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A person’s home is usually his or her most important financial investment. This article is designed mainly for homeowners who are inquiring about types of home improvements and return on investment, and which types of home renovations will most increase the value of their home or property. The return on investment of a home remodeling project allows us to measure its impact on home or property value.

We can divide home renovations or home remodeling into two large categories, interior remodeling, and exterior remodeling.

Research studies on home renovations

Interior remodeling

Interior remodelingReturn on investment
Hardwood flooring refinish147%
New wood flourish118%
Insulation upgrade100%
Basement conversion to living area86%
Closet renovation83%
Attic conversion to living area75%
Complete kitchen renovation75%
Bathroom renovation71%
Kitchen upgrade67%
Add new bathroom63%
Add new primary bedroom suite56%

Source: National Association of Realtors

Exterior remodeling projects:

Exterior remodelingReturn on investment
New roofing100%
Garage door100%
Fiber cement siding86%
Vinyl siding82%
Vinyl windows67%
Wood windows63%
Steel front door63%
Fiberglass front door60%

Source: National Association of Realtors

Professional estimates of return

Despite these numbers, an appraisal called an “as-completed appraisal” (as opposed to an “as-is appraisal”) is the only way to estimate the added value of renovations projects to the value of the property. It estimates the future price or worth of the property after or upon completion of renovations or remodeling projects.

An “as-is appraisal”, as its name suggests, determines the value of the property, as it is on the day of the appraisal. The appraisal is based on the current condition of the property without any regard for future renovation plans.

However, an “as-completed appraisal” determines the future value of the property today, as if the renovation or remodeling plans were already completed. “As-completed appraisals” are usually carried out as part of the process of applying for a renovation loan. The value of the collateral is measured based on the equity of the home “as-completed” rather than on the value of the property “as-is”.

A major benefit of home renovation loans, which rely on “as-completed appraisals”, is that you can be sure what financial return you will get from any renovation, before starting any project.

Before planning any major home improvement project, we recommend studying the potential return on investment of said improvements and choose projects that add to the long-term value of the property.

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