A Look at ROI and How It Impacts Home Remodel Results

When deciding on how to spend their home remodel funds, homeowners can look at potential ROI rates to make the best decision for their household.

A Look at ROI and How It Impacts Home Remodel Results Close
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A Look at ROI and How It Impacts Home Remodel Results

Posted by Gary Ashton RE/MAX Advantage on Monday, February 3rd, 2020 at 8:42am.

What is ROI - And How Does it Affect Home Remodels?No matter what room is getting the makeover, home remodels can costs thousands. Kitchens ring in at around $20,000 on average, while just putting in new wood floors can cost over $4,000. While these improvements often dramatically improve the look, feel, and function of the space, it is nice to have an additional return. Thankfully, when properly completed with quality materials, home remodels do offer a return on investment, or ROI, that offsets some expenses. Here's how it works.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

What is ROI?

When completing home remodels, the improvements can boost the value of the property, providing a return on investment. The ROI is expressed as a percentage of the total cost of the project, and it reflects how much the value of the property might increase.

The overall value increase offsets the cost of the project, though it is not received until homeowners elect to sell the property. As they use the improved areas, wear and tear tends to slowly decrease the return over time.

Common ROI Rates for Home Remodels

The ROI rate differs across all projects, with some areas offering a much higher return than others. Here's a look at the most common ROI rates for home remodeling projects.

Bathroom

A bathroom remodel will typically provide an ROI of up to 70 percent. For homeowners who spend $10,000 on the remodel, that 70 percent return rate translates into a $7,000 increase in value of the home. If they continue to live in the home, however, the rate will steadily drop as the materials start to show wear, as is the case with most home improvement projects.

Kitchen

Depending on its state prior to the remodel, the kitchen usually provides the largest potential ROI of all home improvement projects. Minor kitchen remodels may offer a return of up to 80 percent, while major overhauls are usually at the 65 percent ROI range. The quality of the materials and appliances goes a long way in boosting the return, as high-end finishes are incredibly desirable to home buyers.

Siding

Siding projects rival kitchen remodels in providing a high return on investment. Depending on the materials used, siding remodels can bring in a 70 to 80 percent ROI. On average, siding projects cost around $15,000, which can then boost the home value by as much as $12,000. Regular siding maintenance can help protect this investment and ensure the full return is realized when the home sells.

Roof

As it protects the interior space and makes the entire home look fantastic, the roof is another place where a high ROI is the norm. Most roof renovations offer up to a 70 percent ROI to homeowners. Roofing costs can vary dramatically as a result of the difference in price across all materials. Metal roofs, for example, can run up to $900 per square foot, while asphalt only costs around $200 for each square foot at the most. The return can differ a bit as well, depending on the expected life of the materials and provided warranty.

By looking at these potential returns, East Nashville homeowners can best allocate their funds if they are looking to get a high return when they sell in the near future. Otherwise, they might use their home improvement funds differently, depending on the needs of their household. Either way, their understanding of ROI will help guide their decision and best use their home remodel funds for their next project.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

 

Gary Ashton

The Ashton Real Estate Group of RE/MAX Advantage

The #1 Real Estate Team in Tennessee and #2 RE/MAX team in the World!

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