Will This Renovation Project Up My Resale Value?
This is probably one of the most frequently asked questions that I get from potential clients when bidding on a renovation. Why would someone want to sink a ton of money into something that they won't be able to get a return on their investment, or at least maximize that return. Your home is one of the largest single investments that you make and of course as a homeowner, one would naturally want to keep it looking nice and updated for as little money as possible but when it's time to sell, we always want top dollar.
Remodeling Magazine has given us some insight on that burning question with data by region showing a project cost vs. value of a renovation at the time of re-sale. Now if you think "I'm going to get full value of my kitchen renovation cost because I think it's awesome!" think again. Honestly, not one project that you invest in on a home renovation is a "silver bullet" that you can see an instant full return on investment. Of course that all depends on what what the market can support. Ask any realtor and they'll be able to give you all sorts of market stats, comparable home sales and current market demand for your house.
The initial grab in this report is that it provides a snapshot by regional view, of a specific project scenario. It then provides the estimated resale value of that particular project and finally reveals the percentage of job cost compared to the resale value.
First off, being able to show a clear view of what a typical renovation job can cost is a great tool. That can be HUGE for someone on the fence asking the question "How much will this renovation cost?" It also confirms that certain projects around the home can get expensive! You guessed it - kitchens and bathrooms pretty much top the chart.
Looking closer at the report it, shows the regional cost (highlighted) and compares it to the national average (shown in gray), lists the estimated resale value, the estimated recouped cost (percentage) and then compares it to 2019's numbers showing the trend from the previous year.
I'm sure you've heard that the kitchen is the "hub" of a house, a gathering place, so for discussion sake, let's follow the Major Upscale Kitchen Remodel on this report. I'm sure you could easily figure out why a kitchen or even a bathroom renovation top the chart for costs. Well, the hard & fast answer is that more trade work is involved, (i.e. plumbing) and of course there are more fixtures involved like cabinets, plumbing fixtures, and more expensive flooring. Seems pretty logical right? The more hands and materials involved even in a small area of square footage drive the project cost up.
If you dig deeper in this report, you can click on each project scenario and it further shows this cost/value trend for the last decade. Here's that example of that upscale kitchen remodel that is up toward the top of the chart. Check it out....the cost exceeds the value! The percentage of project cost vs. value is currently at 49.5%. Now before you go saying "Oh MAN! I'm not going to spend that kind of money and never see it again!" You actually will. Remember, if you're planning on staying in your house for any amount of time, that is what I would call the "Enjoyment Factor" - the period of time you get to savor the fruits from the project.
So, if you decide to go through with a renovation to your house, it would only stand to reason that you will be the first to get enjoyment out of that improvement. Right?? Exactly!! Kind of like that "new car" smell. That is the un-measurable part of this equation.
So this information is all well and good, but what constitutes a "Major Kitchen Remodel - Upscale"? Well, while within the detail of the project description, you can scroll down and get a better idea of what an upscale kitchen remodel involves, complete with before and after renderings! (Again, this is a general idea of what would constitute the project scenario.)
All-in-all, what have we learned here?
1). Home improvement projects can get expensive in a hurry! It's all in how you look at how the project increases your re-sale value.
2) It is key to navigate through the "cost vs value report" and prioritize projects that make the most sense for your stage in home ownership.
3) According to the Remodeling Magazine, the curb appeal items and "wow factor" improvements still get a decent return on investment (although nothing is 100+%)
4) Timing is everything. If you want to improve your house...do it! It's just important to know the what you're improving toward. Long term enjoyment and eventual re-selling or short term re-sell.
Check out the Remodeling Magazine - 2020 Cost vs Value Chart here: