How Much did your Renovation Increase your Resale Value?

Home Renovations & Resale Value

One of the most common misconceptions about home renovations is that the money spent on a highly functional and aesthetic re-jigging of key rooms is just like any other expense.

But that’s simply not true – renovations are not an expense, but an investment that will increase the value of your home.

The question then is – how much?

One very simple rule of thumb, and a low-ball estimate at that, is to simply add on the amount you spent on your renovation to the existing value of your house.

So, spend $50,000 on a bathroom-and-kitchen renovation? Well, then your house is now worth $50,000 more.

But there are more factors that come into play when it comes to trying to determine how much value a renovation adds to your home.

What is it replacing?

For the calculation, one good rule is that if you take away something that has value (IE valuable materials), then you should remove that cost amount from the total cost of your renovation. This means that if you rip out granite counters worth $500 in a renovation costing you $2000, the maximum value will by $1500.

Overdoing the renovation risks lost value

Simply put, some people go way overboard in their home renovation. And that’s fine for them, as they’re getting exactly the at-home living changes they want. But when it comes to reselling the property, there is such a thing as too much. This is because potential buyers may not share the same value ideas as you.

If you put in teak flooring, for example, that costs ten times as much as normal wood flooring, odds are the buyer won’t view this with the same priority as you – and instead think the floors are worth as much as normal wood flooring would cost.

Buyers value visible, not unseen, changes

Another problem with buyers is that they add value to what they see. This means that the renovation changes they can’t see – such as wiring and plumbing – won’t factor into their value estimation.

How old is the reno?

The newer the renovation, the closer the added house value will be to the renovation cost. This means that a fence that runs you $1000 will add $1000 to your home value right after it is installed. But as the years go by the additional home value will start to drop below the $1000 mark.

One essential thing to keep in mind while renovating a home is to consider how time-sensitive the changes you’re making are. Is this a flash-in-the-pan fad that is going to be outdated in three years? Make changes that have been widely accepted as popular over numerous years to ensure that you’re not wasting both time and money.


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