Been in your home a while? You’re probably starting to notice a few signs of wear and tear. And you’ve probably also picked out a few things that just need improving. Maybe you want to add another bedroom or convert an outdoor patio into a climate controlled sunroom. But what if you’re planning to sell soon? Even if you’re not thinking about that right now, this is life! The unexpected is about the only thing you can truly expect. So, you might want to consider the financial impact of your home repairs.
It might be tempting to do the improvements you want to do first, but disciplined homeowners understand the value of treating their abode like an investment. After all, a home is almost always the largest investment you own. That’s why it makes sense to look at your improvements from a financial standpoint.
And probably the first thing to consider is any repairs that are required from a safety standpoint. Even if you’re paying for liability insurance, there could be financial risks associated with any hazardous conditions like damaged deck railings or an out of code electrical system. What if you or a loved one gets injured and misses work? What about the medical bills? Your ability to work and bring home income must be protected, so be sure to address any safety issues around the home first.
Improvements that PAY!
So after your home is safe, what’s next? Do any improvements actually make you money on average? Or are they at best going to return a portion of your investment in the form of equity?
It turns out, you’re probably never going to get a financial gain out of home improvements. Only a few repairs even come close to breaking even. Most major repairs like bathroom remodels and window replacements only yielded an average 80% return on investment in the form of equity. Probably the best way to increase your equity is to focus on curb appeal. Simple things like landscaping or adding a nice wooden deck can really attract more buyers.
But what about numbers? Let’s take a quick look at a few projects based on their return percentages. You might be surprised at the different results:
Backyard Patio – 47.6%
Bathroom Addition – 59.9%
Midrance Bathroom Remodel – 70.1%
Upscale Bathroom Remodel – 56.2%
Midrange Deck Addition (Composite) – 63.6%
Midrange Deck Addition (Wood) – 82.8%
Midrange Entry Door Replacement (Steel) – 91.3%
Midrange Kitchen Remodel – 59.0%
Upscale Window Replacement (Vinyl) – 74.3%
Upscale Window Replacement (Wood) – 69.5%
More percentages available here: http://www.remodeling.hw.net/cost-vs-value/2018/
Notice how the value changes depending on the materials you use? It seems like homeowners favor the traditional look of a wooden deck while viewing wooden windows less favorably. In both cases, the manmade material is going to be much more durable though. As I stated before, it sometimes has everything to curb appeal and less to do with reason.
The Bottom Line:
At the end of the day, you can’t really view home improvements as something that will provide a financial return on investment. You’re more or less spending that money to improve your own quality of life while you’re in the home. Sure, most upgrades and repairs will have a positive impact on home equity. But you can’t expect even a dollar for dollar return. So, keep that in mind and focus on the most important repairs and improvements first.