Should I Spend Money On that Home Improvement? 7 Questions That’ll Help You Decide

2. Will it add value?

There’s a misconception that if a home improvement is done well, then it automatically adds value. Improvements may add some value to your home when you sell, but there’s no guarantee you’ll make the entire investment back.

If you’re purely looking to add value for an imminent sale, simple renovation projects are a smart way to make a massive difference. The key is keeping the project yields high but the upfront costs low. As a general rule of thumb you should be mindful of the following when taking on projects solely to add value:

• Materials
  If you’re not sticking around to enjoy your new kitchen counters, think twice about installing an expensive material like concrete ($100-$160 per square foot) or marble ($70-$100 per square foot). Instead, work with an affordable, but reliable material like granite ($50-$80 per square foot) or wood ($30-$85 per square foot) where you’re more likely to recoup the cost at time of sale. The same goes for fixtures and finishes.
• Scale
  Choose smaller, less expensive projects in areas of the home that pack the biggest punch. Focus on spaces like the kitchen and bathroom where buyers are pickiest, and you’ll see the largest ROI.
• Updating vs. Renovating
  Opt for minor updates and changes instead of a full-scale renovation, saving you from going overboard. It’s a great idea to add square footage to your patio, but think twice about adding a full outdoor kitchen on top of that.

Want to get to work on something? According to HomeLight’s Top Agent Insights report for Q1 2019, a few affordable projects that lead to a large ROI when you sell include:

• Deep clean ($167 cost / $1,728 increase / 935% ROI)
• Declutter ($486 cost / $2,584 increase / 432% ROI)
• New wood floors ($4,338 cost / $6,555 increase / 51% ROI)
• Paint home exterior ($2,803 cost / $4,228 increase / 51% ROI)
• Exterior landscaping ($3,240 cost / $3,892 increase / 20% ROI)

According to Remodeling’s 2019 Cost vs. Value study, here are the projects where you’ll see the biggest cost recoup (though none will get you 100% of your money back):

• Garage door replacement: 97.5% cost recoup
• Manufactured stone veneer: 94.9% cost recoup
• Minor kitchen remodel: 80.5% cost recoup
• Deck addition (wood): 75.6% cost recoup
• Siding replacement: 75.6% cost recoup

As for these common but historically lower-return projects, there’s no guarantee that you’ll recoup more than 50%-60% of your spend, based on Remodeling’s research:

• Upscale master suite addition: 50.4%
• Backyard patio: 55.2%
• Bathroom addition: 58.1%
• Midrange master suite addition: 59.4%
• Major kitchen remodel: 59.7%

If you have a budget to make improvements, but you’re not selling the property just yet, think about projects that’ll improve your quality of life, but also make a return on the backend. Not every project, even if it’s well done, will recoup its original costs.

But if your family of four is suffering in a home with one bathroom and you’re not planning to sell anytime soon, then you shouldn’t hesitate to add another full bath if you’ve got the funds to do it. You can’t put a price tag on your sanity.

On the other hand, if you’re making a home improvement to add value, work with your real estate agent to prioritize ROI in the decision-making process.

That means looking at the big picture and considering the value it’ll bring to the sale, not just the price tag of the project, explains Jody Costello, founder of homeowner renovation educational site, Contractor from Hell.

“Our third-story addition was worth every dollar,” recalls Costello. “Being perched on a hill overlooking the bay and metro downtown in San Diego, we also now have sweeping views of the shipping lanes where cruise ships, boaters and the Navy [are] traveling regularly.”

Upgrades like adding physical square footage can make the home feel bigger, adding to the value of the home. A second floor addition can yield a 65% ROI on average. “Our home’s value has jumped exponentially with the view we now have,” Costello says, “We’ll be selling our home in the next 2 years.”

3. Will it add marketability?

Adding value is all about cash in the bank, but a home’s overall marketability comes from the small touches you can showcase as features or benefits in your home. You can think of them as line item details featured in your listing when it comes time to sell. For example, you’d see a listing advertising, “Shower with run of the mill showerhead,” but you might see, “Master bathroom with rain dual-shower system.”

They don’t always correlate to ROI, but marketable upgrades can catch a buyer’s eye and make you stand out among the competition.

Marketable updates include:

• Heated towel bars in the master bath
• A wine cooler
• An updated or expanded patio
• New kitchen countertops
• Smart home appliances

If you’re considering selling in a particularly competitive landscape, small updates for marketability can be icing on the cake of your listing.

4. Will it bring me joy?

You’d never find a backyard pool if homeowners made improvements based solely on ROI. Notoriously expensive to build, pools have an average 15%-25% ROI. That doesn’t stop homeowners from installing a pool for their own enjoyment.

“Most people that are putting in pools have the intentions of staying there long term and they’re going to [use] it and benefit for themselves,” says Chastain.

If an improvement brings you joy, chances are you’ll keep your property longer. Average duration of homeownership in the US is 13.3 years, and there’s no good reason to live with improvements you hate for more than a decade, even if they add value.

What brings you joy might not necessarily bring a large return on investment, however. According to HomeAdvisor’s Homeowner Happiness Index, these features will bring you the biggest smiles:

• Up-to-date kitchen
• Up-to-date bathroom
• Patio or deck
• Hardwood flooring
• Master bedroom with private bath
• Professional landscaping
• New windows
• Adequate closet/storage space
• Improved insulation
• Freshly painted exterior

Jake Lizarraga of home improvement site Interior Charm witnessed this last year when a client wanted to renovate a home he just purchased.

“The most worthwhile part of the project for him was combining the two bedrooms. Seeing as he was a bachelor, the other room would’ve gone unused,” Lizarraga shared. “After removing the wall between the two rooms he was left with a spacious living space. It was also relatively cheap compared to the rest of the renovation, making it more than worth it.”

Chastain has seen similar behavior from families justifying additions to their homes.

“They’ll do a $50,000 add-on because they wanted another 50 square feet and a bathroom. From an ROI standpoint, that’s insane. But that’s what they wanted to do,” says Chastain.

It ended up increasing the quality of life for the family, and that extra space to grow into meant they wouldn’t have to move again anytime soon.

5. Is it classic?

Trends come and go, but classic updates are more likely to improve a home’s value. Trend fixtures and finishes that were all the rage a few years ago might need an update before going to market.

“I don’t recommend making updates for a sale until it’s closer to when you’ll actually put your home on the market,” explains Chastain. “It’s kind of hard to say that in two years that the taste or style won’t be different-—you never know.”

However, some improvements are timeless, explains Andrew at Air Capital Roofing and Remodeling in Wichita, Kansas. “One renovation we do often that many homeowners feel is completely worth it is popcorn ceiling removal. We do these projects a lot when our customers are getting ready to buy or sell their house.”

Buyers tend to be turned off by the dated look of popcorn ceilings, and under certain circumstances, removing them to create a smooth ceiling can create that bright and blank slate buyers search for.

6. Will it add more work to the house?

You might be dying to install a pool or home sauna. However, make sure you’re budgeting for not only upfront costs of installation, but also the annual maintenance costs. On average, a pool will cost you $1,400 annually in maintenance, and a sauna can cost several hundred dollars a year.

What sounded nice in theory might lead to more work and less enjoyment than you thought.

Tonya Bruin, founder of Handyman Service group To Do Done, discovered this firsthand after deciding to install a pond in her backyard.

“It looked nice at first, but the water pump needs to be removed every fall and reset every spring, as well as having the water levels topped up,” said Bruin. “The frogs and nature have taken over, so we don’t want to add chemicals and kill wildlife—it’s definitely not the swimmable pond we had planned for.”

High-maintenance projects will not only add unexpected annual expenses in upkeep, they might also turn off potential buyers in the future. Know the work and costs upfront to prevent surprise expenses and time-consuming tasks on the backend.

7. Do my neighbors have it?

Your neighbor’s latest home gadget might make him the envy (or annoyance) of the block, but take note of common home updates in your area. When you sell your home, you’re in direct competition with the market around you, and if your home lacks standard features, your property won’t be as enticing.

But keeping up with the Joneses can cause you to overspend and needlessly chase fads. If you over-do updates and luxury features, you might end up the nicest house on the block, pricing yourself out of the market.

“The reality is we don’t recommend getting those updates until you’re getting ready to put the home on the market,” Chastain says.

“We want to look at the market at that present day to see if it makes financial sense for them to do it.”

Over 75% of real estate agents agree that the number one thing a homeowner can do to boost their marketability is improve curb appeal. Spending just $500 on exterior improvements can lead to gains on the bottom line. According to data from HomeLight’s Q2 Top Agent Insights Survey these outdoor projects can yield the highest ROI:

• Lawn Care Service ($268 cost / $1,211 increase / 352% ROI)
• Fresh Mulch ($340 cost / $769 increase / 126% ROI)
• New Patio ($3,269 cost / $3,563 increase / 9% ROI)
• Low-end Landscape ($1,411 cost / $1,525 increase / 8% ROI)

The key to home improvements: Keep your house current, but watch what you spend

Making updates to your home will keep your listing competitive, and depending on the state of your market, you might need more improvements than you think. As you consider selling your home, work with your agent to find that sweet spot between smart updates and overspending.

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