Home renovations not only improve quality of life for occupants, they increase the value of a home. However, not all home renovations are equal when it comes to adding value. 

Remodeling with ROI in Mind

When deciding on which renovations to do to your property, the thought of return on investment, or ROI, should always be in mind. ROI from a home renovation depends on several factors including: real estate market conditions, home location, project type, and timing. A good rule of thumb is that you can expect a 70% average ROI from home renovation projects.

Home renovations with the best ROI are projects that add functional space and square footage to your property. Keeping that in mind, this makes the type of project one of the biggest factors when it comes to determining the ROI for your renovation. Some of the top home renovations with the biggest ROI include:

Kitchen & Bathroom Renovations

Kitchen and bathroom renovations remain one of the top home improvements with the highest levels of ROI. Why? Because kitchens and bathrooms are functional and filled with appliances that are necessary in every home. This makes these spaces useful for any potential buyer or tenant. 

It’s important to keep in mind that a high ROI may not be true if you’re completing a renovation that is purely aesthetic, using luxury materials and finishes, or creating a space that is not normal in your neighborhood.

Finished Basements

By adding functional space to your home with a finished basement, you can be almost certain that you will receive a good ROI. Additional space and square footage can even move your home into a higher price bracket when it comes time to sell. The addition of a finished basement and livable areas can make your home more appealing to potential buyers.

Curb Appeal

Curb appeal is the first thing potential buyers notice when they see a property. Overall, any projects that improve the exterior of a home – including renovations that may not be an aesthetic improvement like new windows, roofing, and siding – will result in a high ROI.

Refinishing Hardwood Floors

Hardwood floors are considered the gold standard in flooring, and are often favored over carpet, because of their classic look, durability, and ability to be cleaned. Refinishing existing flooring is one of the best home renovations that not only modernize a space, but also bring more functionality and livability to an existing space. 5% of real estate agents who have suggested refinishing wood floors to their clients have seen the update help close a sale.

Short-Term vs. Long-Term ROI

While you can expect a positive ROI on most home renovations, it’s important to understand which renovations will provide you a long-term ROI and which will provide a short-term ROI when it comes time to sell your home.

Renovations that do not rely on design trends and add functional space and square footage to your home will result in a long-term ROI. These renovations include home additions, finishing basements, or upgrading appliances. Whether you are planning to sell your home in five years or twenty years, the value these renovations add withstand the test of time.

Home renovations that are completed for aesthetic purposes are ones that will result in short-term ROI. While an updated kitchen is one of the top home renovation for ROI, if you are giving your kitchen a farmhouse makeover, you may boost your homes value in a hot market within the next few years – but if you are not planning on selling for another twenty years, the design style could be seen as outdated to potential home buyers.

The Bottom Line

Home renovations that are desirable by potential buyers and tenants are always relative to location, real estate market, and project type. So it’s important to note that there are some renovations that may not add significant value to your property. These include luxury upgrades, aesthetic-only improvements, or renovations that are not normal for homes in the neighborhood.

Your home is an appreciating asset so it makes sense to invest in home renovations to keep it in good condition. If you’re an experienced investor looking to fund your next Fix and Flip project, First Equity is here to help! Our fix and flip loan program is a quick, easy and reliable method for funding your next project. Learn more about our Fix and Flip Loans and Get a Quote today!