The ROI of Home Improvements – Will Improvements Increase Your Value

The ROI of Home Improvements – Will Improvements Increase Your Value


If you spend $20,000 on a new outdoor
kitchen does that mean that your home is now worth $20,000 more? Hi this is Andrew
with The Andrew Smith Team of the EXP Realty and I saw a question very similar
to that on the Nextdoor app last week where someone was asking about the ROI
of an outdoor improvement project that they were looking to make. I thought it
was a topic that would be good to go in to as it’s a question that’s fairly
common and the answer depends on more than just the improvement to be honest
with you. When you start looking at making home improvements and then try
to calculate the ROI the difficulty and the challenge is that it’s not just the
improvement that is being factored in. Now last week I did a video on how
supply and demand affects home prices and that same theory is applicable here.
Here’s what I mean. The overall market, and what’s going on
in your local area, is going to play a large role, rather than just the
improvements that you’re looking to make. For instance, if
you’re in a hot area and pools are in high demand and you’re in a home that
doesn’t have a pool, and pool homes sell faster and for more money than non pool
homes, then for you adding the pool could make sense. You are going to get a better
return on that overall then you would have when you didn’t have a pool. So
there’s you know it depends, local market conditions definitely play into that. Also when you
look at the actual type of improvements that you’re considering it depends on
what category those improvements would fall into. Here’s what I mean, if we’re
talking a maintenance item plumbing, electrical, air conditioning, heating, roof
okay a buyer doesn’t like having to make those type of repairs upon buying the
home. A buyer coming in that’s writing an
offer and you know attempting to purchase your home, they expect the
plumbing to work, they expect heating and air-conditioning, they expect no
electrical problems and they expect that the roof doesn’t leak. If you’ve got
issues in some of those areas, but you spend $10,000 remodeling
your kitchen, the buyer is not going to be as impressed or concerned by the fact
that they’ve got great new appliances when they have water coming in from the
next rain because the roof leaks. So you’ve really got to keep things
in perspective on what in your particular home needs to be done. The
other item is bells and whistles improvements. If you’re looking at
adding an unbelievable surround sound system or you know installing
speakers throughout your entire home that are very high level,
depending on where you live, if you’re a waterfront home in Miami that
may be expected in that neighborhood, if you’re a standard residential home in a
tract development in any other area in the country that might not be such a
good idea. You’re not going to get the return on that. In general, kitchens and
baths offer the best return overall. Those are two rooms that buyers focus on
when they’re looking at buying. If you’ve got a home that’s very dated, you know
it’s got dated cabinets, dated appliances, old tile counters and you’re
being compared to a home where they’ve gone ahead and redone the kitchen, they
have new appliances, new cabinets, new countertops- the home with the updated
kitchen, all else being equal, is going to sell faster and for more money than your
home. Are they going to get dollar for dollar back on that kitchen, you know
the money they spent on that kitchen, maybe, maybe not depending upon the other
market conditions. The other thing is if most of the homes in your
neighborhood say are a 4 bedroom 3 bath and your home is a
3 bedroom 3 bath, if you were to add square footage and add a 4th bedroom,
then that is absolutely going to offer you a good return on investment. You’ve
kept the improvements that you’re making consistent with what is common in your
particular neighborhood. The bottom line is it really does depend on several
different factors. The other one in there is how long you’re going to remain
in the home. If you’re going to put in an outdoor kitchen, or a pool, and
then you’re planning on selling in 18 months
that’s probably not worth it. You’re not going to recover that money, but you know
if your family’s at an age where those are things that you are likely to enjoy
yourselves over the next 5, 6, 7 or 8 years then that has value to you
and your family over and above the return that you will possibly get when
you sell. Hopefully that helps gives you a little bit of guidance with
regards to the improvements that you’re looking to make. A lot of it has
to do with your own personal needs and wants and then also paying attention to
what’s common in your local marketplace, but as always, if you have any questions please
feel free to shoot me an email [email protected] or give me a
call at 888-447-9650 and I’d be
happy to discuss your specific situation through with you and see if I can’t
offer you some advice that works for you

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