Return on investment or (ROI) is key to understand as a homeowner. Being able to evaluate the cost and return on a potential project for your home is crucial for your bottom line and achieving your financial and home goals.
What is ROI?
ROI, or return on investment, is a metric that can be used to evaluate how well an investment has performed. This is often expressed in a percentage, allowing you to evaluate how good an ROI is relative to other investment opportunities. Many homeowners seek to remodel or upgrade areas in their homes; ROI can help you evaluate how much you might invest in the upgrade and how much more your home may sell for down the road as a result of the update.
Buyers often like seeing specific features in a home, and based on current trends, it is easier to predict how much a particular upgrade may enhance home value upon completion. Upgrades like additional rooms, or kitchen upgrades are known to be high ROI projects–meaning you will make some of the money back when you sell the home. In some cases, you can even make money after making the upgrades, which is what many home flippers rely on when choosing to buy a property that needs TLC.
Are ROI evaluations always accurate?
For homeowners who evaluate remodel projects, ROI is often used as a predictor of a buyer’s interest in a particular upgrade. While these numbers are based on a lot of aggregate data, it’s impossible to know when hot trends or general housing market shifts will render the estimated ROI inaccurate. Furthermore, the longer you wait between the upgrade and the sale of the home, the more likely those shifts are to be significant, meaning you may not get as much as you put into the project. Checking comps in your area and with experts locally can help you make the best choice when investing in an upgrade or remodel.
Are any upgrades sure to enhance ROI?
While a buyer’s ideal design trends, appliance needs, and ideal layouts may shift over time, there is one stalwart truth–more square footage is a win. In most cases, adding usable square footage to your home is a guaranteed way to boost your ROI when selling–this is especially true if the additional square footage comes in the form of an additional bathroom or bedroom. Buyers with growing families are always eager to have more space in the form of additional bedrooms, and additional bathrooms are a large convenience.
