Reading time: 4 minutes
Published: November 10, 2024
Modified: December 26, 2024
When considering home upgrades with the highest payback at resale, it’s natural to wonder how much of your investment you’ll get back when you sell. While return on investment (ROI) is an important factor, there’s more to consider—like the enjoyment these upgrades bring to your daily life.
Here, we’ll explore the ROI for different types of projects and why the decision to renovate often goes beyond just dollars and cents.
Key Takeaways
- Exterior projects, such as garage doors and entry doors, often provide the highest ROI, sometimes recouping 100-200% of the cost.
- Interior remodels, like kitchens and bathrooms, may have a lower ROI but add valuable enjoyment to your daily life.
- Major renovations increase your home’s basis, which can reduce capital gains taxes when you sell, potentially saving you up to 20% of the gain.
Exterior Projects: Strong ROI and Curb Appeal
According to the Remodeling 2024 Cost vs. Value Report (www.costvsvalue.com ↗), exterior projects continue to offer some of the highest returns on investment. The top project across both exterior and interior renovations is a garage door replacement, which can recoup nearly 200% of its cost. Other exterior upgrades, like entry door replacements and new stone veneer, are also excellent for boosting resale value, often recouping 100-200% of their costs.
These updates enhance curb appeal and give a strong first impression, adding immediate value to your home.
Interior Projects: Personal Enjoyment and Value for Resale
Interior remodels, like kitchens and bathrooms, may not yield the same ROI as exterior projects but can still significantly enhance your living experience. As compiled in the Remodeling 2024 Cost vs. Value Report, a mid-range kitchen remodel, for example, might recoup around 40-50% of its cost.
Although this ROI may be lower than some exterior projects, the daily enjoyment and increased functionality of a new kitchen or updated bathroom make these investments valuable. Remember to think about how much enjoyment you’ll get from these upgrades, not just their resale value.
Projects with the Lowest ROI
Some projects, like major bedroom and bathroom additions, typically yield a lower ROI. These might recover less than 40% of their costs at resale, so they may not make financial sense if your main goal is ROI.
However, major additions, like a new bedroom, may be necessary to accommodate older or new family members joining your household. If these improvements enhance your lifestyle, the cost of the project can be considered a secondary concern.
Tax Benefits and Increasing Your Home’s Basis
Beyond ROI, major home improvements can offer tax benefits when it’s time to sell. The IRS allows you to add renovation costs to your home’s basis, which reduces your taxable profit upon sale.
This basis increase can lead to significant savings on capital gains taxes, potentially saving up to 20% on long-term gains. This is a valuable consideration for major renovations, especially if you plan to sell in the future.
For related information, see How to Calculate Capital Gains on a House Sale.
The Big Picture: Balancing Financial and Personal Benefits
While calculating ROI is a helpful way to measure a project’s potential, it shouldn’t be your only reason to renovate. Think about the joy or convenience a project will add to your life and whether it aligns with your financial goals.
The best renovations strike a balance between adding value to your home and enhancing your quality of life. After all, your home should be both a financial asset and a place you love to live in.
For more in-depth information and data on various home improvement projects and their resale value, you can explore the full Remodeling 2024 Cost vs. Value Report © 2024 Zonda Media, a Delaware Corporation. Complete data from the Remodeling 2024 Cost vs. Value Report can be downloaded free at www.costvsvalue.com ↗.