Good News: Scrimping on a Home Remodel May Actually Pay Off

Moderation may actually be key here, especially if you plan to sell your home.

You Don’t Have to Go All Out on a Remodel to Make it Worthwhile, According to a New Study
Photo: Getty Images

Any homeowner should know that every home remodeling effort and item on the home renovation checklist has some impact on the ability to sell a home, when the time comes. Long-time homeowners who plan to stay put for years to come or age in place have a little less to worry about in this regard, but anyone who may end up moving in the next 10 years or so should carefully consider how every home remodeling project—no matter how small—could add to or detract from a home's overall value.

Unfortunately, the simple act of remodeling and updating doesn't promise an increase in home value. Some projects, especially if they cater to very specific tastes or lifestyles (think dog showers), can decrease a home's value in the eyes of potential buyers, even if that project does use the hottest tech or most expensive features. Because home remodeling costs can be astronomical, especially for large-scale updates, budget-savvy homeowners will want to make sure every update offers some sort of return on investment by boosting a home's overall resale value. (Any sensible person would want that kitchen remodel cost to help pay for itself in some way, right?)

According to a report from property search site Zillow, bigger investments in home remodeling projects don't necessarily pay off in bigger boosts to home value. The report, which examines how people preparing to sell their home can best prepare their property, says a mid-range bathroom remodel actually adds more value per dollar invested than an upscale one.

A mid-range update, according to Zillow, could include replacing the toilet, bathtub, and light fixtures; replacing a single-basin sink with a double one; re-tiling the floor; and hanging wallpaper. Such an update typically results in a $1.71 increase in home value for every dollar spent, meaning such a remodel could actually pay for itself, and then some, when it comes time to sell the home. An upscale bathroom remodel with high-end features, a shower wall, a bidet, and other luxurious add-ons typically only adds 87 cents per dollar spent, meaning the update would actually cost the homeowner more money in the long run.

The mid-range factor applies to other updates, too: Zillow's report says that new, mid-range windows can return $1.15 for every dollar spent on purchasing and installing new windows, while fancier windows would just help homeowners break even on their investment in their home. Kitchen renovations and finishing a basement offer terrible returns on investment, so even in these cases, investing just enough might make the most financial sense, if investing more isn't going to really add to a home's value.

Owning a home often serves two purposes: First, it gives people a place to live, and updating that space can contribute to comfort and overall happiness in the home. Second, owning a home is an investment (and a pretty big one), and updates (or a lack of them) can change the value of that investment. People will prioritize these purposes differently, often depending on how often they plan to move, but it's important to remember that the best home updates should serve both purposes.

In that regard, the news that mid-grade remodels are actually better than high-end ones is excellent news for typical homeowners, who may balk at the idea that the only good renovations are the ones that add the flashiest, newest finishes. A high-tech refrigerator might be cool, but it's not necessary for anyone worried about resale value; the updated, more affordable pick might actually be more valuable in the long run. Anyone with luxurious tastes may want to splurge on only the best updates anyway, but all homeowners should know that it's certainly not necessary.

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