Renovations can make your home more comfortable, but some renovations are better than others when it comes to your return on investment (ROI). Therefore, it’s important to analyze how much cost you’ll recoup, in terms of your home’s value and asking price when you put it on the market. Here are some of the renovations with the highest ROI and some of the most common ways to fund these renovations.
Garage Door Replacement
Year after year, replacing the garage door comes in as one of the renovations with the highest ROI. In 2022, the average cost of a brand-new garage door is just about $4,000, and the average resale value is just over $3,700. This means you are likely going to recoup about 93% of your costs, making it a worthwhile investment. This curb appeal enhancer can net you an even higher ROI if you focus on polishing your overall curb appeal as well (paint, landscaping, front door, etc.).
Outdoor Living
Ever since COVID, people are spending more and more time at home, whether it be for quarantine, work from home, or hustling a side gig. The front and back entertainment space is important to a new homebuyer as they are envisioning spending quite a bit of time outside entertaining their family and friends. Having a deck in the back yard remains one of the most popular items on a homebuyer’s wish list as well as one of the renovations with the highest ROI. A classic wood deck is less expensive to install but requires more upkeep. A wood deck typically nets an ROI of 75-80%. Composite decks have exceptional durability, which living in the PNW we know it is important that the deck can withstand rain and cold temperatures. The average cost of building a composite deck is about $5,000 more than a wood deck, but can also resale for $5K more. To look at best options for you check out your local hardware store to find the best materials for your home.
Windows
Just as a simple window washing can do wonders for curb appeal, replacing windows all together can make a large difference when it comes to ROI. Windows are often said to be the eyes of the home, so it’s important to put your best eyes forward. Typically replacing vinyl framed windows will net a little higher ROI than wood framed windows, since the cost of wood is higher than vinyl.
Minor Kitchen Remodel
By changing a few minor things in your kitchen, you can make the space feel completely different and recoup most of that cost. Updating hardware, changing light fixtures, giving the kitchen a new coat of paint, painting cabinets, and potentially updating appliances are common kitchen upgrades that produce high ROI. Depending on how much a remodel you take on, this project can cost anywhere from $5,000 to $25,000 and typically nets 80% ROI.
Bathroom Remodel
Simply changing out a pedestal sink to a vanity with storage space can make your bathroom more functional and can play a part in producing a high ROI. Additionally, painting the walls, updating hardware, and changing light fixtures can help with the overall bathroom upgrade. Depending on how much of a job you take on, a bathroom remodel can cost anywhere from $1,000 to $5,000 and will generally net a 67% ROI.
Now that we have talked about high ROI producing home renovations, let us talk about how to pay for these home renovations.
Cash
The easiest and arguably the best way to pay is with cash. Using cash will not tie up your home’s equity and makes the most financial sense. However, with cash you are limiting your scope of work since you have a set budget.
Cash Out Refinance
A cash out refinance is a great option if you have owned your home for a few years and have built an adequate amount of equity in those years. You can also do a cash out refinance if you have cleared the loan balance. If the home value has increased significantly recently, a cash out refinance might also make sense. It is important to note that your monthly payments may increase if you choose to do a cash out refinance.
Personal Loan
With a personal loan, you have a shorter repayment time, but you will not have to put up your home as collateral. A personal loan requires a high credit score and will require higher interest rates. Unlike a mortgage, a personal loan does not produce any tax advantages.
Home Equity Loans
A home equity line of credit (HELOC) takes a loan against the equity of your home but allows for low interest rates. You also can deduct interest payments from your taxes. You will need a high credit score to open a HELOC, and if you fail to repay, it may result in a foreclosure.
Credit Cards
Using your credit cards will allows you to pay for home renovations upfront without cash. You will be rewarded with point for each dollar spent. However, you will need to pay off balance in full every month, and you will have higher interest rates.
If you are interested in learning more about talking out a loan to pay for some home renovations, reach out to us at HomeTown Lenders NW and we can walk through your options making sure you understand the advantages and disadvantages of each option for your situation.