If you are reading this, you most probably came here looking for information on choosing home remodeling projects with the best ROI. ROI stands for return on investment and is the measure of how much value you get after a renovation.
As a homeowner, the biggest challenge is choosing a renovation project that upgrades your home and brings you value at the same time. If this is you, then this is the place to be. In this article, we will define ROI, how to calculate it, and how to choose the projects with the best return on investment.
How to Calculate the ROI of Home Remodeling Projects?
ROI, Return on Investment, is the amount of money you get after investing in a project, e.g., home improvement. It’s an equation you get when you divide the profit by the cost of an investment. For example, a home that’s had kitchen or bathroom remodeling will reach a higher market price than a home that hasn’t had any renovation projects.
The Cost vs. Value Report will guide you in estimating the return on their home improvement ventures.
Costs of Kitchen, Bathroom and Basement Remodels in the US
Kitchen Remodeling
Remodeling a kitchen in the US costs between $22,000 and $50,000. The price relies on various factors such as:
- Size
- Cabinet installation
- Scope of the renovations – complete overhaul vs. specific sections
A major renovation can cost up to $70,000, while an average-sized kitchen typically costs approximately $20,000. A small-sized kitchen averages around $10,000 in cost. If you live In Atlanta, remodeling your kitchen costs between $11,000 to $41,000.
Bathroom Remodeling
Bathroom renovations in the US range from $6000 to $16,000, with the average cost being $10,788. The estimate translates into between $70 to $275 per square foot.
A budget bathroom renovation in Atlanta starts at $16,000, while a high-end one averages around $38,000. The cost of a bathroom remodel depends on the project’s scope, size, equipment, and supplies.
Basement Remodeling
Remodeling your basement will cost you between $12,170 to $33,280. A full-scale remodel can cost up to $50,000, while a small-scale one can set you back $3,850. The average cost for a basement renovation is around $21,0000, depending on factors such as size and materials involved. In Atlanta, an unfinished basement costs around $6500 to $15,500.
If the goal is to stay in your home & not sell it for the next ten years or so — you should prioritize additions or improvements that will be most useful or enjoyable for your family.
Cost vs. Value of Kitchen, Bathroom and Basement Remodeling in Atlanta, Georgia
Kitchen Remodeling
Below are estimates of kitchen remodeling projects:
Major/Full Kitchen Remodeling
A major project includes upgrading the cabinet, countertops, ventilation, and appliances such as the refrigerator.
- Cost: approximately $51,000
- Value: 71%
Minor/Partial Remodeling
A major project includes upgrading the cabinet, countertops, ventilation, and appliances such as the refrigerator.
- Cost: approximately $51,000
- Value: 71%
Bathroom Remodeling
It entails replacing the bathroom, toilet, and flooring.
- Cost: approximately $14,600
- Value: 69%
Basement Remodeling
This type of project involves renovating the plumbing, wiring, and paint.
- Cost: $56,000
- Value: 79%
Calculating Short-Term Value vs. Long-Term Value
Short-term value refers to any investment that lasts twelve months or less. They usually have a high ROI but are also high risk. So as a homeowner, embarking on a short-term value project means you have equal chances of either increasing the value of your home or losing money.
Examples of short-term value projects include:
- Renovating rental properties like Airbnbs
- Fixing and flipping houses
Long-term value, on the other hand, refers to investments that last twelve months or longer. They are a more stable source of return and have lower risks compared to short-term value projects.
Examples of long term value projects are those that add functional space or increase square footage. For example, a major kitchen remodel where you replace all the appliances with newer multipurpose models and install new facilities, including the sinks, cabinets, and countertops.
These renovations are long-lasting since they don’t rely on trends. At the same time, they provide enough room for any activities you may need to do e.g food prepping, and cooking. Another example is using multi-use items e.g a portable kitchen island that pulls out for days you want to eat breakfast in your kitchen.
Is Remodeling a Good Investment?
Remodeling isn’t always a good investment. Although home improvement adds to the aesthetic value of a house, these effects do not always translate into an increase in value. Sometimes renovations may decrease a home’s worth, depending on the type of remodeling done. Examples include swimming pool installations and specific garage improvements.
Remodeling is more likely to be a good investment when it’s done to increase the quality of the house as opposed to fixing structural or design flaws. You must exercise caution and do thorough research before starting home renovations.
What Determines the Value of a Home after a Renovation?
Once you renovate a home, its value depends on how much you spend on the project and other factors such as home loans and location.
Most renovations usually yield at least 70% ROI. Here’s how you calculate After Renovation Value:
The estimated value for your current home + (70% x cost of renovations).
It’s worth noting that an official appraiser may use a more specific method to find the After Renovation Value of your home. As a result, the values may differ from your rough estimate.
After Renovation Value depends on factors such as:
- The size of the house
- Location
- Age and state of your home
- Types of renovations
- Local market
What Is the Average ROI of Home Remodeling Projects?
The return on investment (ROI) of a home improvement project depends on many factors, such as the project’s scope, existing condition, and any existing mechanicals in the home. The size of your investment will contribute to the return on investment. These costs can often change based on homeowners’ budgeting needs and location.
Most home renovations don’t give you back 100% of your investment. In fact, the average ROI of home improvements is approximately 70%. They are investments that the owner undertakes to increase the quality of their home and value.
Home Improvement Projects With the Best ROI
Here is an overview of the ROI of home remodeling projects:
Minor Bathroom Remodel
A minor bathroom remodel consists of upgrades to the
- Shower
- Bathtub
- Cabinets, and
- Toilet.
It can set you back between $2000 to $5500 but will give you a 60.1% return on investment.
Landscaping
One of the best ROI home improvements is landscaping. The average landscaping cost is approximately $5000 and promises a 100% ROI. This renovation can be anything from trimming the hedges to a full-on backyard makeover.
Minor Kitchen Remodel
Kitchens are one of the most used rooms in a home. The average person spends over 400 hours in the kitchen alone. It explains why kitchens are high ROI areas for home renovations.
A mini kitchen remodel costs approximately $26,000 and entails the following:
- Cabinet upgrading
- Floor replacement
- New backsplash installation
- Repainting
Attic Bedroom Conversion
Attic bedroom conversion is another lucrative home improvement project. If you have a home with a convertible attic, then a good idea would be to convert it into a bedroom. It costs an average of between $50,000 to $75,000 and gives you a 53% ROI. Increasing room capacity is an excellent way to raise the property’s value.
Major Bathroom Remodel
A major bathroom remodel costs approximately $75,692 with a 54% ROI, according to the Cost vs.Value guide. You can estimate how much a homeowner has spent on renovations based on certain home areas.
These locations include the bathroom and the kitchen. However, it doesn’t mean that you should go overboard with improvements. The goal is to tailor your renovations to areas that get a lot of attention, for example, the bathtub, shower stall, and lighting.
Major Kitchen Remodel
A major kitchen remodel costs around $150,000 with a 54% ROI. It involves a complete upheaval where you replace everything: from the counters to the cabinets. It’s a great way to eliminate clutter while upgrading equipment, such as refrigerators.
Home Improvement Projects With Less ROI
Here are some of the worst ROI home improvements:
Home Office Remodeling
Are you thinking of renovating your home office? Well, you might want to think twice about that. Home office remodeling has a low ROI, averaging around 48%. Chances are, you’ll spend thousands on improving your working space only to get very little return.
Although Atlanta has over 300,000 residents, only 4% of the city works remotely. So, finding buyers needing a home office may present a challenge if you decide to sell your home.
Garage Addition
Although a garage addition is a labor-intensive project, it only gives a 60% return on investment.
Bathroom Addition
A bathroom addition renovation project will only give you a 52% return on investment despite spending over $60,000 in costs.
Common Mistakes to Avoid
Here are common mistakes that you should avoid when remodeling your home:
1. Leaning Too Much on Trends
Leaning too much on trends can affect the return on your investment. The style that’s currently trending right now may not be in five years from now. Similarly, some trends require a lot of capital and labor, which increases your remodeling costs. It lowers your ROI, so the best alternative would be to derive elements you like and add your twist to them.
2. Not Having a Budget
The biggest mistake you can make when renovating is not having a budget. A budget keeps you disciplined and protects you from impulse buys. Without one, you’ll end up spending more than you anticipated which can cause financial challenges.
So, in the end, you’ll find that you paid way more for the project than you anticipated. Also, you lower your return on investment since the cost is more than the value.
3. Buying Poor Quality Materials
Cheap is expensive, and cheap materials negatively impact the ROI of home improvement projects. Invest in your materials and equipment because it will save you a lot in replacements and repairs in the future.
The problem with choosing substandard materials is that you’ll incur replacement costs. Consequently, your ROI will be smaller compared to what you spent initially.
Summary
Renovations aren’t always lucrative. Sometimes you end up incurring extra costs you hadn’t accounted for. That’s why it’s important for you as a homeowner to prioritize your Return On Investment. ROI is one of the most factors to consider when planning a renovation since it determines how much value you’ll get. It also protects you from running into unexpected losses.
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