Owning your own home is part of what is often referred to as the “American Dream”. But when you own your home and are fully responsible for repairs, maintenance and upkeep, it can change your view of things. You’ll soon find yourself with a seemingly endless list of things to fix, change, or upgrade. Organizing and prioritizing this list of projects is not only a way to save your sanity, but it can also make financial sense. Deciding which projects will increase the value of your home the most can help you prioritize which items to check off your list first.
Which projects are worth the most?
A common way to decide whether a particular home improvement project is worth it is to look at what is called the Return on Investment (ROI). To calculate the ROI of a project, divide the estimated amount it will add to the value of your home and divide that by how much it will cost to complete the project. So if a kitchen remodel costs $40,000 and adds $30,000 to your home’s value, the ROI is 75% ($30,000 divided by $40,000). The higher the ROI, the more a project can be worth.
It’s also important to keep in mind that there’s more to deciding whether or not to do a particular project than just the monetary ROI. Since this is your home and probably where you and your family spend most of your time, you also want to make sure you feel comfortable. So a project that improves your day-to-day life may be worth doing, even if the monetary return on your investment isn’t that great.
Add more space
One of the categories of projects that typically has the highest ROI is adding more space. This can be things like adding an extra bedroom, finishing unused attic or basement space or doing a home extension. Because buyers typically look at the total square footage finished and the number of bedrooms, having more bedrooms can increase the value of your home.
Refurbishing a kitchen or bathroom
The conventional wisdom for home improvement ROI says “kitchen and bathrooms”. That means updating a kitchen or bathroom (or adding additional bathrooms) generally yields the biggest and best ROI. That doesn’t mean other projects aren’t worth doing — you’ll want to find a balance between your return on investment and your own comfort and enjoyment.
Upgrading your home with Smart Home Tech
Another home upgrade that is becoming more and more popular is upgrading your home with smart home technology. More and more buyers prefer a home with smart home technology already in place and turned on. Here are a few smart home technology upgrades to consider adding to your home:
Smart thermostats Smart outlets and light switches Electrical energy monitoring Smart locks, home security systems and/or video doorbells Integration with home assistants such as Google Home or Alexa Integrated speakers and/or sound system
We’re still pretty early in the smart home revolution, so these items may not be worth it in a strict monetary sense. So you may want to focus on smart home technology items that would increase your standard of living and enjoyment or provide an ongoing monetary benefit (like a smart thermostat).
Financing your home improvement projects
Depending on the size and scope of your home improvement project, you have various financing options. If your project is small enough, you may be able to fund it with everyday expenses or your savings account. For larger projects, consider financing it with a 0% interest credit card – just make sure to pay it off before your 0% introductory period ends. Another option can be getting a home equity loan or home equity line of credit (HELOC).
Getting an equity loan or HELOC can be directly tied to your return on investment. If an appraisal shows that adding a kitchen, bathroom, bedrooms or other project will increase the value of your home, you may be able to get a loan based on the value after your home has been repaired. This can provide additional financing options if you don’t have a lot of existing equity.
It comes down to
If you’re like most homeowners, you have a very long list of potential home improvements to consider. There are two main factors to look at when considering whether a particular home improvement is worth it. The first thing to look at is the ROI – how much will it add to your home’s value compared to how much it costs. The other consideration is how much it will improve your life and the lives of everyone you live with. Balancing these two considerations can help you make the best decision for you as to whether a home improvement project is worth it.
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Dan Miller (100 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families travel for free/cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.
This post Is Renovating Your Home Worth It?
was original published at “https://mint.intuit.com/blog/home-ownership/is-remodeling-your-home-worth-it/”