What Can You Expect for a Return on Your Investment?

If you’re considering a renovation in preparation for selling your home, your return on investment (ROI) will be top of your mind. But even if ROI isn’t the primary reason you’re thinking about a remodel, it should be part of your planning. In fact, if you’ll be staying in your home for another 10 years or more, you’ll likely see a greater ROI through the natural appreciation of your home’s value.

Renovations with the highest ROI make the space more usable and more modern, sometimes extending the square footage of the home. They’re not changes based on current trends, but long-lasting improvements. Most of all, they’re renovations that are done well. Buyers can spot hasty, unprofessional work and cheap fittings — and you don’t want to live with them, either! DIY work done without permits can incur expenses when reselling, as you may have to retroactively acquire permits to ensure the work is up to code during the inspection stage.

So how much can you plan on recouping? The highest-value renovations are kitchens, bathrooms, and expansions. According to a recent report by the National Association of the Remodeling Industry, kitchen renovations can recoup around 80% of their cost, and can even have up to a 96% return, making it one of the top renovations in terms of value. A well-done bathroom can recoup 70-75% of its cost.

Increasing square footage of the house is another one of the best ways to increase its value, whether that’s finishing your basement, converting a deck to a sunroom, or making an addition. A finished basement instills an extra layer of confidence in buyers, as a basement renovation ensures the space was waterproofed, and would have uncovered and addressed any issues with the foundation. Homeowners can recoup between 60% and 80% of the cost of finishing their basement.

Those are attractive numbers, but how can you be sure your project qualifies? GMH will give you expert advice to give you the highest possible return on investment. Before our first visit to your home, we’ll thoroughly research your neighborhood and the sales data on comparable homes in order to help you set realistic goals. You want to avoid over-improving; the value of your renovated home should be close to that of your neighbors’, or it will be difficult to sell at the assessed price. For example, the best way to hit that 80% ROI on a basement remodel is if the project brings the usable square footage of your house into line with the average in the neighborhood, rather than blowing past it. If you’re financing your renovation, it may even be difficult to get funding, as financial institutions will consider sales comps when debating approval of a loan.

What can you do to maximize ROI? Higher sales price is just one side of the equation; the other is containing your costs. Beyond working with your contractor to choose your projects wisely, you’ll also want to look at your expenses. You may hit your target number for resale value, but ROI will depend on whether you hit your budget for the renovations. Be sure to create a realistic budget and stick to it.