Answer: Most of the time, yes, but how much? Â It depends. Â
Typically, when we are asked this question, the person asking wants to understand what kind of return they might see for the project theyâ€™re considering. Â The rate of return can vary widely from project to project, based on many factors.
For those who are satisfied with a generic â€œrule of thumbâ€ type overview, there are plenty of articles published every year in home magazines or blogs that can provide average rates of return. Â For an example, see: this report
Some of these articles even break down different common project types by region of the country. Â These overviews are not a bad starting point, but they are generic and they are averages.
For a more specific answer about possible return on investment, hereâ€™s how we look at it.
- First, we consider the property and itâ€™s surrounding area. Â Is the subject property just like every other one in the area, or is it completely unique and different? Â In a neighborhood where every home is identical, a remodel done really well could make the house stand out and improve itâ€™s value. Â Conversely, a remodel that makes the subject property into the most expensive house on the block typically isnâ€™t going to provide a very high rate of return at sale time.
- Second, we look at what the proposed remodel project does for the house. Â In most homes, there are one or two things about the property that limit itâ€™s value. Â Maybe itâ€™s the square footage or number of bedrooms. Â Maybe itâ€™s a cramped kitchen, or poor layout that wastes space or restricts access to the yard. Â Could be any number of things, but there are generally one or two key attributes that would need to be changed in order to maximize the value of the home. Â So, if the proposed remodel project addresses (and fixes) at least one of those key items, then the return can be very good…in some cases even exceeding the cost of the project. Â If however, the remodel ignores the limiting attributes and invests in other areas, then itâ€™s likely that the return will be much lower.
- Third, we evaluate what the proposed remodel consists of. Â Kitchens and baths tend to have relatively higher return on investment, for the simple reason that every home has one, and these are high-use spaces in the home. Â Adding a bonus room, or building out a home office will suit the needs of fewer buyers, and thus typically provide a lower return (compared to a kitchen).
- Fourth, we consider style. Â This includes remodeling in a style that is complementary to the existing architecture, as well as remodeling in a style thatâ€™s current and popular, not outdated or too impractical to suit a new buyerâ€™s tastes.
While the factors listed above are important to consider, each situation is unique and nobody has a crystal ball to predict the future. Â A little research and consideration, though, can get you closer to understanding what kind of return to expect from your project.