Most homeowners know that renovations and improvements don’t always pay off, but even so some projects are better investments than others.
The average return on investment for home renovations is on the rise, with projects returning an average of 64.4 percent for homes sold within the year, up from 62 percent last year, according to the latest cost vs. value report from Remodeling magazine. That’s still a far lower ROI than before the housing boom, when renovations had a cost-value ratio of nearly 90 percent.
Of course, there may be non-monetary benefits for projects that don’t have a great return. The average ROI on a bathroom addition was 56.2 percent of upscale projects and 56.7 percent of mid-range projects. That, however, doesn’t factor in the value of cutting down wait time or pre-coffee disagreements in a crowded house.
Similarly, a backup power generator returned just 59.4 percent, but could be worth a lot more to residents who don’t have to dump the contents of a fridge or move in with family after a bad storm knocks out neighborhood power.
Overall renovation costs increased this year, according to the report, with the average project costing nearly 5 percent more than last year. The project that saw the biggest price increase was replacing a steel entry door, which cost 8.6 percent more this year.
One way to keep costs down and keep headaches to a minimum is to properly vet your contractor. The Better Business Bureau received move than 3,700 complaints last year about home improvement vendors.
Click here to see the projects with the lowest return on investment nationally.