of increase.
Home additions are worth the effort. Unsure how to proceed? Talk to an expert.
Interested in learning more about how we can help you make the right choice on your home addition? Do not hesitate to contact us to discuss your options today.