On average, home renovations provide a 70% return on investment. Home renovations are one of the only investments that can improve the quality of life in your living space and increase the value of your home for the future. Home improvements with the best ROI are projects that add functional space and square feet. In short, before you invest tons of money in an elaborate renovation project, consider what competing properties in your neighborhood have to offer.
There is a good brochure from the Appraisal Institute that offers some good general suggestions for homeowners considering renovations. And remember, even with real estate renovations that are known to add value, there's a good chance you'll spend more money than you'll receive on resale. Larger renovations aren't always better, as spending more doesn't always guarantee greater value creation. I once rented a house to someone who bought houses in need of renovation, fixed them, lived in them for the time required to comply with UK tax laws, and then sold them.
Even so, homeowners should be careful with the projects they choose to complete, as potential value gains can only be realized to the extent that buyers are willing to pay for renovations. The National Association of Realtors (NAR) cites hardwood floors (new or refinished), kitchen renovations (new countertops and state-of-the-art appliances), renovated bathrooms, and basement or attic conversions as projects with the highest return on investment, often recovering 80% or more of their resale cost. He or she can assess the current value of your home and then view the plans, as well as the contractor's proposal, and assess the expected value of the home once the renovations are complete. Contrary to popular belief, renovating or adding a pool isn't the best way to add value to your home.
If you must use your garage space as a gym or as an additional living space, make sure future homeowners can easily and cost-effectively pull out renovations. And while it's natural to want to make improvements to increase the resale value of your home, some renovations will actually cost you money in the long run. Conventional wisdom seems to be that renovating homes generally doesn't improve the value other than the cost of doing so. On the other hand, it is clear that some are able to make a profit by buying, renovating and exchanging homes.
There's always something of value in adding personal touches, even if it's the simple fact that you'll enjoy your renovations as long as you own the home. You must balance the cost of renovation with the loss of value due to aging of various parts of the home.