Which Home Renovations Have the Best Payback

Maybe you're thinking about buying a new house and have to prioritize the features you want? can afford? Or you think an addition will give you the space you need. Your home is a huge investment and you want to spend your money wisely. So this month, we're offering tips on how to research home renovations.

Hanley Wood's annual Cost vs Value report is a good place to start. It provides cost data plus the projected return on investment (ROI) for 29 popular home improvement projects. The report breaks the data down for 99 different markets across the US, so you can get a good idea of costs and value for where you live. Click on each project for details but remember to define your own project scope which may be different than the project they surveyed.

First though, let's review some home price fundamentals. These will help you determine how much to invest in your home.

• Don't spend too much on home renovations. Learn the value of houses on your street and in your neighborhood. You never want to own the most expensive home as you'll have trouble selling and/or recouping what you invest.
• Consider how long you'll stay in your home. Major investments make sense if you plan to stay in your home for a long time. If you plan to move in a few years, focus on low cost changes to showcase your home's best features.
• Stick to your budget by adjusting project scope. For additions you can reduce the footprint by shrinking the flagstone patio from 20 to 18 sq ft. Plan future features but delay their purchase/installation. Start with a fire pit and add the modular kitchen and pergola at a later date.
• Research tax benefits and lower utility bills to help lower costs. Insulation for example, is projected to recoup more than the original investment.

Home Renovations That Add More Living Space

The survey includes 3 types of home improvements that provide added living space – remodeling unfinished space (basement), additions for more indoor space (bathrooms, family rooms and master bedroom suite) and outdoor living spaces (decks and new this year, a backyard patio).

The interior projects have good ROIs with the larger additions estimated to provide returns from 60 to 71% (highest is 2-story at 71%). Only the bathroom addition comes in with a lower ROI of 54% (lower cost project) to the upscale bathroom remodel at 57%.

• Backyard Patio (Cost of $51,985; Resale value $28.547 for ROI of 55%)
• Basement Remodel (Cost of $71,115; Resale value $49,768 for ROI of 70%)
• Bathroom Addition (Cost of $49,232; Resale value $23,283 for ROI of 54%)
  • Upscale Bathroom Addition (Cost of $81,515; Resale Value $46,507 for ROI of 57%)
• Composite Deck Addition (Cost of $17,249; Resale value $11,252 for ROI of 65%)
  • Upscale Composite Deck Addition (Cost of $39,339; Resale value $22,171 for ROI of 56%)
• Wood Deck Additions (Cost of $10,707; Resale value $7,652 for ROI of 72%)
• Family Room Addition (Cost of $89,566; Resale value 62,055 for ROI of $69%)
• Master Suite Addition (Cost of $119,533; Resale value $77,506 for ROI of 65%
  • Upscale Master Suite Addition (Cost of $250,687; Resale value $150,140 for ROI of 60%)
• Two-Story Addition (Cost of $176,108; Resale value $125,222 for ROI of 71%

Home Renovations to Enhance Your Lifestyle

Among the traditional kitchen and bathroom remodeling projects, bathrooms provide the lowest ROI. The minor kitchen remodel offers the best return at 80%. If you're undecided, check similar data for several prior years to make sure you'll get the return you want in 5, 10 or 20 years.

• Bathroom Remodel (Cost of $18,546; Resale value $12,024 for ROI of 65%)
  • Upscale Bathroom Remodel (Cost of $59.979; Resale value $34,546 for ROI of 59%)
• Major Kitchen Remodel (Cost of $62,158; Resale value $40,560 for ROI of 65%)
  • Upscale Major Kitchen Remodel (Cost of $122,991; Resale value 76,149 for ROI of 62%)
• Minor Kitchen Remodel (Cost of $20,830; Resale value of 16,699 for ROI of 80%)
• Universal Bathroom Design (Cost of $15,730; Resale value of $10,766 for ROI of 68%)

Home Renovations that Enhance Curb Appeal

Improvements to your home's exterior continue to provide the highest ROI. One reason is the lower cost of the items compared to larger remodeling projects. Many of these projects (doors and windows listed below) also provide value with lower utility bills and the ability to keep your home at a more comfortable temperature.

• Steel Entry Door Replacement (Cost of $1,413; Resale value $1,282 for ROI of 91%)
  • Upscale Fiberglass Entry Door Replacement (Cost of $3,276; Resale value $2,550 for ROI of 78%)
  • Fiberglass Grand Entrance (Cost of $8,358; Resale value $5,855 for ROI of 70%
  • Upscale Fiberglass Entry Door Replacement (Cost of $3,276; Resale value $2,550 for ROI of 78%)
• Garage Door Replacement (Cost of $1,749; Resale value $1,345 for ROI of 91%)
  • Upscale Garage Door Replacement (Cost of $3,304; Resale value $2,810 for ROI of 85)
• Manufactured Stone Veneer (Cost of $7,851; Resale value $7,019 for ROI of 89%)
• Roofing Replacement (Cost of $20,664; Resale value $14.214 for ROI of 69%)
• Siding Replacement (Cost of $14,518; Resale value $11,093 for ROI of 76%)
• Plus replacement windows listed under Energy Efficiency below

Home Renovations for Energy Efficiency & Emergencies

Loose-fill attic insulation was added to the survey last year and returns a higher value than cost. The return on the backup power generator continues to drop from it's highest point after Hurricane Sandy.

• Attic Insulation (Cost of $1,343; Resale value $1,446 for ROI of 108%)
• Backup Power Generator (Cost of $12,860; Resale value $6,940 for ROI of 54%)
• Vinyl Replacement Windows (Cost of $15,282; Resale value $11,286 for ROI of 74%)
• Wood Replacement Windows (Cost of $18,759; Resale value $13,691 for ROI of 73%)

Have fun planning your next home improvement project!

PS We've got lots more articles on home renovations including these:

• Remodeling Trends Focusing on Lower Costs
• Home Remodeling: Homeowner Priorities Changing
• Home Renovations & Garage Door ROI