How much return on my investment can I expect from a remodel?

Price, Location and Time

Other than the specific remodeling project, what other factors will affect the value you ultimately derive from remodeling? Here are a few keys:

  • The price of the house and the cost of the renovation. As a general rule, smaller renovations on less expensive houses tend to return a greater percentage of their cost. Of course, the absolute numbers are smaller -- that is, 75 percent of a $6,000 project is less than 60 percent of a $25,000 project [source: Remodeling].
  • Location is key. One of the cardinal rules of remodeling is: Don't increase the value of your home beyond the neighborhood. The neighborhood is one of the biggest things home buyers are interested in -- they'll see an area they like with home prices they can afford and start their shopping there. It's unlikely that a house will sell if it's priced way above the going rate for other homes in the area. That means that if you put in some pricey renovations, you won't get as much of the cost back when you sell.
  • Look for government assistance. You might be able to bring down the cost of some home improvement projects using government programs that will subsidize a portion of it, especially if you live in a low-income area or are putting in energy-efficient upgrades. If you pay for the remodeling with a home equity loan, the interest will probably be tax-deductible.
  • Time is money. Everything depreciates over the years, including remodeled homes. Mechanical upgrades are the most time-sensitive, since furnaces, hot water heaters and other major systems eventually wear out and need to be replaced again. Roofs and siding suffer the same fate, but at a slower rate. You can keep remodeled areas from looking dated by sticking with classic styles instead of the latest trends [source: Tracey].
  • Don't forget the importance of curb appeal. Some projects influence the value of a house simply because they make the house look better and more appealing to a prospective buyer who's just driving by. New siding, roof, and windows can make a house look well-kept and maintained, while touching up paint and adding some landscaping can add value even if you didn't have to spend much time or money to get it done.