Renovation Projects with the Best (and Worst) Return on Investment
If you’re currently considering buying a property that needs a little facelift, you’ve no doubt been carefully thinking about whether the costs will outweigh the benefit.
Or, as a homeowner you’ll likely be eager to increase the value of your property while living in it, and as an investor you may be looking for the right property to flip.
When thinking of potential renovation projects it is obviously very important to consider if the cost benefit ratio of anything you’re going to change or add. Here is a list of possible renovations that offer the best (and worst) ROI.
Highest ROI Renovations:
- Curb Appeal Updates
The renovations which undoubtedly offer the highest ROI are those that increase curb appeal.
It seems buyers don’t give homes a second chance at a first impression. For example, a new entry door or building paintwork has been shown to make a significant difference to the way buyers perceive a home yet have very small installation costs, making the cost to value ratio very favourable.
Paintwork, a neat entryway, solid fencing are all relatively low-cost but make a big difference to the way that buyers perceive your property and, thus, the number of interested buyers and the final offer they’re willing to make.
- Kitchen Renovations
Kitchen renos are expensive, but buyers place a lot of value on a good kitchen. Many of our clients add a dream kitchen to their list of must-haves.
The potential return for a new kitchen has been pegged at around 68-120%.
If you can’t afford to give it a complete overhaul, good lighting, smart kitchen cabinets and neutral colours will give it a good refresh.
- The Attic
If your home has an attic, you’re in luck. There are two very high ROI alterations you can make to it.
The first is to add high quality insulation. This offers a double-return: it’s energy efficient and makes the living space more appealing.
The second is to add an attic bedroom. Creating an attic bedroom typically will increase your home value because you are adding additional space and increasing the all-important ‘number of bedrooms’ metric.
However, it is important to note that the costs of this renovation can add up quickly. Consider that you’ll need to have stair access, add a few windows and possibly strengthen the floors.
- A Granny Flat
A granny flat is an excellent way to both add value and create a second supplementary income. They are relatively cheap to build and the ROI is very high. A good quality granny flat may cost between $110k - $130k but return rental income of between $300 - $500 per week.
The cost benefit ratio of adding a granny flat differs with each property and area, but if you get it right it can earn you great returns.
Lowest ROI Renovations:
- A Home Office
Using a bedroom as a home office is perfectly fine, but do not be tempted to remove the cupboards or install any expensive and/or permanent office equipment to a home office. These renovations can be costly and you’ll end up losing the bidders who need the extra bedroom.
In addition, with the cafe and co-working-space culture we live in, people no longer need a designated space inside their home to work. Rather leave it as a bedroom.
- Risky Decor Choices
You might be a paragon of style and taste, but if your decor choices are risqué your resale value may suffer.
Intense colours, avant garde themes, trendy fixtures and anything that’s likely to elicit a ‘love it or hate it’ response are generally not great investments in terms of resale value.
Believe it or not, even wall colour can put some buyers off considering the home. If they lack imagination, or want to move into a ‘livable’ house right away, your decor choices are going to count against you.
- A Garage Room
Converting your garage into an extra room can be a great way to create extra living space, ideal for a growing family or for guests.
You don’t have to forego the extra parking space either: building a carport is fairly cheap and very effective if you have the space in front of the house.
As ever, it’s important to take into account all the factors, including the area, property style, comparable properties and current property market into account before making a decision. However, if you get it right, a few well-planned renovations can make all the difference.