Home renovations are a great way to enhance your home’s space, utility and appearance. Whether it’s an exterior project like adding on a new deck or an interior improvement such as updating the kitchen, there’s no shortage of ways to improve your home. Although almost all renovation projects will increase your home’s value, some have a greater return than others. By choosing your project wisely, you could pass most of the cost of your upgrade on to your home’s future buyer in the form of a higher sales price.

What to know before you start

There are a few things to know before diving headlong into a major renovation. To start with, each type of remodeling project typically has a certain expected return on investment (ROI). Adding a wooden deck, renovating the kitchen or bathroom and replacing windows generally have the highest ROI. Another consideration is that while you may be able to recoup a significant portion of a project’s cost when you sell your home, you likely won’t recover the full amount unless the renovation fixes a structural problem or design flaw. The exception to this is if your project involves a rental property. Because property investors can increase rent based on improvements, they can recoup the cost over time and not just during a one-time sale.

Location matters

The type of home improvement project isn’t the only factor to consider before starting a remodel. Location plays a major role in determining if the type of project makes sense for the area where your property is located and how much its ROI will be.

One common mistake homeowners make is enhancing their home well beyond the market value of neighboring properties. Prospective homebuyers often gravitate toward neighborhoods based on nearby amenities, local school rankings and, crucially, general home prices. Performing a major home renovation may still increase the interest of potential buyers, but it’s not likely to increase the home’s value well above other homes nearby.

Geographic location also comes into play when thinking about ROI. For instance, an in-ground swimming pool may offset its cost more easily in states with warmer climates where the pool can be enjoyed more months out of the year.

Timing plays a role

How much value your home improvement project can recoup in costs also depends on the state of the housing market. When demand for homes is high, home renovations tend to have a more significant impact on a property’s value than in low-demand situations. Improvements will also have the greatest effect on homes that fall into the average- or below-average pricing category. A knowledgeable real estate agent can help you understand the different market scenarios if you’re looking to time your renovation and get the most value back.

Some projects maintain their value longer

The type of work you plan on doing to your home is something else to consider. Building an addition to your home or finishing a room such as a basement or attic will create a long-term increase in value to the property that’s less impacted by the passage of time. On the other hand, updating the appliances in your kitchen or installing a new HVAC system will enhance your home’s value immediately but will eventually become outdated as time goes by, lessening the long-term ROI.

The renovations with the greatest ROI

Average Renovation/Remodeling Cost ROI
Project Average ROI
Wood Deck Addition 80%-85%
Siding Replacement 75%-83%
Minor Kitchen Remodel 75%-83%
Window Replacement 75%-80%
Bathroom Remodel 70%-78%
Major Kitchen Remodel 70%-78%
Attic Bedroom Remodel 65%-76%
Basement Remodel 65%-75%
Two-Story Addition 65%-74%
Garage Addition 60%-70%

Source: Remodeling Online


In the end, the most important reason to undertake a home renovation is for the enjoyment and utility you’ll get out of it. But if you’re weighing the options among several home improvement projects or your goal is to generate the greatest cost recovery for your investment, all projects aren’t created equal. Understanding your location, the current housing market and the long-term effects of a project will help you maximize your renovation’s value.

If you need funds for a home renovation – either for a place you currently own or one you are considering buying – get in touch to learn about the financing options we offer.