Remodeling Return on Investment (ROI)

  • By Jeremy Thompson
  • 15 Feb, 2012
Similar to business ROI, remodeling ROI measures the efficiency of an investment. It’s calculated as the return of the investment divided by the cost. In order to recoup your remodeling investment, a project must occur when you are planning to stay in the home, not just for the sake of increasing resale value. You can’t […] The post Remodeling Return on Investment (ROI) appeared first on J. Thompson Builders.
In order to recoup your remodeling investment, a project must occur when you are planning to stay in the home, not just for the sake of increasing resale value. You can’t guarantee a return on your investment, so the goal is to remodel to enjoy the benefits. Don’t exceed the home’s value or the neighborhood selling price. If you make improvements to increase your home value to $300,000, it will never sell for that amount if it’s sitting in a $100,000 neighborhood.
Each year (since the 1980s) Remodeling Online/Remodeling Magazine releases its annual Cost vs. Value Report. The report breaks down the ROI of each remodeling project by type and region. Remodeling Online polls real estate agents and appraisers throughout the country to determine the cost of remodeling projects and how much value is added to the house’s selling price one year later.
Exterior remodeling projects typically have a higher ROI. Fiber cement siding replacement offers about a 67 percent ROI. Siding can bring in a 59 percent return. Adding a deck on your home may return as much as 60 percent.
Inside the home, kitchen and bathroom remodels offer some of the highest ROIs because that’s where we live and where most buyers want to see a finished, updated room, not one they have to update once they move in. Kitchens often return as much as 55 percent ROI, while bathrooms may deliver as much as a 70 percent return.
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