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Home Update Return on Your Investment

Investing in Your Home and Fireplace

Home Improvements and Return on Investment

As a homeowner, you have already made one of the most important investments that you can make for your family’s future. But it shouldn’t stop there. Owning a home is not a static thing—as you no doubt know. If you make smart choices about the improvements you do to your home, you can see a very nice R.O.I when you decide to put it on the market.


What is R.O.I.?

R.O.I. stands for Return On Investment. Successful bankers and businesspeople use it as a key concept in any investment process. The concept is to get the maximum return for the minimum investment in your home—not just in terms of money, but also in terms of the time and effort involved in remodeling.


R.O.I vs. Lifestyle Improvements

It is important to draw a distinction here between Lifestyle improvements and R.O.I improvements.

• Lifestyle improvements are projects important to you and your family but not necessarily to a potential homebuyer. Pools, tennis courts, even a home office may be just what you want for your home, but they generally do not offer a good return on your investment in the real estate market because the increase in the resale value of your home is significantly less than the cost.

• R.O.I. improvements are designed to make your home more attractive to buyers so you can sell it for a higher price. Since you are making ROI improvements to make money, it is important to look at the bottom line—the return on your investment. Adding a bedroom or bathroom, upgrading old or damaged windows, and improving the appearance of your fireplace are generally good investments that will pay off when you decide to sell your home.

The distinction between Lifestyle and R.O.I. improvements offers a good way to think about which projects are right for you and your home. Don’t think of Lifestyle improvements as bad and R.O.I. improvements as good—if you really want to make a change to your house, it might be worth doing even if the return isn’t as good as other projects.

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Fireplace Remodeling Projects - Cost vs. Value

Many people ask if it is worthwhile to invest time and money in home improvements. This question does not have a simple yes or no answer.

  • How much will a home renovation project cost?
  • How long will a fireplace resurfacing take?
  • Can you recover your fireplace remodeling investment when you sell your home?

Read below the steps of a home renovation projects, most common costs and average return on investment, associated with it.


A lot of home renovation projects depend on the following factors:

 Your Plans. If you are planning to sell your home in the next 1-2 years, some home improvement projects are not for you. This is because some projects will not give you a good return on your investment. You may want to concentrate on basic maintenance and quick, inexpensive improvements that are attractive to buyers.

If you are planning to live in your house for several years, then larger projects such as adding a second story, a deck, or an upscale kitchen or bath become more attractive because you and your family can enjoy them and because your home is continuing to appreciate in value as you live there. This appreciation offsets much of the renovation cost.

• Your neighborhood. Always consider your neighborhood when planning a home improvement project. For example, if most of the houses in your neighborhood are 2/1 (two bedroom, one bath), adding two bedrooms and a bath to your house may not give you the same return you would get in a neighborhood of larger houses. This is called “overbuilding.” If you overbuild for your neighborhood, the smaller (and less expensive) houses around you will lower the value of your own house—no matter how nice it is. Instead of adding on to your house, you may want to consider working on the existing features of your home such as improving the appearance of an ugly fireplace.

 The Project. Really, it all boils down to this. Is the specific project you are planning worth the investment? To calculate the R.O.I. for a project, take the increased resale value of your home after the improvement and divide that number by the cost of the project.

This chart shows some common home improvements and their average R.O.I.:

Project

Cost

Average R.O.I

Remodel bathroom

$7,500 to $8,500

69% to 77%

Painting

$700

200% plus

Minor kitchen remodel (new appliances, surfaces)

$2,000 to $8,500

80% to 102%

Major kitchen upgrade (new appliances, cabinets, island)

$9,000 to $25,000

70% to 90%

Finish basement

$3,000 to $7,000

15% to 25%

Add a new fireplace

$3,000 to $8,000

60% to 90%

Update fireplace (replace/rebuild)

$3,000 to $8,000

50% to 80%

Update fireplace (custom fireplace paint kit)

$200

150% to 200%

Add a bathroom

$5,000 to $12,000

92%

Build a pool

$10,000 and up

39% to 44%

Add insulation

$1,750

65%


Ideas for High ROI Projects: Remodel Your Fireplace, Kitchen, and More


Home improvement is an ongoing process. If you are deciding how best to spend your money and your time improving your home, consider the R.O.I. (return on investment) for each project. Extensive and expensive projects will increase the value of your home, but several smaller projects—especially ones that you can do yourself, such as paiting or remodeling an ugly fireplace—may offer a better return on your investment.

If you are looking for a home improvement project with a good return on your investment, try one of these:


1. Basic Maintenance.

Maintenance may not be exciting or glamorous, and you might not be able to show it off to your friends, but it can be the most important thing you do for your house. Since nearly all potential buyers hire independent home inspectors, any structural or maintenance issue will almost certainly be discovered—and a buyer may expect you to fix it on short notice or deduct the expected cost from the price of the house. Even worse, the potential buyer may walk away from the deal. Check for the following issues:

  • Leaks – Fix a roof or plumbing leak early before it causes water damage. This will definitely save you money (and headaches) in the long run. Check for loose roof tiles and flashing.
  • Gutters and Downspouts – Clean out clogged gutters. Re-attach any disconnected spouts. Replace or repair damaged gutters. Water from clogged gutters can get into walls, make paint blister or peel, or cause the gutter to sag.
  • Cracks – Repair any cracks in your foundation quickly. Check to make sure gutters and downspouts are not draining into foundation cracks.
  • Fireplace – Repair chipped or damaged brick. Clean and repaint the firebox flat black. Clean off soot and smoke.
  • Furnace – Check furnace operation and replace the filter regularly.

2. Curb Appeal.

A lot of real estate agents talk about “curb appeal.” This is the first impression that a potential buyer gets as they pull up to your house. Ideally, the outside appearance of your house should inspire buyers to want to come inside and take a better look. This first impression also sets up the buyer’s expectations—even if you have lovingly restored the interior of a house, if the outside needs work the buyers may still think of the house as a “fixer-upper” and bid accordingly.

Try the following to improve the outside appearance of your house:

  • Paint – The outside walls of your house are probably the first place a potential buyer will look. Faded, chipped, or peeling paint may not be a deal-breaker, but it definitely makes a bad first impression—and the buyer will deduct the cost of repainting from any offer.
  • Vinyl Siding – The same goes for old, discolored, or dirty siding. Often pressure washing can work miracles on dirty siding. Don’t be afraid to replace it if necessary—you will generally get a good return (85%-90%) and it should help sell the house.
  • Lawn – A well-maintained lawn improves the appearance and adds value to a house. You don’t want to go nuts—grandiose landscaping projects won’t pay for themselves. But if you have a green thumb, plant flowers along a walkway or beside a mailbox for a friendly, welcoming feeling.

3. Interior.

The interior of your home is just as important as how it looks from the outside. When touring a home, buyers visualize themselves living in the space with their own furniture and possessions, but they want all the basic elements (lights, doors, fireplaces) already in place. You want to provide a clean, finished interior that looks like it is ready for someone to move into.

Here are some ideas for improvements to the interior of your home:

  • Kitchen – People notice kitchen remodels, but all-new appliances and cabinets are expensive. Smaller projects such as a new sink or cooking station cost less and offer a better return. Upgrade the look of your kitchen with under-cabinet lighting, new countertops, or a ceramic tile backsplash.
  • Walls – Painting is almost always a great return on your investment. Painting the walls instantly improves the look and feel of a room. Although strong, dark colors are becoming popular especially in Victorian houses, a light color is a safer bet for most houses. Paint the walls yourself to keep some money in your pocket for a better return.
  • Fireplace – A fireplace can be a big draw for a potential buyer. If you have an ugly fireplace, you can paint the fireplace bricksas a quick do-it-yourself project. You can repaint fireplace brick and achieve an upscale, “real brick” look with a do-it-yourself kit that contains everything you need to remodel an ugly fireplace in a single weekend. This project costs about $200—a small investment that should give you a nice return.

Whichever projects you consider for your home, keep the bottom line in mind. And remember that small improvements that add monetary value to your home can make your home more enjoyable to your family as well.

Share your home improvement stories with Brick Anew and we will publish them on our blog.