Six Home Improvements Offering the Highest ROI

Whether you've purchased a fixer-upper or are thinking about selling your home in the near future, it's important to determine which renovations or upgrades can add value to your property.

Not all home projects are equal when it comes to earning you a return on investment (ROI), noted Frank Zaccherio, a Broker/Realtor at Keller Williams Realty in Pinehurst, North Carolina. Zaccherio works with his clients (sellers) to determine cost-effective upgrades that will help the property sell faster and for more money. His recommendations commonly include outdoor enhancements – such as adding a small patio or deck.

"Buyers in our area want nice clean backyards where they can enjoy the afternoon sun," he said. "Those kinds of projects will offer sellers the best ROI."

Outdoor Living

That echoes findings from a recent report by Remodeling magazine, which list upgrades in terms of their ROI. Four of the top six projects were exterior projects. Only the minor kitchen remodel—a relatively modest indoor project among those covered — rivaled the ROI of exterior projects on list.

Overall, ROIs were dropping from previous years of the report, but the largest drops were for more costly upgrades, like a major kitchen or bathroom remodel.

"When you start doing major renovations, like replacing floors and cabinets, that's a major upgrade that probably not going to offer much ROI," said Zaccherio.

How Much Can I Expect?

Conversations with sellers who have invested heavily in upgrades and have the unrealistic expectation of recouping full value when they sell are difficult. "I have to make sellers understand that upgrades don't pay back dollar-for-dollar, especially if they're not on the buyer's wish list," said Zaccherio.

While a typical home improvement project might return .60 -.75 on the dollar, some upgrades like putting in an in-ground swimming pool could return .50 or less – and might even turn off some buyers.

"You need to invest in enhancements that will be appreciated by local buyers and avoid pricing your home out of their reach," Zaccherio said. To understand the most popular upgrades in your area with the most likely potential of providing a higher-than-normal ROI, talk to a local real estate agent, contractor, or home builder. These pros will know what buyers are looking for and which upgrades will help your house sell more quickly and for top dollar.

Projects That Offer the Most ROI

With that in mind, here are six renovation projects ranked (nationally) in terms of their potential ROI as determined by Remodeling magazine:

1. Garage Door -- 97.5% ROI
   Replacing a garage door with an upscale model costs an estimated $3,611 and could earn back $3,520 for sellers.
2. Stone Veneer -- 94.9% ROI
   By adding manufactured stone to the lower third of a home front facade and extending it over the front entry for an estimated cost of $8,449, sellers could recoup $8,907.
3. Minor Kitchen Remodel -- 80.5% ROI
   By spending $22,507 on things like new cabinet fronts and energy efficient appliances, sellers might recoup $18,123.
4. Wood Deck -- 75.6% ROI
   Adding a 16’ x 20’ wood deck costs about $13,333 and adds $10,083 in value.
5. Siding -- 75.6% ROI
   It will cost about $16,036 to replace siding, but sellers might recoup $12,119 by doing so.
6. Steel Entry Door -- 74.9% ROI
   If sellers spend an estimated $1,826 on a new door, they may recoup $1,368. “If you don’t have the funds for a new door, sometimes a bucket of paint is the best upgrade,” Zaccherio said.

Freddie Mac recently announced its CHOICERenovation^SM mortgage, which offers more cost-effective options for financing or refinancing home renovations, repairs, or improvements. Further, CHOICERenovation is unique in that it allows borrowers to use proceeds to renovate or repair a property that has been damaged in a natural disaster or finance improvements to help prevent damage from a future disaster, such as building storm surge barriers, foundation retrofitting, or retaining walls.

To learn more about maintaining, repairing and renovating, visit MyHome by Freddie Mac^®.