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Best Value Home Renovations

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Over dinner last night the topic of what the best return on investment renovations were and I went with the generally accepted addition of a full bathroom as the highest return. After scouring the internet, I found this great site that listed their opinions – I’m inclined to believe, if not the absolute numbers, that their relative place on the list is probably accurate. Tops is the addition of a full 2nd bathroom, average cost of $12k, and a payback of 100%. The worse is to finish the basement, which my friend correctly identified, at a cost of approximately $8k and an average 15% return.



This is the table, with some items removed (which I thought you couldn’t accurately quantify, like landscaping is so broad), from the site:

Home Improvement Avg. Cost Return %
Finish a Basement $8,000 15%
Build a Swimming Pool $10,000 25%
Add a Garage $15,000 40%
Replace Roof $6,000 50%
Replace Siding $10,000 60%
Sunroom $25,000 60%
Home Office $6,000 60%
Bathroom Remodel $7,000 70%
Replace Windows $6,000 70%
Add a Fireplace $3,000 75%
Add a Deck $6,000 80%
Kitchen Remodel Major $30,000 80%
Kitchen Remodel Minor $8,000 90%
Attic Bedroom $10,000 90%
Add 2nd Full Bathroom $12,000 100%

The article they have written is very good, I suggest you read it, because it puts some substance behind the numbers and the article makes good sense. Ultimately though, they say that you shouldn’t go by ROI as your reasons for the improvements. If you will enjoy it aesthetically or it will bring happiness to you personally if you have the improvement done, then you should value that more than its ability to increase your home’s value.

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8 Responses to “Best Value Home Renovations”

  1. Matt says:

    In other words, unless you’re planning on selling in the immediate future, most of the value of a home renovation is not denominated in cash. :)

    The items on the bottom (that is, the lowest-returning ones) kind of surprise me. But the easy ability of an added bathroom or bedroom to translate into higher sale prices is pretty obvious.

  2. jim says:

    Exactly, this is a good guide for people who want to “quickly” boost their home’s value through improvements (not repairs). I was very surprised a finished basement only nets you, on average, only a 15% return. I think you’ll see a higher return if you place is smaller overall (reported square footage of a home is only finished square footage, so you get a boost in total living space if you finish the basement) and the basement is an important living space.

    For example, in my townhouse, the basement is very important. But in many two story single family homes, the basement is an afterthought/storage area. Finishing a storage area probably won’t get you very much.

  3. Carnival of Personal Finance #8

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  4. Matt says:

    On further reflection, my working hypothesis is that the highest-returning home improvements are that way less because of increasing the value of a house to any given prospective buyer than by attracting additional buyers with higher pricing expectations…which, given the nature of the housing market, will naturally tend to be a more effective way to increase the sale price.

  5. jim says:

    Matt, that’s an interesting point you make (which I agree with) and it also increases the expectations of a house. A 2 bedroom, 1 bath place isn’t even on most people’s radar (people put a premium on having their own full bathroom) but a 2 bedroom, 2 bath place is – so you’re effectively increasing the demand by adding the bathroom and not necessarily actually increasing the home’s value by the cost of the project.

  6. Caitlin says:

    I know those are average prices but….wow those are way way lower than Boston area costs to do comparable work. Boy would I love to add an attic bedroom for only $10k. Sigh. (the stairs alone would probably cost me that). I wonder about the affect of passing time on these returns (ie. if a major kitchen remodel is 5 years old, how has the return diminshed)

  7. R. L. Shattuck says:

    Where in the world did you come up with your average remodeling costs listed on this page?
    I’m betting that the links I see listed on this same page wouldn’t touch a basement finish or remodel for $8,000. and these people probably pay you to park their link on this page.
    HELLO, If you go low-mid quality on material to finish a basement your going to have to spend somewhere between four and five grand to get it complete! What’s that leave for the craftsman/tradesman to install?
    IT SIMPLY DOESN’T MAKE SENSE AND YOUR NUMBERS ARE NOT ACCURATE!
    I have two very good friends who are mortgage agents and my girlfriend is a realtor, trust me, your numbers do not reflect an accurate return either!

  8. [...] kid to “shut his pie-hole” doesn’t count.Recover Improvement Costs. Jim from Blueprint for Financial Prosperity has discovered a great resource for determining the return on investment for home renovations. Pop [...]


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