What is ROI?
“Return on investment” is an idea that helps guide decisions on home improvements. In short, if a person invests x amount of dollars, how many of those dollars will be returned upon sale of the home or upon appraisal of the property? There are of course many factors(aren’t there always!?) but generally the answer will usually involve “keeping up with the Joneses”. The safest investment involves keeping the house value in the median of the neighborhood. If a property is on a street with 200,000 dollar homes, is already worth 180,000, then an investment over 20K assumes some risk.
What’s important to know is how much the given property is truly worth and the price of similar homes that have recently sold. The next consideration is the range of improvements. Kitchen and bath remodels typically return the most–even 80-90%. These rooms are essential in every way and represent the best investments. On the lower side are unique and/or “fun” improvements. These include pools, “she sheds” courts, gyms and landscaping. Even though folks may enjoy all the above, they often won’t return even half the money invested. While many people enjoy a pool, everyone needs a bathroom.
There are of course, other considerations. Even if a new kitchen is called for, it’s important to right size it for the property. Purchasers and investors expect clean and modern–modest fixtures often do the trick. Another very important consideration–your happiness and comfort! You will never get paid back for an awesome heated tile floor–unless you consider toasty toes on a cold winter morning a good payback. ROI is an important consideration in evaluating a home improvement, but it isn’t the only one, and often times it isn’t even the most important one.