How to balance cost vs. value in home renovations

Real Estate

Buyers and sellers should consider different factors when it comes to investing money into their properties.

Today’s housing market has created quite a bit of havoc for both buyers and sellers. Both sides of the transaction are often not quite sure what to do and when to do it. Some buyers are starting to sit on the sidelines as the market has simply become too heated, and interest rates remain stubbornly high. Many sellers cannot lower their asking price much because they are often giving up an extremely low mortgage rate in exchange for a much higher rate. This is causing some sellers to stay put and pull their homes from the market.

What does this have to do with remodeling? Quite a bit, actually.

We have clients who are considering selling and want to know what they should do to the house to help it sell. We have other clients who just bought a home knowing they were going to have some remodeling done to it, and want our help in deciding how much to do.

Both are concerned about the same thing: Cost vs. value.

Sellers

Let’s start with the seller, since that is pretty easy. There are several well-respected construction industry publications that agree most remodeling projects have a negative return on investment. That seems counter to people’s expectations, but it’s true. For people who are putting their homes on the market and want to “fix things up,” the main thing to consider is curb appeal, not the kitchen and bath, since a new buyer may be ripping them out anyway.

Obvious repairs need to be made, but a renovation of interior spaces isn’t recommended. A fresh coat of paint, professional cleaning, and a properly staged interior (your listing agent will help with this) should suffice for interior preparation.

Things like a new front door, garage door, power wash, and paint or a landscape makeover will recoup anywhere from 100 percent to 200 percent of your investment. These projects make sense since they will most likely help the home sell faster and, worst-case scenario, you break even on the money spent. It’s all about the curb appeal and the notion that your home can never make another first impression on a potential buyer.

Buyers

As a buyer, or someone who may have recently purchased a home, the considerations are a little more nuanced. One of the most important factors is how long you expect to live in the home. You may be in a career that could have you transferred or promoted to another city. You may be planning a family and the home you bought will be too small in 5 to 10 years. This is important because since many remodeling projects have a negative return on investment in the short run, it will take years for the increased equity to catch up with the money you have laid out. This is why things like kitchens, baths, additions, or any other type of major remodel should never be undertaken if you don’t expect to be there very long.

Here is a small sample of the cost vs. value numbers for common remodeling projects based on homes in the Boston metro area in 2025

The following numbers are the percentage of investment that could be expected to be recouped in the short term:

• Major kitchen remodel: 40.8%
• Midrange bathroom remodel: 65.3%
• New wood deck: 66.4%
• Basement remodel: 62.6%
• Vinyl window replacement: 69.7%

Source: Journal of Light Construction

With numbers like these, it’s easy to see why we ask clients how long they plan to live in their homes, and if it is going to be 10-plus years, don’t worry about the return on investment. Make the kitchen and bath what you want and worry less about the current trends that you see online or in magazines. The home’s equity will catch up with the money invested, and in the meantime, you will have a home that fits your needs, you are proud of, and where you have built lasting memories.

Mark Philben is the project development manager at Charlie Allen Renovations in Cambridge. Send your questions to [email protected].