The Best Home Remodeling Return on Investment [Infographic]

By Sam Ferris

If you have ever watched HGTV?s Love It or List It, you?re probably familiar with the concept of return on investment (ROI). At the end of every episode, viewers see what it cost homeowners to remodel their homes and what the new value of their home is afterwards. That?s a classic example of ROI.

The television show is, at its core, a real-world representation of why homeowners remodel: for increased function, or to receive a high ROI and sell their home. Most of the time, a high ROI is at the top of the list.

But what about your home and the remodeling work you?re going to do? What?s your ROI going to be? There?s a good chance you?ve wondered.

Thankfully, Remodeling Magazine is two steps ahead of the game. They?ve researched the best home remodeling return on investments in the U.S. for the past 13 years. They also just released their 2015 remodeling return on investment data.

We broke down that data* and put the more compelling bits into the following infographic. We also elaborate on four points that we feel are the most important tidbits from their research. After that, we discuss factors that their research may not have taken into account, just for good measure. We link you directly to the data at several points in this blog.

*Note the data we include in the infographic and this blog are the national averages for the U.S. Average costs and ROI?s may differ in certain regions of the country ? like South Texas, for example.

Here?s the truth about remodeling ROI:
The highest ROI isn?t what you think.

Scratch that. The top five ROIs aren?t what you think. Those approaching remodeling from a purely strategic and financial standpoint, take note.

When we view the home at a macro level, it?s actually one of the smallest parts that yields the biggest takeaway. According to Remodeling Magazine?s data, steel entry door replacements result in a 101.8% ROI. No, this isn?t a typo. And, as the data shows, replacing your entry door isn?t expensive, either. The average cost of the replacement? $1,230. The resale value? $1,252. You actually profit.

The next four highest home remodeling projects likewise reap hefty returns:

  • Manufactured stone veneer (92.2%)
  • Garage door replacement (88.4%)
  • Siding replacement (vinyl) (80.7%)
  • Deck addition (wood) (80.5%)
To see their cost and resale values, click here.

Here?s the takeaway: Homeowners who only want to pursue home improvement avenues with the highest ROI should consider these first. Also, notice how these are all exterior renovations. We dish on valuable single-room interiors in our next three points. ?

Minor, midrange kitchen remodels have the best single-room ROI.

Deciding to remodel is the easy part. Really. The hard part is figuring out what single room to remodel first, or, rather, which room is the best investment. From a financial perspective, it?s the kitchen.

With an average cost of $19,226 per Remodeling Magazine, the thought of a minor kitchen remodel probably has you clinging to your wallet like it?s the last scrap of food known to man. But you should feel better about forking over the funds because it yields a 79.3% ROI, the highest among all rooms included in Remodeling Magazine?s research.

The next four highest single-room projects:

  • Attic bedroom (77.2%)
  • Basement (72.8%)
  • Bathroom (70%)
  • Major kitchen (67.8%)
Here?s how the data defines a minor, midrange kitchen remodel:

  • 100 square feet
  • New cabinet fronts
  • New countertops
  • New wall oven and cooktop
  • New flooring
An example of what a midrange kitchen remodel might look like.
Though it?s a huge investment, it?s obviously a worthwhile one. Expect to earn most of it back when you sell your home.

Major, midrange kitchen remodels aren?t too far behind.

But they?re still behind, ranking fifth highest for single-room renovations with a 67.8% ROI. It?s a little counterintuitive; when we think of remodels, we often assume that the more dramatic the transformation, the more value we?ll receive in return. Bigger is better, right? Well, this piece of data turns that notion totally upside down.

They?re also pricier, no doubt. The average cost for a major kitchen remodel is $56,768, about $27,000 more than a minor kitchen remodel (try to breathe).

The criteria for a major, midrange kitchen remodel:

  • 200 square feet
  • All new appliances, including wall oven, cooktop, microwave, dishwasher, custom lighting, etc.
  • All new cabinets
  • New countertops
  • New floors
What a major kitchen remodel looks like.
The truth is, a major kitchen overhaul may not be as worth it. A lot will depend on the size of your kitchen and what needs to be updated. Still, a 67.8% ROI is nothing to balk at.

Midrange bathroom remodels produce a higher ROI than upscale bathroom remodels.

Here?s another lesson in the ?size doesn?t always matter? series. As we mentioned earlier in this blog post, midrange bathroom actually ranks fourth highest for single-room remodels, with a 70% ROI. An upscale remodel? 59.8% ROI.

That?s about the same difference between midrange and major kitchen remodels, so it?s not a jaw-dropping decrease. It is noticeable, though.

So what?s the difference between midrange and upscale bathroom makeovers? The study determines midrange as follows (among other factors):

  • Update a 35 square foot bathroom
  • All new fixtures
  • All new tub and toilet
  • Wall tile surrounding the tub
  • New floors
Now compare these updates to those of an upscale bathroom:

  • Expand a 35 square foot bathroom to 100 square feet
  • Relocate all fixtures
  • New shower and tub
  • Wall tile surrounding shower
  • New cabinets
  • New floors
Decide what?s important to you in a bathroom remodel other than ROI. If it?s ROI alone, update a small bathroom. If you need better function in your bathing space, go upscale.

But is resale value the only factor by which we can arrive at an actual return on investment? It?s a legitimate question. We?d argue it isn?t. Here?s why:

ROI doesn?t measure other factors like function, aesthetics, and happiness.

In reality, homes are more than an asset on your tax return. They?re our day-to-day living spaces, and with that comes needs that resale value can?t account for:

  • Function
  • Aesthetics
  • Well-being
Not everyone remodels because there?s some type of monetary value they?ll receive in return. As remodeling experts, we?ve realized this firsthand ? countless times. Some remodel because they lack adequate cooking and storage space in their kitchens, or because they?ve outgrown their master bathroom. Some tire of the way their home looks. Many have no intention of selling their home.

Monetary value is definitely a factor in the decision-making process. In truth, it isn?t the only form of value. Remodeling makes our homes infinitely easier to live in and infinitely more attractive. That makes us happy. Those are returns on investment we?ll take any day.

Up-to-date kitchens and bathrooms sell.

Boy, do they ever. The opposite notion (outdated kitchens and bathrooms don?t sell) isn?t necessarily true. Some homeowners purposely buy older homes with older designs: they?re searching for a type of Zeitgeist, or they?re buying at a discount, knowing they?ll need to remodel in the near future.

It?s a topic we?ve touched on before. An up-to-date kitchen could mean the difference between ?sold? and ?reduced price.? HGTV says it best:

?The benefits of remodeling your kitchen are endless, and the best part of it is that you?ll probably get 85% of your money back. It may be a few thousand dollars to replace countertops where a buyer may knock $10,000 off the asking price if your kitchen looks dated.?

HGTV does admit, however, that major overhauls aren?t the best option for sellers. Remodeling Magazine?s data seems to support that statement, as smaller remodeling projects typically yield higher ROIs than larger projects.

A midrange kitchen remodel is likely the best option for those upgrading for the purpose of selling in the near future. But a major kitchen or bathroom remodel will certainly help your home sell in the long run as well.

The ROI for kitchen and bath remodeling is still pretty high.

Based on the numbers we?ve presented, you might hesitate to remodel your kitchen or bathroom and instead lean more toward a quick exterior facelift. Don?t. The ROIs for a kitchen and bath remodel are still impressive:

  • Midrange kitchen (79.3%)
  • Bathroom (70%)
  • Major kitchen (67.8%)
These aren?t numbers to knock off. They are, admittedly, middle of the road in terms of Remodeling Magazine?s ROI rankings. But if there?s one thing that?s clear from the rankings, it?s that single room makeovers don?t yield as good of returns as simpler exterior projects. For single rooms, they?re certainly worth it.

So you?ve examined the data and now you?re ready to remodel. Let?s talk. As kitchen and bath remodeling professionals, we know how to design with both ROI and improving your day-to-day living in mind. Click here to set up a free consultation with one of our designers.