If you’re hoping to make some home improvements that will add value to your home, a new study suggests your best bet may be to start outdoors.
Remodeling Magazine’s “2020 Cost vs. Value Report” looked at the average costs associated with different home improvement projects over the past year, along with the amount homeowners would likely be able to recoup for the improvement upon selling the house. Researchers polled nearly 1,400 full-time real estate professionals, each of whom had a network of more than 100 consumers. The questions focused on 22 home improvement projects completed in more than 100 U.S. markets.
The study found that the overall cost-to-value ratio was 63.7%, meaning consumers were able to recoup an average 63.7% of their investment when making home improvements. That was down from 71.2% in 2014.
The biggest factor that contributed to the declining return on investment for homebuyers was an increase in building material costs. Still, the study's researchers described the remodeling market as “healthy.”
Improvements with the biggest bang for your buck
While one of the perks of homeownership is remodeling your house in any way you like, some projects can have a bigger impact on your bottom line than others. According to the study, homeowners were able to see a higher return on their investments from select projects focused on the exterior of their house.
When ranking the biggest return on investments, 9 of the 10 improvements were outdoor projects. These were, in order:
- The installation of stone veneer, with a 95.6% return on investment
- Garage door replacement, with a 94.5% return
- “Mid-range” minor kitchen remodel, with a 77.6% return
- Fiber-cement siding replacement, also with a 77.6% return
- Vinyl-siding replacement, with a 74.7% return
- Vinyl-window replacement, with a 72.3% return
- The addition of a wood deck, with a 72.1% return
- Wood-window replacement, with a 68.9% return
- Steel entry door replacement, with a 68.8% return
- Composite deck addition, with a 66.8% return
The only indoor home improvement to crack the top 10 was the minor kitchen remodel, at No. 3. One reason some indoor projects don’t show as high of a return may be that many overhauls — such as bathroom and master-suite revamps – are done to the homeowner’s tastes, so they may not have widespread appeal to potential homebuyers, Remodeling Magazine said.
A home is not just a place to live, but also an investment. You can leverage that investment by making improvements that will add the most value to your home. Even if you have no plans of selling your house in the near future, you can take steps to make sure you can get the most for it when you do decide to sell.
Meanwhile, if you decide you want to make major renovations but don’t know how you will finance them, a home renovation loan may be an option worth exploring.