Remodeling a Home – Is It a Good Investment?

home remodel ROI

For those who own a home, increasing its value is always a priority. While updates or renovations may be initial out-of-pocket expenses, they can be recouped with a higher sale price when it’s time to move. As an added advantage, you’ll be able to make changes that enhance the look of your space during the time you live there, making it more comfortable as well as enjoyable. Which project is right for your property? For insight into selecting a home update to get started with, the information below can help.

Consider Your Return on Investment

When you spend money on any updates or renovations in your home, it’s important that it will bring you a sense of enjoyment. After all, you spend a lot of time in your home and should like the way it looks. However, you should not overlook the profit potential that you can expect from the work you are spending your time and money on. To determine the size of payback you can expect for different projects before you ever paint a wall or lift a tile, you’ll want to do some research.

Fortunately there are resources that can give you estimates for paybacks on particular projects, such as this annual Cost vs. Value Report. Doing some research online about things that homebuyers keep in mind when searching for a home, can provide you with some insights as to what’s worth spending money on.

Keep in mind that real estate agents are great sources to go to for advice on this topic as they are trained and are experienced in what upgrades add value to a home, especially in your area. Another useful exercise to determine return on investment is to visit a local real estate website and compare values of homes that have been renovated with ones that are still waiting for a facelift.

With this information, you may decide to take on a more ambitious project, such as bathroom remodeling or tackle a full kitchen renewal. As a rule of thumb, it’s important to remember that the more important the room is to the home, the better return investment it will have in the future.

Analyze Your Risk Before Starting

While selecting the right renovation project can get you excited about a better home value in the future, you shouldn’t overlook other information that can affect the potential value of your home. Details such as the location and market conditions can also play a role in the value of property in the future. The quality of the work will also impact whether or not you see a return on your investment. With so many factors coming into play with your return on investment (ROI), you must completely analyze your risk if you’re only making improvements so that you can pass the expense off to future buyers.

To put this in perspective, if you were to upgrade your kitchen to a chef’s paradise with top end finishes, would you get that money back? If you make changes that are essentially “too nice” for the neighborhood you’re in, then you could end up eating that money when it comes time to sell. Most homeowners will only get back the cost of construction, so any extras you decide on will only be there to enhance your satisfaction while still living in the home. However, because these extras may entice buyers to choose your home over another, they could certainly be worth it if you have the budget.

When it comes to renovating an investment property, things are a bit different because you have more options for recovery. The first is to sell the house for an increased price due to the changes that you made. The second is to rent the property out, only for a higher monthly price because of the updates that you’ve done.

Is the Location Ideal for Renovations?

As stated above, the neighborhood you’re in should be considered before you ever commit to doing a renovation. Your goal should be to make improvements that keep you in line with the average cost of properties in the area. With that, you’ll appeal to buyers who can afford to buy your home rather than risk being priced too high and alienating buyers.

The location where you live also affects which projects will attract buyers and get them to pay a premium for your home. For instance, an in-ground pool may attract home buyers in regions where it’s hot year-round, while it may not be a major selling point in areas that experience snow and rain throughout part of the year.

Your Decision to Remodel

When remodeling any room in your home, the future value of any project should always be considered. By doing your research to learn what updates will pay off when you decide to sell, you’ll be making the best investment possible. While it might seem like bigger changes are better, you might be surprised to find that’s not always the case. After learning the facts and figures, you’ll be more likely to remodel in a way that increases your enjoyment of your home and the value of it when you decide to sell.

Author Bio:
Joe Samson is a REALTOR® in Calgary, AB. He has helped hundreds of clients with their real estate plans since 2005. Visit to learn more about Joe or to connect with him on social media!