29 Apr 9 Home Renovation Projects with the Lowest Return on Investment
Making improvements to your home might not sound like it could ever be a negative thing. But did you know that some home improvements could be detrimental to your bottom line when you sell?
When it comes to return on investment, not all home renovation projects are created equal. Home sellers with an eye for maximizing profits are wise to carefully research which improvements will equal the best return and which represent a veritable money pit.
No Home Improvement Project Will Recoup 100% Of Your Cost
Remodeling Magazine’s 2021 Cost vs. Value Report (CVV) looked at the costs and return on investment (ROI) of home renovation projects in 101 housing markets across the United States. The report concludes that the majority of projects return less than 75% of their costs upon resale. It found only two projects that returned more than that: garage door replacement (93.8% ROI) and adding manufactured stone veneer (92.1%).
That being said, some home improvements from an ROI perspective are worse than others. Keep reading and we will outline the worst home improvements for return on investment for you.
1. Upscale Bathroom Addition – 54.7% ROI
If you aren’t careful, a bathroom remodel can end up losing more of your money than you had planned at resale.
The CVV reports an upscale remodel assumes expanding within the original home’s footprint from a 35 square foot bath to 100 square feet, moving fixtures, and installing electric in-floor heat, among numerous other upgrades. This renovation may feature attractive amenities like a freestanding soaker tub, high-end fixtures, and a custom drawer base, but it doesn’t add up to a high ROI.
Instead of springing for an upscale bath remodel, consider more simple cosmetic fixes like replacing broken tiles, updating an old backsplash or floor, or installing new countertops. Some metrics suggest a $1.75 return for every $1 spent on these more minor upgrades.
2. Midrange Master Suite Addition – 54.7% ROI
Adding a midrange primary bedroom to any house may seem like a home improvement that will make buyers see your home as turn-key but it’s rarely known to help close a home faster or bring a noteworthy amount of profit to a sale. One of the best ways to evaluate how beneficial an investment like this is is to look at comparable homes on your block or in the neighborhood. If primary suites are the norm in the area, it makes more sense to spend on this upgrade than if the neighbors largely stick to smaller homes with fewer bedrooms. The privacy and relative luxury of a private portion of a house won’t do a seller much good if it puts a house too far above nearby comps.
Rather than fashioning a new addition, think about working with existing spaces. Transforming an unused attic or combining two bedrooms (only if there’s one to spare) will save as much as 80% on the cost of the buildout and make better use of otherwise wasted space.
3. Major Upscale Kitchen Remodel – 53.9% ROI
A high-end major kitchen remodel can be a truly justifiable investment for homeowners planning to savor the fruits of their labor, but these undertakings, on a whole, don’t add much by way of monetary return.
Upscale kitchen improvements cost nearly $150,000 on average and run the probability of not matching a buyer’s optics for the space. In such a situation, your investment is ultimately made moot. All the details of an upscale kitchen remodel only increase the likelihood of your aesthetic not matching a prospective buyer’s.
Any home remodeling should be consistent with the overall value of the home. High-end and costly upgrades in a home worth as much as the kitchen may not be a worthy investment. As with other upgrades (and other remodels with low ROI), it’s critical to consider other homes in your neighborhood and whether the upgrades you are thinking about are the norm or the anomaly on the block.
4. Mid-Range Bathroom Addition – 53.1% ROI
Even mid-range bathroom additions won’t boost your ROI as much as you would expect when it comes to reselling your home.
A mid-range bathroom addition assumes the creation of a 6×8 room off the existing house and over a cement-walled crawlspace. The addition requires all-new fixtures, ceramic tile, and basic wiring. The addition otherwise replaces everything in the room for about 75% of the cost of an upscale remodel but with an even lower return on investment.
Additional bathrooms bring in the best ROI if they’re necessary, such as in a case where there isn’t already one on the first floor or if the primary bedroom is a long walk down the hall from a bath. Smarter bathroom investments generally come by simple upgrades like nicer hardware or replacing significantly dated tiles or vanities.
5. Upscale Bathroom Addition – 52.8% ROI
Adding a brand new, 100-square-foot master bath to your master bedroom is even worse for your projected ROI than a mid-range bathroom addition. That may be because some of the amenities (from in-floor heat to high-end faucets) project more of a sense of upkeep and expense than luxury.
Interestingly, different regions in the U.S. tend to have different ROIs for this project. If you’re in the Pacific region, for example, you may see a significantly higher return on an upscale bath addition than those in the North Central United States. Be sure to check comparable homes in your area to see if an upscale bathroom renovation makes sense in your neighborhood.
6. Upscale Master Suite Addition – 47.7% ROI
The CVV report quantifies an upscale primary suite addition as a 32×20 foot room with a crawl space below and a spacious, attached bathroom. The layout has a few red flags for buyers, though (from excessive space that spells expensive upkeep and maintenance to custom bookcases and custom mantle over a high-end gas fireplace). Custom, luxury items are pricey add-ons that a potential buyer may want to remove anyway.
As these kinds of renovations may not be to a new homeowner’s liking, additions like this one are for a current homeowner who is intending to stay in the house to enjoy the addition for many years. If you’re selling a home that doesn’t have a primary bedroom attached, consider a more understated and modest project to get the highest possible return on investment.
7. Sunroom – 47% ROI
For anyone with a genuine green thumb and an itch to create more room in their home, a sunroom is very enticing. However, the truth is that a sunroom is considered one of the worst home renovation projects when it comes to return on investment.
Sunrooms can be quite expensive to build and maintain, especially if you opt for more of a greenhouse-style design that features floor-to-ceiling windows.
A recurring theme with many of the low ROI return projects is the fact that some of the additions you make to your home won’t appeal to everybody. When deciding on a home renovation, be sure you’re fully committed to what it will bring to your home because you’re potentially shrinking your pool of prospective homebuyers.
8. Swimming Pool – 35% ROI
Speaking of pools, putting a swimming pool in your yard is considered another of the worst home renovation projects you can do. A new pool can cost anywhere from $15,000-$150,000 to install.
If you live in a northern climate and won’t be able to use the pool for a very significant part of the year, the already low return on investment drops even further (25%). And owning an above-ground pool is something many experts agree actually decreases your home’s worth.
While a pool is a welcome addition to your home when the weather is hot, here are a few reasons why they’re still considered a bad investment:
- pools are notoriously time consuming and expensive to maintain
- pools leave less space in your yard for gardens and non-swimming recreational space
- many prospective homebuyers have no interest in owning a pool
9. Home Theater – 25% ROI
Building a home theater is another of the worst home renovation projects you can do. This is a home improvement project that offers limited niche appeal to prospective homebuyers and a downright ugly return on investment.
A state-of-the-art home theater can undeniably enhance your TV and movie watching, but be aware that not everybody craves that experience. A dedicated viewing room will be seen by most homebuyers as a space that could be better utilized.
If you’re looking to create a high-end entertainment room, a less permanent solution might be wiser. A high-quality custom entertainment center for your family room or basement is one option.
The bottom line is that some of the most attractive investments for your home can be some of the worst home improvements for ROI when it comes time to resell your home. Yet, is it always about the bottom line? A home improvement project, a home upgrade, or a renovation can be for pleasure, not your wallet. Before starting any home improvement project make sure you’re doing it for the right person. Do it for yourself, not the next homeowner. That being said, if you foresee a move coming in the next year or two, be sure to be smart about any home projects and what they will mean to your profit when it comes time to sell.