Which home improvements
give the best payback?
If you’re thinking about
remodeling your kitchen, or finishing your basement, you probably want
to get your investment back when you sell your home.
But when it comes to payback value of home improvements, some are
definitely more profitable than others. As a
general rule, kitchen and bathroom projects usually get a nice return on
investment, typically 90% or more.Things like
adding rooms or finishing basements tend to pay back the least.Finishing a basement usually returns less than 50%, so
it’s not a project likely to show profit at selling time.
There are a number of
factors that go into determining how well a project will pay back. Payback value depends a lot on the current market
conditions in your area. If the market is hot and
homes are selling fast, you can expect a higher payback value than you
would get in a slow market.
The type of project you
do and how it fits in with other homes in the area can have a big
influence on payback too. If you put your money
into the wrong type of improvement, you won’t get your money back. But if you're smart about what you do, you can make
money. The payback will be better on improvements
that are in demand and conform to neighborhood standards. Adding
a second bathroom in a neighborhood where most homes have two bathrooms
will give a high return on investment. Building a
large addition that makes your home twice as big as the other homes on
the block probably won’t pay back very well. Likewise,
the popularity of a project will factor into how much it pays back. An improvement heavily customized to your wants and
needs won’t pay back as well as something more common to other homes in
the neighborhood.
Another factor to
consider is the cost of the improvements. If you
can do the work yourself, you can save significantly on the cost of the
project and greatly improve the chances of getting a good return on the
investment.
The list below is
compiled from several published surveys and shows typical payback for
some popular remodeling projects:
-
Kitchen remodeling – 90%
-
Add a bathroom – 90%
-
Bathroom remodeling – 80%
-
Install central heating –
90%
-
Install central air – 75%
-
Add a deck – 70%
-
Replace windows – 70%
-
Add a room – 55%
-
Build a pool – 45%
-
Finish a basement – 40%