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."
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.
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.
With that in mind, here are six renovation projects ranked (nationally) in terms of their potential ROI as determined by Remodeling magazine:
Freddie Mac recently announced its CHOICERenovationSM 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®.