Whether you’re thinking of selling in the next six months or a few years down the road, remodeling with ROI in mind is a smart move. Your home is a huge financial investment, and any money you put toward it should not only increase your enjoyment of the home now but also add value that you’ll recoup when you sell.
According to the Zillow Group Consumer Housing Trends Report 2018, sellers make an average of 2.2 renovations or improvements before selling. And 79% of sellers make at least one improvement, which means that only 21% list their home as-is.
How to budget for renovations to increase home value
Before researching renovations that might add the most value to your home, decide how much you can afford to spend and how you’ll pay for the renovations.
All-cash home improvements
If you can afford it, paying cash is your best option, as you’ll avoid debt and interest payments. But the drawback is that the money you spend will be tied up until you sell the home.
Using financing for renovations
Many homeowners opt to finance their remodeling project — especially if they’re planning on selling shortly after finishing the project — as they’ll be able to pay the loan back in full after closing.
There are a few different ways to pay for your project, but note that most lenders require that your remaining mortgage balance plus the amount you borrow total less than 90% of your home’s pre-improvement value. For example, if you owe $270,000 on your $350,000 home, lenders would consider loaning you up to $45,000 ($315,000 is 90% of $350,000).
Here are two common financing options:
SECOND MORTGAGE
Much like your first mortgage, a second mortgage allows you to borrow a fixed amount of cash, in a lump sum, with a fixed interest rate.
HOME EQUITY LINE OF CREDIT (HELOC)
A HELOC operates like a revolving credit line, secured by the equity in your home. You borrow what you need as you go, but you’re borrowing with a variable interest rate, so costs can go up (or down) over time.
Best ROI home improvements in 2019
If you’re contemplating investing in a major remodeling project, the following 10 home improvement projects provide the best return on investment for homes nationwide, according to Remodeling magazine’s 2019 Cost vs. Value Report.
1. Garage door replacement
- Cost: $3,600
- Resale: $3,520
- Recoup: 97.5%
2. Manufactured stone veneer
- Cost: $8,907
- Resale: $8,449
- Recoup: 94.9%
3. Minor kitchen remodel
- Cost: $22,507
- Resale: $18,123
- Recoup: 80.5%
4. Deck addition (wood)
- Cost: $13,333
- Resale: $10,083
- Recoup: 75.6%
5. Siding replacement
- Cost: $16,036
- Resale: $12,119
- Recoup: 75.6%
6. Entry door replacement (steel)
- Cost: $1,826
- Resale: $1,368
- Recoup: 74.9%
7. Window replacement (vinyl)
- Cost: $16,082
- Resale: $12,332
- Recoup: 73.4%
8. Grand entrance (fiberglass)
- Cost: $8,994
- Resale: $6,469
- Recoup: 71.9%
9. Window replacement (wood)
- Cost: $20,526
- Resale: $14,530
- Recoup: 70.8%
10. Deck addition (composite)
- Cost: $19,150
- Resale: $13,232
- Recoup: 69.1%
Best low-cost home improvements for resale
You don’t have to spend a lot of money to make your home more appealing to buyers. Consider these lower-cost projects that still offer a lot of bang for your buck.
New interior paint
Most homes have natural wear and tear, a few dings on the walls or nail holes remaining where art used to hang. These imperfections are particularly noticeable in marketing photos and virtual tours. A new coat of paint gives your home a fresh and updated look for shoppers. According to the Zillow Group Report, 36% of sellers paint their home’s interior before selling.
- Generally speaking, stick to neutrals — gray, beige, or greige walls and white trim.
- The Zillow 2018 Paint Color Analysis found that homes with light taupe living rooms sell for a $2,793 premium.
- Homes with light blue or blue-gray bathrooms sell for a $2,786 premium.
Curb appeal
The first thing buyers will see, both online and in person, is your home’s exterior. Whether they’re viewing your exterior photo in an online listing, driving by, or attending a private tour or open house, it’s imperative that your home makes a good first impression.
- Painting your front door can have a big impact. The Zillow 2018 Paint Color Analysis found that homes with charcoal, smoky-black or jet-black front doors sell for a $6,271 premium.
- 29% of sellers spruce up the landscaping as part of their pre-sale prep.
Smart home technology
The Zillow Group Report found that 42% of Generation Z buyers and 37% of millennials rate smart home technology as highly important in their home search.
- Smart thermostats are a popular and relatively easy addition.
- Buyers also look for things like voice-assistant-controlled light bulbs. They can help your home compete against new construction homes, which often come packed with smart home features.
New lighting
Good lighting is crucial to showcasing your home’s features, especially if your home doesn’t have a lot of natural light. Upgrading your lighting is easy and inexpensive, and it can make even small rooms feel larger. Consider these steps:
- Add new pendants in the kitchen.
- Spruce up the decor with window treatments.
Small bathroom updates
You don’t need to rip out tile or add all new fixtures to give your bathroom a face-lift. In fact, 26% of sellers make improvements to the bathroom before selling, and they can be simple fixes.
- Replace the vanity lights for a more updated look.
- Recaulk or reglaze the tub instead of replacing.
Flooring
Sprucing up flooring is another common task, taken on by 26% of sellers.
- Deep clean wall-to-wall carpets.
- Buff out or refinish hardwoods, especially if there are visible scratches or stains.
Renovations that won’t add value in every market
Not every home improvement project is guaranteed to attract more buyers or give you a good ROI, even if it’s something you enjoy while you’re still living in the home. If you’re renovating with the goal of eventually selling, you’d be wise to avoid the following upgrades:
Swimming pools
Pools are a polarizing topic for buyers — some buyers love a home with a pool, but many others see it as a safety issue or a huge maintenance burden.
Luxury upgrades
It depends on your real estate market and your specific neighborhood, but super high-end touches like professional-grade appliances and marble countertops may not be something buyers are willing to pay extra for.
High-end landscaping
Similarly, investing in expensive landscaping and water features doesn’t always pay off, as buyers can see them as a hassle.
Minimum repairs: What to fix before selling a house
Small repairs and maintenance are often needed to show buyers that you’ve taken good care of the home. These small efforts can make a big difference when it comes to how long it takes to sell your home and how much it sells for. And it can streamline the negotiation process since your buyer won’t have to request repairs as a result of their inspection.
Consider tackling these projects before taking on bigger improvements:
- Replace broken mechanicals, like your HVAC system or appliances.
- Remove peeling wallpaper and repaint.
- Take care of weeds and overgrown landscaping.
- Repair broken or leaky plumbing.
- Replace cracked tiles.
Not sure what those must-do repairs are for your specific home? A pre-inspection can give you a good idea of the issues buyers are going to care about.
What if I can’t afford home improvements before listing?
If your budget won’t allow you to complete any repairs or improvements before listing, you have three options:
Sell as-is: When you sell as-is, you make it clear to buyers that you won’t be making any repairs before closing. You’ll want to adjust your listing price to accommodate for that fact. Note that buyers may try to negotiate the price even lower, especially if the property is in bad shape.
Offer a credit at closing: If your buyer’s inspection uncovers any issues in the home, you can offer a credit to the buyer that will allow them to make the repairs after closing. Often, the credit the buyer requests ends up being higher than what the cost would have been if you had completed the repairs ahead of time.