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The Remodeling Projects With the Highest Return on Investment in 2017

Written by Cristina Miguelez

Published on November 28, 2017


The Remodeling Projects With the Highest Return on Investment in 2017

If you are looking to either flip a house or improve the home's value, it's important to know which are the projects with the highest return on investment.

To provide you with the most accurate and up-to-date information, we consult a number of sources when producing each article, including licensed contractors and industry experts.

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Remodeling your home can be a great way to bring new and much-needed energy back into your house. It can also be a great way to grow your real estate investment. If you are in the latter group of renovators who are looking to either flip a house or just improve the value of their own home, it is important to know which are the remodeling projects with the highest return on investment.

With the latest 2017 data collected from Remodeling, we have created the above infographic to provide a visual representation of various remodeling projects to reflect the initial investment of the project as well as percentage of that investment one could expect to recoup. The visualization represents calculations based on midrange projects.

Top 3 Projects by Resale vs Recoup

The data plainly shows that the most profitable projects in terms of resale value are all major additions. Whether it be a two-story, master suite or family room addition, it is no wonder that these are also the costliest projects. As it pertains to cost recoup, however, it is the smaller projects that have the best return on investment. Coming in on top, a fiberglass insulation renovation on one's attic is the only project that delivers a resale that surpasses the job cost. Following the insulation project, a steel entry door replacement and a manufactured stone veneer offer a cost recoup of 90.7% and 89.4%, respectively. As one would expect, it is the costliest projects that provide the greatest resale value; however, smaller jobs are the most effective at recouping their expenses.

The Little Things Make a Big Difference

The infographic clearly shows us that a two-story addition is the most valuable (and the most expensive) project in terms of sheer dollars, but upon closer inspection of the infographic, we find that while large projects clearly equate to a larger resale value in terms of dollar amount, it is the smaller projects that offer the greatest return on investment. Of the top seven projects in terms of size, none offer more than a 71.1% recoup on the cost of the project. However, out of the seven smallest projects, only one recoups less than 70%, with three of them recouping nearly 90% or more of the cost. As reported in The New York Times, there is a correlation to the amount of money spent on a project and the amount that is likely to be recouped. The more expensive a project, the lower the return on investment in terms of percentage.

The Real Estate Connection

It seems obvious enough that if you're looking to sell your home, remodeling is necessary to increasing its value. What is important is to find out the right projects for your local real estate market. According to experts from the Forbes Real Estate Council, there are a number of things homeowners should consider when renovating with the intention of increasing resale value. These experts advise homeowners to not think in terms of what they want the property to look like but what prospective buyers in the area look for and expect in their specific market. Additionally, they warn owners to be aware of when to stop renovation, encouraging them to research their market to determine the minimal amount of renovation that turns the maximum amount of cost recoup. Knowing the return on investment for specific projects is integral to making the most out of your investment. While it is important to be cognizant of average ROI based on available metrics for the market at large or even for your specific state and region, it is just as important to be aware of dynamics affecting your actual ROI. This requires a deeper understanding of the micro-dynamics of your local market. For example, a granite countertop may seem like a great upgrade, but if every house in your neighborhood has a laminate countertop, you are likely investing in an upgrade that buyers in your area are not concerned with paying more for.

The Highs and Lows of Remodeling by Region

While the national average may paint one picture, a closer look at midrange remodeling projects by region shows that where you live can greatly affect the return on investment you can expect from your renovation. Most midrange projects in the Midwest fell below the national average, while midrange projects on the west coast were more profitable than the national average. For example, projects such as an attic insulation can be around $560 in Chicago and $370 in the San Antonio, while a bathroom remodel, which usually ranges from $5,000 to 50,000, can be around $13,500 in Oklahoma and up to $25,000 in Boston.

Ultimately, the right remodeling project can take your home from mundane to magnificent. If done properly, it can also maximize your investment, making your home not only more attractive and functional, but also more valuable. Not everyone engages in a renovation project with the sole purpose of increasing the value of their home, but it is still important to consider the cost effectiveness of a project, both from an initial standpoint and a long-term perspective. The best part of remodeling is that there is a project for every budget, offering every homeowner the opportunity to grow the value of their property.