Which Home Improvements Pay Back?

Recouping your remodeling investment may be your goal when you sell your home, however not all improvements give you the greatest returns.

Some home improvement and remodeling projects may significantly increase your home’s value. All home improvement and remodeling projects can be used as a tax break against your capital gains when selling your home. Consider these payback estimates for the most typical home improvement projects:

Project Cost

Average Payback

Add new heat or A/C system

Minor kitchen remodel

Major kitchen remodel

Add bathroom

Add a family room

Remodel bathroom

Add a deck

$2,000. to $4,500.

$2,000 to $8,500

$9,000 to $25,000

$5,000 to $12,000

$30,000

$8,500

$6,000

Compiled from several published surveys

100% for heating

75% for A/C

94 % to 102%

90%

92%

86%

77%

73%

Understanding payback value

Payback value depends heavily on the real estate market and prevailing property values. If the market is slow, expect to see less payback than you would in a fast market. Also, consider the neighborhood. If you remodel your house to twice the size of the other homes on the block, it is unlikely that you will be able to sell at double the price. Payback values can include:

Type of improvement:

Kitchen and bathroom remodels consistently return the most in resale value and almost always help to sell a house.

Scope of improvement:

Projects can be large or small. Small projects tend to be cosmetic, such as; paint, new doors, garden windows, and ceiling fans. Large improvements involve adding or upgrading living space.

Desirability:

Today’s fad may be tomorrow’s standard. Backyard decks, for example, were difficult to find years ago; now they are common. As decks have become more desirable, their resale value has increased.

Cost:

The price of home improvements fluctuates depending on economic conditions and region. If remodeling costs are particularly high in your area (or home sale prices particularly low), you will not recoup as much on your investment as you would if costs were in sync with sales prices.

TIP:

If you are financing your home improvements, the best time to apply for a loan is when interest’s rates are low. The less you pay to borrow money for the job, the less the total cost of renovations. Also, these are estimated payback returns. Other factors include: quality of materials and products used in the renovations.