Despite claims of television decorating "experts" that a few hundred dollars in home renovations add thousands of dollars of value, the average return on your remodeling investment is apt to be far more modest. In fact, you're likely to spend at least 20 percent more than you gain. Whether fixing up your house is worth it depends on the project and your long-term plans for your home.
Consider the Neighborhood
You don't want to have the most tricked-out house in the neighborhood, nor do you want the plainest. You'll get the most value from renovations that put your home on par with your neighbors'. For example, installing granite counters in a neighborhood where laminate is typical returns less on the investment than would granite counters in a neighborhood where granite is the norm.
Keep It Proportionate
The value of your fix-ups is limited by your home's market value. PBS' Hometime recommends getting an appraisal and comparing your home's value to the values of homes that have sold recently. If your home is already at the top of the market, spend frugally. An $80,000 home with an unfinished basement, located in a neighborhood of $100,000 homes with finished basements, might give a solid return on a new $20,000 basement that makes it like neighboring homes. However, you'll lose your shirt if you spend $50,000 on the same basement because the house will still be worth only $100,000.
Projects With Highest Returns
According to Remodeling Magazine's 2011-2012 cost vs. value report, the highest returns come from replacing a home's siding, windows and doors. These are relatively inexpensive renovations that increase your home's curb appeal and enhance its energy efficiency. Indoors, the most lucrative fix is a minor kitchen remodel, which offers an average return of 72.1 percent. Spruce-ups such as fresh paint, updated light and plumbing fixtures and new grout and caulking throughout your home are almost always worth doing because they make your home look clean, updated and well maintained at very little cost.
Other Factors
Home fix-ups aren't just about money; there are lifestyle issues to consider as well. Although the luxury shower you install in place of an unused tub might not pay for itself monetarily, the enjoyment you get from your updated bathroom also has value. The length of time you plan to stay in your home matters, too. It's rarely a good idea to do major projects shortly before you sell. However, if a renovation makes it easier or more pleasant to live in your home, and it doesn't break your budget, it's probably worth doing.
References
Writer Bio
Daria Kelly Uhlig began writing professionally for websites in 2008. She is a licensed real-estate agent who specializes in resort real estate rentals in Ocean City, Md. Her real estate, business and finance articles have appeared on a number of sites, including Motley Fool, The Nest and more. Uhlig holds an associate degree in communications from Centenary College.