With the homebuying season in full bloom, you may be thinking of heading to The Home Depot or another home improvement store to buy some supplies for an add-on or another project on your humble abode.
But money expert Clark Howard wants you to think carefully about your motives before you hire a contractor or take on a home project by yourself.
Clark says envisioning a huge payday down the road when you sell your home is not a good reason to spend your hard-earned money on renovation projects.
Clark’s Only Reason for a Home Improvement Project
“The reason you do an improvement to your home is because you want to,” Clark says. “Because you end up losing money when you do a home improvement; you don’t make money.”
Clark says the exceptions are repairs or updates, such as painting or landscaping, that you’d usually do before you put your home on the market. In those cases, it makes sense to do some sensible upgrades that can add to your home’s curb appeal.
On the other hand, if you’re just trying to dump your hard-earned money into your home for the sake of getting it back when you sell it, things could backfire badly, according to Clark.
“It’s almost unheard of that any improvement to your home will pay you more in later resale value than what it cost you to do it. In fact, it’s typical that when you do a home improvement, you’re going to get about 50 cents back on the dollar in value when you sell your home,” he says.
Home Improvement Projects Average Rate of Return
“Let’s say you spend $50,000 on a kitchen remodel. You’re going to lose somewhere close to $25,000 of that,” says Clark. “Because when you sell the place, you might get $25,000 more in value, but you’ve spent $50,000 to get there.”
There’s data to support Clark’s point. Remodeling Magazine’s 2023 Cost vs. Value Report discovered that a major kitchen remodel only recoups 41% of a homeowner’s investment.
Of 23 home projects listed in the report, only four of them give homeowners 100% or better returns. Take a look at the top 10 on the list.
| Project | Job Cost | Value at Sale | % Cost Recovered |
|---|---|---|---|
| HVAC Conversion (Electrification) | $17,747 | $18,366 | 103.5% |
| Garage Door Replacement | $4,302 | $4,418 | 102.7% |
| Manufactured Stone Veneer | $10,925 | $11,177 | 102.3% |
| Entry Door Replacement | $2,214 | $2,235 | 100.9% |
| Siding Replacement (Vinyl) | $16,348 | $15,485 | 94.7% |
| Siding Replacement (Fiber Cement) | $19,361 | $17,129 | 88.5% |
| Minor Kitchen Remodel | $26,790 | $22,963 | 85.7% |
| Window Replacement (Vinyl) | $20,091 | $13,766 | 68.5% |
| Bathroom Remodel (Midrange) | $24,606 | $16,413 | 66.7% |
| Window Replacement (Wood) | $24,376 | $14,912 | 61.2% |
The report says, “While the projects with the highest returns have edged over 100%, those at the lower end of the ROI range have dropped well below 50%, with the overall cost–value ratio down to 34.8%, the lowest in the history of the report.”
Read the full report from Remodeling Magazine.
Final Thoughts
Before starting any home improvement project, make sure you’re doing it for the right person. Clark says you should do it for yourself, not the home’s next owner:
“Please remember the real reason that you do a home improvement project, a home upgrade, a renovation,” says Clark. “You do it for your pleasure, not for your wallet.”
