Renovations that Yield the Best Return on Investment

The best places to use your home-improvement budget, plus renovations to avoid.

Kitchen
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Will this renovation pay off? That's the question on the mind of every homeowner who's thinking about undertaking a project to bolster their home's resale value. And in today's tight housing market, the answer to that question may even determine whether the house will sell.

Fortunately for homeowners, a number of remodeling projects offer the potential for a high return on investment (ROI). According to Remodeling magazine's annual cost vs. value report, some of the best renovations are those done on the exterior of the home—siding, window, and door replacements—because they immediately improve a home's curb appeal. In other words, if the paint on your front door is peeling or the sidewalk is badly cracked, you're not making a good first impression—and that can make prospective buyers question how much you've put into maintaining the home's interior. Even simple fixes, like pulling weeds and trimming unkempt shrubbery, can make a home more inviting.

Beyond curb appeal, certain projects will provide higher returns than others. U.S. News asked real estate agents and home contractors for their recommendations:

Attic bedrooms. According to Remodeling, you'll recoup 73 percent of your investment when turning the attic into a bedroom. However, this also ranks as one of the most expensive projects, averaging $50,148 nationally. But if you have the money, an attic bedroom is a desirable feature among homebuyers. "Any time you add additional square footage like that can have a very positive effect on the selling price," says Paul Wyman, a real estate agent with Wyman Group in Kokomo, Ind.

Kitchens. Although a kitchen remodel returns only 66 percent, on average, Chris Dossman, a real estate agent with Century 21 Scheetz in Indianapolis, says kitchens are one of the first things homebuyers look at. "If you have a house that doesn't have an updated kitchen but you have a remodeled attic, that's not what people are looking for," she says.

The cost of a major kitchen remodel varies widely depending on the region. Nonetheless, it's important not to go overboard, as you don't want to price your home out of the local market. For example, if you're in a neighborhood where the average home value is $200,000 and you put in a $50,000 kitchen, you're out-pricing your house.

A major kitchen redesign may not be a good decision if the space only requires a facelift. "You don't have to completely gut your kitchen if it's in good working shape," says Adam Taffel, a real estate broker with Centre Realty Group in Newton, Mass. In many cases, less-drastic updates like refinishing surfaces, upgrading appliances, and installing new light fixtures will cut it.

But making the mistake of opting for a facelift when the space does, in fact, need a full-scale remodel will cost you. "You need to ask yourself questions like, 'Are the cabinets structurally sound enough that if I spend a significant amount of money refacing them, are they going to just fall apart anyway?'" says Darius Baker, a contractor with D&J Kitchen & Baths, Inc. in Sacramento, Calif.

Baths. Investing in a bathroom remodel yields a 62 percent return, on average, but you've got to do it right. Many homebuyers are looking for a master bathroom with two sinks, custom showers, and great lighting. You'll turn off buyers if you only put in the minimal amount of work. "A lot of folks, when they buy a home, don't want to have put a lot of work into it," says agent Wyman. "An outdated bathroom requires a lot of work." Since bathrooms are especially prone to looking dated, pick neutral colors and finishings.

Also consider bumping out the size of a bathroom. Many buyers looking for a three-bedroom home want two full baths rather than one full and one half bath, says bath contractor Baker.

And sometimes less is more. "Giving it new paint, a new toilet, a new shower faucet, and a new [shower]head is probably the best bang for your buck. But that's assuming the flooring is nice and the walls around the tub and shower are in good standing condition," says contractor Dennis Gehman of Gehman Design Remodeling in Harleysville, Penn.