If you’re planning a home improvement project this year, money expert Clark Howard has one thing he wants you to keep in mind.
He says there’s only one reason you should make a renovation to your home.
Clark says the only reason to renovate your home is for your own enjoyment.
“The reason you do an improvement to your home is ‘cause you want to. Because you end up losing money when you do a home improvement; you don’t make money.
“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.”
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.
Remodeling Magazine’s 2021 Cost vs. Value Report looked at the costs and return on investment (ROI) of home renovation projects in 150 housing markets across the United States.
The report concludes that the majority of projects return less than 75% of their costs upon resale. It found only two projects that returned more than that: garage door replacement (93.8% ROI) and adding manufactured stone veneer (92.1% ROI).
It appears that “more is less” when it comes to kitchen remodeling. The report puts the ROI at 72.2% for a minor kitchen renovation but only 60.1% for a midrange kitchen redo. And for an upscale kitchen remodeling project, the report says the ROI would be only about 54%.
“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.”
Improvements made to the outside of your home are generally better moneywise than interior renovations: According to the 2021 Cost vs. Value Report, 11 out of the top 12 projects yielding the greatest return on investment were exterior improvements.
Deck additions yield an average 63-66% return on investment according to the report, which also finds that replacing your vinyl siding could get you a 68% ROI.
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.”
To hear Clark’s full take on this topic, listen to this segment from his podcast:
This post was last modified on July 2, 2021 3:34 pm
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