Understanding How Home Improvements Can Affect ROI

September 17, 2014
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Return on Investment (ROI) is a term that is exchanged frequently when it comes to home improvement. We’ve mentioned it several times on our blog, as well as highlighted several projects that can bring a significant ROI for homeowners.

Whether you choose to enhance an existing bedroom, extend your kitchen, install new flooring in the basement or even replace the garage door, all of these improvements can strengthen the value of your property in some way. For today’s post, we wanted to shed a little more light onto how home improvement ROI works and why some projects yield a higher ROI than others.

How Does ROI Work?
In real estate, ROI is the formula that is used to evaluate the cost of remodeling projects versus the value those projects will retain when the time comes for resale. In terms of home improvements, making adjustments to outdated areas of your home will not only make the space more enjoyable to live in, but also increase the resale value of the property. So while it may seem costly for some of the projects listed below, the chance that you will recover most of the monies spent on these improvements is very high.

Home Improvement Projects That Yield Great Returns

Kitchens
Since the kitchen is usually the area in a home that gets the most traffic, it is often one of the first aspects of a home that is judged during evaluation by buyers. Updated, modern and functional kitchens are an important selling feature. If yours is lacking in any of these areas, improving those areas will most likely increase your ROI. While the cost of improving a kitchen can be relatively high, the returns are as high as 72%! Knowing this can make the initial investment bearable.

Doors and Windows
One of the easiest ways to change the look of a home while at the same time increasing its value is to update the doors and windows. Considering the growing movement toward energy-efficiency in homes, the installation of high-end, energy-efficient, “green” doors and windows will be a welcome addition to any home. When you add in the amount of money saved each year on energy bills to the ROI for this improvement, you could end up close to breaking even!

Outdoor Elements
Not surprisingly, many people place the quality and condition of decks and other outdoor spaces of a property as extremely important. Whether this means your patio and recreation area, the landscaping or even the type and style of boundary fence, an often-underestimated aspect of properties is outdoor care. According to Realtor Magazine, a deck addition can yield as much as nearly 73% return on investment.

Structural Enhancements
The structure of a home is often-overlooked since it’s not really visible as much as the elements inside, or even outside, the house. Let’s discuss the roof, for example. Prevention is one way to keep a roof in top condition and ready for any sudden circumstances that may arise such as extreme weather situations. Siding is also important when determining a home’s overall condition and one that cannot be ignored, especially when you plan to put your house on the market. The difference between having quality vinyl siding installed versus less-than-desired worn, faded existing siding can be significant. With an ROI of as much as 70-80%, there is an excellent financial incentive to improve these areas as well.

Home improvement offers several levels of satisfaction to homeowners. Not only will the quality of your life be greatly enhanced by a remodel or addition, but also when it does come time to sell, the value of your home will be significantly increased, giving you an exceptional ROI as a result of those home improvements.

Have you recently improved parts of your home? If so, share with us below how it has enhanced your living space and/or possibly gave you a better-than-average ROI! We appreciate your feedback!

*image: Thinkstock/Getty Images


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