Best renovations for adding value to your home
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Renovations have the ability to make us happier in the places we call home, but some updates can add more value than others when it’s time to sell or refinance. Some of the best home improvements — think an updated kitchen, new deck or remodeled bathroom — can get pricey. That’s why before you decide to take on a remodeling project, it’s helpful to know what kind of return on it you might expect — that is, how much of its costs it’ll recoup, in terms of adding to your home’s value and asking price when you put it on the market.
Best home renovations in 2022
Each year, Remodeling magazine analyzes costs for major remodeling projects with the value those projects retain at resale. Recently released, the 2022 Cost vs. Value report compares the average cost of 22 remodeling projects in 150 markets throughout the U.S.
Here are the six home remodeling projects that nationally deliver the highest returns on investment (ROI), according to the report. So if you’re thinking of listing your home, these are the renovations that should top your to-do list.
1. Garage door replacement
- Average cost: $4,041
- Average resale value: $3,769
- Cost recouped: 93.3%
A good-looking garage door is high on the list when it comes to getting cash back on your investment. The estimate for this job is based on the cost of removing and disposing of 16-by-seven-foot garage doors and replacing them with four-section doors with heavy-duty galvanized steel tracks, and assumes you’re reusing the motorized garage door opener. This curb appeal enhancer could get you back nearly the entire amount (93.3 percent) of what you spent on it when you sell your home — one of the few home remodeling projects to do so.
2. Manufactured stone veneer
- Average cost: $11,066
- Average resale value: $10,109
- Cost recouped: 91.4%
Stone always imparts a classic, classy vibe. Replacing vinyl siding with stone veneer — even on just a part of your home, such as the entryway — can greatly enhance the exterior and, again, the curb appeal of a house. The average cost estimate accounts for 36 linear feet of sills, 40 linear feet of corners and one address block, and materials including two water-resistant barrier layers and corrosion-resistant lath and fasteners. This project also recoups almost all of its cost (just over 91 percent).
3. Minor kitchen remodel
- Average cost: $28,279
- Average resale value: $20,125
- Cost recouped: 71.2%
A modern-looking and functional kitchen can of course boost your enjoyment of everyday activities like cooking, sharing meals with your family and entertaining friends. It’s a strong selling point with prospective home buyers too. A minor remodel, as the report defines it, is based on a 200-square-foot kitchen with 30 linear feet of countertops and cabinets, where you might be replacing appliances with new, more energy-efficient models; refacing cabinets with shaker-style panels; installing new countertops or a sink; replacing hardware; adding new flooring; and repainting the walls. Except for the appliances, it mainly involves cosmetic changes, and that’s how you’ll recoup close to three-fourths (71 percent) of your outlay. If you’re thinking ROI, keep the project modest. Interestingly, major kitchen remodels that involve changing the room’s size or layout, or installing new cabinetry, return much less: 53–57 percent.
Old or dilapidated siding can make even the nicest, structurally sound home look worn-out. The report considers replacing it with two types of quality man-made materials: fiber-cement and vinyl.
- Average cost: $22,093
- Average resale value: $15,090
- Cost recouped: 68.3%
For the average home, replacing 1,250 square feet with new fiber-cement siding will cost you just over $22,000 and you can expect to get back more than two-thirds of that investment upon resale. This upgrade includes 4/4 and 5/4 trim (4/4 and 5/4 are fractions measuring thickness).
- Average cost: $18,662
- Average resale value: $12,541
- Cost recouped: 67.2%
Vinyl siding can be more budget-friendly than fiber-cement siding, but it has nearly the same ROI. The $18,662 average cost estimates replacing 1,250 square feet with the new siding, and you should get back roughly 67 percent of that investment upon resale.
Windows are the eyes of the home, it’s sometimes said. Again, you have a couple of options, frame-materials-wise, which impact the ROI a bit.
- Average cost: $20,482
- Average resale value: $13,822
- Cost recouped: 67.5%
You could recoup just over two-thirds of the cost to replace your current windows if you install low-E, simulated, divided-light vinyl windows with a custom-color exterior finish. (Low-E means low emissivity, an energy saver.) You’ll want to ensure that the trim exterior matches existing ones, and the interior trim is left untouched, to keep costs within range. The average cost for this type of renovation — which accounts for 10 windows — will set you back $20,482.
- Average cost: $24,388
- Average resale value: $16,160
- Cost recouped: 66.3%
If you do the above, but make the frames out of warmer wood windows (better for older or more traditional-looking homes), you’ll spend a little over $24,000 for the job. Not surprisingly, since wood is more expensive, your expected return on investment drops by a full percentage point.
6. Deck addition
Having a finished outdoor area to work, entertain or just relax in is tops on many prospective homebuyers’ wish lists. The deck remains one of the most popular sorts of “hardscaping” elements. And yet again, material does matter.
- Average cost: $19,248
- Average resale value: $12,464
- Cost recouped: 64.8%
The classic wood deck is less expensive to install — though it requires more upkeep — and offers a pretty good return, close to two-thirds of its outlay. The estimate is for a 16×20-foot deck with a simply patterned floor, railings and stairs — plus a built-in planter and bench.
- Average cost: $24,677
- Average resale value: $15,315
- Cost recouped: 62.1%
Composite decks have exceptional durability. You won’t have to worry about them rotting, warping or splintering like wood tends to do. As a result, they’re more expensive, which hammers their ROI somewhat, down to 62 percent.
How to pay for home renovations
The good news is that there are a number of ways you can pay for them. To finance home improvements, consider a home remodel or home repair loan, which are unsecured personal loans you can get through a bank, credit union or online lender. You can also use credit cards to cover home renovations, although the interest rates can be high.
If you want to go the secured loans route, mortgages can also pay for home renovations. You can obtain a home equity line of credit (HELOC), which is a revolving line of credit that’s backed by your home. Because HELOCs are secured, they tend to have lower interest rates than unsecured loans.
Alternatively, you could get a home equity loan, also known as a second mortgage, which has a fixed rate, is paid out in a lump sum and repaid over a predetermined duration. A home equity loan might be a strong contender to pay for home improvement projects if you have a firm idea of what you want to do and how much it’ll cost.
You could also do a cash-out refinance, which swaps your current mortgage with a new, bigger loan so you’ll have the funds to make renovations. Refinancing comes with closing costs and can stretch out the length of your repayment period, but if you can get a low interest rate, it can be one of the more cost-effective options.
Bottom line on home value-enhancing renovations
Bear in mind that these figures are national averages. Costs can vary greatly by region based on the cost of labor and materials, as well as the level of service offered. And they can change. “Inflation is a major factor in home remodel materials, as many common materials and contractors are increasing in prices,” says Mary Anderson, co-founder of Brotherly Love Real Estate, a Philadelphia-based firm that buys houses for cash. Particularly wood: The ROI on all the lumber-involved projects has dropped significantly this year, as prices have soared.
Still, the right remodeling project can still boost your home’s worth over time. If you refinance, for instance, an appraiser takes renovations into account when estimating your home’s value. A higher home value means you’ll have more equity and a lower loan-to-value ratio. You might even be able to cancel private mortgage insurance payments earlier than anticipated.
Likewise, when you go to sell your home, buyers are likely to pay more for a clean, well-kept property with modern updates that’s move-in ready .
Other options suggested by Ryan David, owner of We Buy Houses in Pennsylvania, include, “Use tax refunds to pay for renovations. Or, use your business funds if you have, for example, an S Corp. If you are flipping homes, the money you use you can write off as business expenses.”