As you may have been aware, I conducted an expert roundup a couple of weeks ago where I asked 45 experts what they felt were the best home improvements to increase the value of your home.
Even though the roundup was a great success and produced a number of very useful insights, a number of readers raised some concern. The results seemed to differ from what is typically published in the Cost vs Value Report in that some home improvements in the expert roundup showed a positive return of investment, while in the Cost vs Value Report none yield a positive return.
Wouldn’t it be a sad state of affairs if every home improvement that we made didn’t even recoup what we paid for it?
Well, I’m going to show you today that it is possible to consistently add value to your home that out ways your investment.
What Is the Cost vs Value Report Anyway?
The Cost vs Value Report is a report published annually and is largely regarded as the industry benchmark for measuring the ROI on home improvements. It only covers the US market at this point in time.
The costs of the home improvement projects are estimates of generic projects that are generated by RemodelMax, which is a publisher of estimating tools for remodelers. The resale value data is aggregated through the collection of survey results of around 4,500 members of the National Association of Realtors (NAR).
The members of the NAR are provided with three-dimensional illustrations, construction costs, and median home prices when asked what premium they thought each improvement was worth. Based on the average home improvement costs, and the resale data collected through the surveys, an average return was calculated which forms the basis of the Cost vs Value Report.
Home Improvement Motivations
The Cost vs Value Report is an average which leaves one big question unanswered.
What is the motivation of the people that chose to make a home improvement? Was it done to increase the value of the property? Was it done to increase the quality of life? Or was it done for some other reason?
The answer is that we simply don’t know exactly what assumption is used in the Cost vs Value Report.
To get a feel for what it may have been, a good starting point would be a recent survey that was conducted by Houzz which noted that only 54% of those who conducted a recent remodeling project, considered increasing home value as an important factor.
This means that 46% did not factor increasing their home value into their decision making. That’s nearly half of the people!
If almost half of the people did not even take home value into consideration, how can we expect the outcome of home improvements to show a positive ROI? The answer is that we can’t because this wasn’t a desired outcome for many of those that made an improvement to begin with.
Home Flippers Generate Consistent Positive Returns
RealtyTrac’s Home Flipping Report for Q2 2014 notes that the average return on investment of 21% was experienced on flipping homes in the US, with an average gross profit of $46,000 per flipped home.
This isn’t a coincidence either. These guys (and girls) are able to consistently make profits by doing this and have been doing so for years and years.
So why are they able to generate a consistent and positive return on investment? Because the ultimate goal of a home flipper is to generate as much return on investment and each and every activity is focused around that goal.
So guys and girls remember… if you conduct a home improvement with the right motivations, do your research up front, use a style that is in demand, and make sure you watch the costs – you can more than recoup your investment through home value appreciation.
Read this post in its entirety at KayuConnection.com.