There’s a reason property owners are often advised not to go overboard when sinking money into home renovations. There are few projects that actually let you to recoup your costs in full and come out ahead financially.
Whether you’re looking to improve your own property or you’re a real estate investor in the business of flipping houses, it’s important to recognize which renovations are most likely to pay off. And here’s one worth putting on your list.
Upgrade your kitchen — but don’t go overboard
For many people, the kitchen is the heart of the home. And an updated kitchen is likely to appeal to buyers when the time comes to sell your property. That’s why if you’re going to put money into renovations, it pays to focus on a kitchen remodel — but a minor one, not a major one.
Often, homeowners and house-flippers go overboard on things like high-end appliances that don’t necessarily appeal to the average buyer, or even the average avid cook. And so if you’re going to remodel your kitchen, it pays to focus on things like updated countertops, refaced cabinets, and appliances that are upgraded but not necessarily top of the line. What you shouldn’t do is spring for the most expensive backsplash, custom lighting, and appliances that cost more than a really nice vehicle.
Running the numbers
Each year, Remodeling Magazine puts out a Cost Vs Value Report. In its 2021 report, it states that the average minor kitchen remodel will cost $26,214. Of that, you’ll get $18,927 in resale value. All told, you’ll recoup a little over 72% of your cost.
But there’s a little more to the story than that. In a normal housing market, you may, in fact, only get the bulk of your money back in the form of resale value for a minor kitchen remodel rather than all of your money back.
Today’s housing market, however, isn’t normal. Rather, it’s utterly starved for inventory. That means that buyers are not only duking it out over existing properties, but they’re also coming in with offers that are way above asking prices in an effort to get them accepted.
Of the various features that are likely to appeal to buyers today, upgraded kitchens are high on that list. And so if you have near-term plans to sell, investing in a minor kitchen remodel could actually result in more resale value than usual. You may even find that the project pays for itself and then some.
Of course, that might make you wonder: Should you bother upgrading your kitchen if you won’t get to enjoy it yourself? That’s up for debate. In today’s real estate market, sellers have a lot of leeway, and updates and repairs that may normally be necessary aren’t deal breakers due to a glaring lack of inventory.
But if you’re not quite ready to move, a minor kitchen remodel could be a wise choice. Not only might it enable you to enjoy your living space while you’re still there, but it could result in a strong level of resale value once you are ready to move on.
Values can change over time
The aforementioned cost versus value metrics can change from year to year. Right now, the estimated recouped cost on a low-grade kitchen remodel is a little over 72%. In two years, that could be 82%, or more. And so rather than fixate on specific percentages, consider the fact that an updated kitchen could be your ticket to commanding a higher sale price for your home — no matter when you decide to list it.