Following a seismic shift toward working and schooling from home during the COVID-19 pandemic, many homeowners chose to focus their attention indoors on making home improvements.
According to a 2021 study conducted by the Joint Center for Housing Studies of Harvard University’s Improving America’s Housing, spending on improvements and repairs to owner-occupied and rental properties grew an estimated 3 percent in 2020. With people across the country spending more time at home, and with health concerns about having contractors on site, DIY projects also grew in popularity.
While the recent wave of home improvement projects is likely to increase overall property values across the nation, some of these renovations are more likely to pay off than others. For homeowners wondering how their desired updates will impact their bottom line when they try to sell, we compiled a list of home improvements generating the highest return so far in 2021.
- Remodeling some of the key features of your home can be hugely beneficial if you want to either increase your home’s value or your own quality of living.
- When deciding what to remodel it’s important to consider the purpose, cost, and ROI before investing large amounts of time and money. Some renovations might have a smaller or larger payoff than you think.
- Adding features such as a remodeled kitchen or a new front door can be great for increasing the value of your home, but you might want to think twice before adding other amenities, such as an in-ground pool or a backyard patio.
9 home improvements that add value to your home
When remodeling your home, it’s important to consider how you can optimize the return on investment (ROI). In other words, how can you improve your home in a way that guarantees a monetary return? Regardless of whether you are planning to put your home on the market in the short term or stay in it for the long run, here are nine home improvements to consider in 2021:
1. Attract eyes to the entryway
Replacing your front door with a steel door might not seem like it would have a big impact on the value of your home, but this feature is often one of the first that is seen in photos of your home. Having a strong curb appeal (the aesthetic look of a home’s exterior) can heavily influence a homebuyer’s first impression. Additionally, a steel door helps contribute to a sense of safety which is especially important for families with children.
Average cost and ROI: 65% on $2,082
2. Clean up the kitchen
A renovated kitchen could prove to be the deciding factor for a potential homebuyer. This room is consistently one of the most important spaces, so buyers want it to look and feel like their own. When upgrading your kitchen, it’s important to install new appliances, add granite or marble countertops, and make sure there is sufficient lighting. And you definitely can’t go wrong with extra features, such as ornate handles, a tucked-away garbage, and a kitchen island. According to Remodeling Magazine’s 2021 “Cost vs. Value Report,” a kitchen remodel has the third highest ROI of 22 different home improvement projects.
Average cost and ROI: 72.2% on $26,214
3. Get decked out
A backyard deck can be a really great feature to add to your house if it is located in warm climates where it is certainly desirable to be outside. In regions with better weather, home buyers are willing to spend more on a home that has a deck. So, while it is important to consider your geographical area before making this investment, it could definitely have a high payoff. Most decks are made out of wood or composite materials, and these have different ROIs.
Cost and ROI: 65.8% on $16,766 for wood and 63.2% on $22,426 for composite.
4. Bring your bathroom up to date
Like the kitchen, potential homebuyers care a lot about the feel and appearance of their bathroom. And this can be done relatively easy, by adding new vanity lights, granite countertops, nicer tiling, and a new sink. And your bathroom does not need to be completely upscaled. In fact, a midrange remodeling has a higher ROI than a much fancier one.
Cost and ROI: 60.1% on $24,424
5. Get your paint on
Giving the inside of your home a nice fresh coat of paint can immediately make it look more sophisticated and put together. Paint chippings and other seemingly slight imperfections are particularly noticeable in marketing photos, so you definitely want to make sure to avoid anything that may raise eyebrows. It is especially important to add new paint coats in high traffic areas, and it is recommended that neutral colors, such as gray, beige, or white, are used.
Cost and ROI up to 107% on $967
6. Let your landscaping do the talking
Just like an upgraded doorway, landscaping also greatly increases your home’s curb appeal and can help attract interested buyers. By adding trees, flowers, or simply demonstrating that your lawn is cared for, through mowing, raking, fertilizing, and pruning shrubs, your house will increase in value. It is important to make sure that the style of your home does not clash with the landscaping. For example, if you live in a very modern looking home, you may want to avoid an ornate English-style garden.
Cost and ROI: 100% on $3,000
7. Energy efficiency is a win-win
Having an energy efficient house is not only great for the environment, but it also reduces the home’s utility bill. Making sure the home is tightly insulated will help reduce heat loss during the winter, and replacing any incandescent bulbs with halogen bulbs, compact fluorescent lamps (CFLs) and light-emitting diode (LED) will offer longer lasting light. Additionally, central A/C is more efficient than room air conditioners, not to mention that they are also out of the way, quiet, and convenient to operate. According to Harvard University’s Improving America’s Housing study, many home improvement and replacement projects are related to home energy use, with tens of billions of dollars a year spent on these types of improvements.
Cost and ROI of a standard energy-efficient insulation project: upwards of 116.9% on $1,268
8. Go for a new garage door
An upgraded garage door ranked number one in ROI when compared to 22 other home improvements examined in Remodeling Magazine’s 2021 “Cost vs. Value Report.” In addition to enhancing your curb appeal, upscaling your garage door can increase the ease and convenience of coming and going. If your door is currently made out of wood, consider replacing it with steel, as this material is not only less expensive but also lighter, easier to maintain, and less likely to crack due to weather conditions. Just be sure you know the exact dimensions of your garage before attempting this renovation.
Cost and ROI: 93.8% on $3,907
9. Bring unused areas to life
Converting unused areas, such as a basement or attic, into a liveable space like a home office or guest suite can also help your bottom line. In addition to making these areas more useful in the short-term, attic and basement transformations increase the overall number of amenities in your house, making your property that much more attractive to potential buyers. It’s important to know that bedroom count is usually one of the first things homebuyers look at when they begin the process of looking for a new home. So if you want to increase the number of rooms in your house, make sure they have two exit points and are at least 70 square feet, with no less than 7 feet in any direction (both horizontally and vertically). And while closets aren’t absolutely necessary, buyers typically expect to see them inside any space classified as a bedroom.
Average cost and ROI 77.6% on $62,834 for basement remodel and 84.3% on $49,438 for an attic remodel
Renovation ROI varies by market
While these nine home improvements are definitely worth considering if you’re thinking about putting your home on the market, it is important to recognize that these prices and ROIs are national averages. In reality, the amounts vary depending on location, so make sure to do your own research or consult an expert before putting on the gloves and putting down the money.
3 home improvements that don’t tend to add value
Although upgrading your home may seem like the obvious way to increase its value, some improvements cost more than the return on investment you will receive. In general, luxury upgrades to bedrooms and living spaces tend not to do as well as more mid-level upgrades to kitchens, bathrooms, and floors that appeal to a larger pool of buyers. The same holds true for major investments in pools and outdoor patios, especially in markets where the weather tends to fluctuate across the year. With that in mind, you might want to think twice before spending time and money on the following renovations.
1. Pools can be a problem
Pools are a polarizing topic for buyers — some seek out a home with a pool, but others see it as a safety concern or a massive maintenance burden. Whether a pool is a worthwhile investment also greatly depends on the climate in which you live. But even if you live in a warm and sunny area, you might not use it as much as you think. If you do choose to make the investment, inground pools are the most popular and are typically vinyl-lined, concrete, or fiberglass.
Cost and ROI: 43% on $57,500
2. Consider saying no to a backyard patio
A backyard patio may sound like a great idea, but like pools, it is not worthwhile in areas with less desirable weather conditions. Additionally, having a patio can lead to plant drainage and it can be overtaken by weeds, creating work for the homeowner. However, with more people eating at home due to the pandemic, a nice outdoor patio for meals has definitely gained in popularity. So if you do want to tackle this project, you’ll need to make sure you remove all of the sod in the area where the patio will be, add landscape fabric, build a base of gravel and sand, and then place the stones down as close together as possible.
Cost and ROI: 47.6% on $3,994
3. A master suite isn’t that masterful
A master suite addition ranked dead last on Remodeling Magazine’s 2021 list of renovations that offer the greatest return on investment. While some features like a remodeled kitchen or new hardwood flooring appeal to a wide range of buyers, for most, a basic master bedroom and bathroom are enough to satisfy the requirements of a private space. Having an elaborate master suite does not typically make or break a potential buyer’s decision. However, if this is a project that will increase your own comfort, it could definitely be worth considering.
Cost and ROI: 47.7% on $320,976
While these three home improvements won’t bring about the highest return on investment, that doesn’t mean you should never consider them. Your home should be a place that makes you happy. So, if you’re planning to be there for a while, bring on the outdoor kitchen and custom accent wall behind the master bed frame. It’s the personal touches that make a house a home, and what you do with yours is ultimately up to you.
What to do if you can’t afford home renovations
If you’re ready to start renovating after reading and researching which ones are most worthwhile, the financial cost or such improvements doesn’t have to be an obstacle in transforming your home. Here are some solutions to assist with the costs that accompany an upgrade of your home:
Sell as is
Sometimes a buyer will want to make the specific renovations on their own so that it reflects exactly what they want. In this case, none of the aforementioned improvements will come out of your pocket. It is important to adjust your listing price to accommodate for this and be aware that buyers may try to negotiate the price even lower, especially if the property is in bad shape.
REX Home Prep program
The REX Home Prep program offers a great solution for those looking to maximize their selling price without a huge upfront investment. When you are ready to sell your house, we’ll develop a tailored home improvement plan to get your property market ready, including things like deep cleaning, repair work, painting, lawn care, storage, staging, and more. Then, we’ll take it a step further by covering the pre-listing improvement costs up to 1% of the home’s value (capped at $5k). The best part is that there aren’t any additional fees or interest payments — REX will recoup our investment either when your home sells or the listing agreement ends.
Cash out refinancing
A third great solution is to work with REX Home Loans or another trusted lender to reduce your interest rate and take cash out of your equity in order to use that money for home improvements. This cash out refinancing is another way to make those renovations on a more constrained budget.
These solutions are in place so that the house you put on the market is one you are confidently ready to sell.
The bottom line
At the end of the day, unless you are using your home solely as an investment property, the most important factor in determining whether to do a home improvement is the personal value you will derive from having a home that suits your needs, tastes, and lifestyle. Take some time to think about what home improvement projects are right for your home and overall happiness.
If you are strongly considering listing your home and you know that it could definitely stand to have a few repairs, it may be wise to talk to a local real estate professional who can guide you on the specific improvements that buyers are looking for and that are getting the most return in your area.
Selling your house can be a stressful process, but REX can work with you every step of the way to ensure that you are proud of what you are offering up to buyers.
Give us a call at 855-205-0599.