Am I Spending Too Much on My Home Renovations?

By Travis Anderson

In 2011, Travis started his career over and began building his own team; a team that has a different look and feel than most teams in the industry; one built SOLELY for the betterment of the client.

Are you planning on doing home improvements such as remodeling your kitchen, adding square footage, or redoing a bathroom? Before you begin your home improvement project, you should consider your Return on Investment (ROI), especially if you are thinking of selling your home soon.

The other day, one of my clients asked me, “What is my return on investment if I put $60,000 or $70,000 into a kitchen remodel?” The conversation we had got me thinking about sharing about today’s topic.

A great resource to check is a report from the National Association of Realtors (NAR) that shared 11 interior and eight exterior improvements, as well as the average ROI or recovery cost across the United States. Reading the conversation inspired me to share today’s topic.

Besides that, I would also like to give you more information about how to make the most of your home remodeling project.

First, try to keep any single renovation to about 10% of your home’s value. For example, if your home is worth $450,000, a $45,000 kitchen remodel is a reasonable cost and a wise investment. A $100,000 remodel, on the other hand, may potentially price you out of the market.

According to the data, 10 out of 13 recently sold homes in the Twin Cities, with recent renovations, like kitchen/bathroom remodels, fresh paint, and updated fixtures, typically sold within 10% of the median price in the area. Conversely, the remaining homes with original features sold for less. This reinforces the 10% rule, which suggests that staying within this range can maximize your ROI.

While the 10% rule is a good standard, the data also showed that extensive renovations might be justifiable under unique circumstances. For example, one house out of the 10 recently sold homes sold 14% higher than the median home price. The property was almost like new construction in the sense that they remodeled almost everything in the home. On top of that, their location on the water was also a factor in the home’s value. On the flip side, the one that sold significantly below the median needed even the most basic updates. However, even when exceeding the 10% rule, homeowners still often enjoy the home upgrades all the same, even if it means that they don’t get the ROI from them.

So, if you’re considering a specific renovation and want to understand how it might impact your home’s value, contact me. You can reach me by phone or email, and I’ll give you a personalized consultation.