While all home renovations increase the value of the home for the people living in it, there are certain renovations that also increase the house’s value on the real estate market, either for resale or as a rental property. Owners of rental properties are likely to see value in both those categories, as they will be able to charge higher rent for a nicely renovated home and they will also be able to recover some of the renovation costs when the house is eventually sold.
Return on Investment
Home owners should be aware that most renovations do not actually raise the value of the home commensurate to the amount spent. The exception to this rule is if you are fixing a significant design or construction flaw; to be fair, though, the cost recovery on such a fix brings the house back up to fair market value when the flaw would have dropped it well below similar houses without that flaw. It still does not typically mean that the house will command a sale price well above its neighbors.
That last bit is especially important because one of the common mistakes that eager remodelers make is improving their homes far beyond what the market will bear. Buyers tend to be attracted to particular neighborhoods because they are comfortable there, and part of that comfort level is being able to afford the “average” home. Most buyers are not going to pay a premium to own the nicest house on the block.
What Renovations Are “Worth it”?
As stated above, renovations typically do not earn back what they cost. However, as a general rule, adding a deck and replacing siding are the renovations with the greatest ROI at somewhere between 75% and 85%. Adding a garage or a second story come in last on the list at between 60% and 70%.
However, remember that the real reason to renovate is because it will improve your life – and adding a garage or more bedrooms to your house is definitely an improvement for families who are outgrowing their homes.