As a homeowner, at some point, you may want to make changes to your home. This may range from minor updates to more major renovation projects, but some of these projects are costly and may not bring you a good return on investment (ROI).

According to the Remodeling 2019 Cost vs. Value Report, some remodeling projects have a greater ROI than others. The information in this report covers a wide variety of both interior and exterior projects and is specific to the San Francisco area.

While this report contains useful information, it does not include the cost of sweat equity. These cost estimates are based on using paid outside labor. It also does not include information on smaller projects that homeowners commonly do to upgrade their homes, such as cabinet refacing, laminate and vinyl floor installation, bathtub refinishing, and painting.

If you are preparing your home for sale, you can use the information in this report, along with current trends in renovation projects, to help you make the best decisions to make your home more appealing to potential buyers.

100% ROI Is Rare

Remodeling projects depreciate in value, and very few have a 100% ROI. In most cases, the ROIs are far lower than the actual cost of the renovations. This happens because technology improves, items break or wear down, and trends change over time. Additions, such as bathrooms, master suites, and family rooms have the lowest percentage of the costs recouped.

The US’s Trade War With China Will Cost You

A tariff increase from 10% to 25% in 2019 due to the US’s trade war with China has added significantly to the price of construction materials, including many high-end finishes, such as tile, countertops, laminates, and lighting. Consumers are paying more for these materials, but they aren’t recouping these extra costs, so this increase has caused the return on investment for remodeling projects to be lower than it may have been otherwise.

Interior vs Exterior Renovations

Across the US as in San Francisco, the average ROIs for exterior renovations were higher than those of larger discretionary remodeling projects or interior renovations. Nine out of the top 10 projects with the highest ROI in San Francisco are exterior renovation projects.

The reason exterior projects have higher ROIs is largely due to valuations set by real estate agents. They know how important “curb appeal” is to buyers, and this is reflected in these valuations. If homes don’t look great on the outside, many buyers won’t bother to look at the inside.

First impressions also make an impact on how much a buyer is willing to pay for a home. Real estate agents keep this in mind as they estimate the resale value of homes. To get the most out of the Cost vs. Value Report tool, homeowners should think like real estate brokers as they decide which improvements would be best to make their homes more appealing to buyers and provide the greatest ROI.

Manufactured Stone Veneer Takes The Top Spot In SF

While garage door replacements rank first for ROI in many areas in the country, manufactured stone veneer provides the greatest return in San Francisco. This involves adding stone to the lower third of a home’s front facade and extending it over the front entry. The typical manufactured stone veneer addition brings in an ROI of 153.6% of the cost recouped. This is a relatively low-cost project when compared to other more major projects, but the impact is high because it adds to the home’s curb appeal.

You May Love Your New Kitchen, But Will The Next Owner?

Kitchen renovations are the most popular remodeling projects, but if you want the best bang for your buck, the kitchen may not be a top priority. Only the minor kitchen remodel rivals the rate of return of most exterior projects. This type of project may involve replacing drawer fronts and front panels of existing cabinets, updating hardware, replacing appliances and fixtures, installing new flooring, and adding fresh paint.

Major kitchen remodels and larger projects, such as high-end bathroom and master suite remodeling projects may be too individualized to appeal to a wide range of buyers. While there is no universal agreement on the best design elements, there are certain design trends that have a wide appeal to homeowners, but because everyone has different tastes, one person’s new custom kitchen may appear tacky or outdated to some potential buyers.

Conclusion

If you don’t plan on selling your home for a few years, you may not be concerned with recouping the money you spend on renovations right now, but if you do plan to sell your home in the near future, then your ROI is something you should consider before making costly changes. 

According to the Cost vs. Value Report, it may be deceptive to apply national or regional information to specific homes since there are many other factors that affect valuations at the neighborhood or street level.

If you are thinking about a specific type of remodeling project, look at the ROI as well as current trends in the area before making any final decisions, and make sure to speak with your real estate agent about other ways to make your home appeal to the greatest number of buyers.

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