The 10 Best Home Improvements, By Cost Recovery At Resale And Homeowner Happiness

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What comes to mind when you hear the word “home”? Before the COVID-19 pandemic, many likely viewed home as a place to retreat, relax and recharge after a long day. But when home became the center of our lives amidst a global health crisis, it’s understandable that some started to view their homes with a more critical eye.

Maybe your beloved bedroom lost its luster after doubling as a makeshift office. Or perhaps you now see the appeal of a patio after spending ample time in your backyard.

If so, you’re in good company. A survey conducted by Houzz, an online home remodeling service, found that in 2021 more than half of homeowners (55%) renovated their homes. And this trend holds steady in 2022 with 55% of homeowners planning to renovate.

But while your happiness as a homeowner is important, home improvements don’t just hold aesthetic value. Investing in home improvement may also be a wise financial decision.

Let’s consider some of the best home improvements for both cost recovery at resale and homeowner happiness.

Why You Should Spend Money On Home Improvements  

Home improvement projects take quite a bit of money and time. So, is it worth it? Possibly. Here are three reasons you might decide to renovate your home.

Increased Resale Value

Your home’s resale value is the estimated price you can expect to sell it for in the future. Making improvements to your property could increase the amount you get for it, if at some point you decide to sell. This is especially true if you decide to sell in a less favorable market than the current one; when buyers have more choices, home improvements can give your house a competitive edge.

Not sure which home improvements have the best chance at increasing your home’s resale value? No worries! A comparative market analysis prepared by your real estate agent can give you a better idea of which home improvement projects to prioritize. This process can also offer insight into other aspects of your property that may affect its resale value.

Since your home’s resale value depends on several factors besides home improvement, we will be focusing on cost recovery at resale. Cost recovery, in this context, refers to how much you might expect to recover on the cost of improvement projects exclusively.

Increased Cost Basis In The Home 

Cost basis is the original value that a buyer pays for their property. You may be thinking, “What does this have to do with selling a home, or better yet, making home improvements?” The short answer is more than you might initially think.

Cost basis is important to consider when selling your home because you must pay capital gains tax on any amount exceeding what you originally paid for the property. This means that making capital improvements — permanent structural alterations or repairs to a property that increases its overall value — will increase your cost basis. And a higher cost basis means paying a lower tax since you will also be making less profit from the sale.

Simply put, the possibility of a capital gain tax exemption might be a strong incentive for revamping your primary residence.

Increased Enjoyment Of Your Home

We’ve discussed the financial benefits you may receive from investing in home improvement. But you just can’t put a price on the increased levels of happiness that may come from your new and improved space. In fact, Bank of America’s 2021 Homebuyer Insights Report reveals that 54% of respondents experienced increased levels of happiness after finishing home renovation projects.

This makes sense. After all, our homes are often where we go to find tranquility in a fast-paced world. You may find that the money and time that it takes to remodel pale in comparison to the joy you’ll feel when the project is complete.

How We Ranked These Renovations: Cost Recovery

Now that we’ve covered the benefits of spending money on home renovations, there’s still the question of which ones to invest in. Of course, any expensive and time-consuming renovation project should offer a return that justifies its cost.

Let’s discuss the top five interior renovations and the top five exterior renovations that return most of the cost outlaid for the improvement. We’ll do this using the National Association of REALTORS^® (NAR) 2022 Remodeling Impact Report.

This NAR report provides an estimate of the likely dollar value that a specific renovation project would add to a house at resale, otherwise referred to as cost recovery. And from this dollar value, a recovered project cost percentage was calculated.

Furthermore, it provides a “Joy Score” – a number ranging from 0-10 that reflects the homeowner’s reported happiness with a specific renovation project once finished.

While this report provides many valuable insights, we’ll be focusing on the relationship between cost recovery and homeowner happiness once renovations are complete. And while this may be helpful information, it’s difficult to put a dollar amount on the joy home improvements can bring you.

The Top 5 Interior Home Improvements

Finding a balance between the cost of an improvement project, cost recovery and your happiness is important. If you’re looking to sell your home, especially within the next 5 years, consider prioritizing these high-cost-recovery improvements. If you’re about to sell, before signing off on any project, consult with your listing agent first.

Source: National Association of REALTORS^® 2022 Remodeling Impact Report

Hardwood Flooring Refinish

When a prospective buyer steps into your home, flooring is likely to be one of the first things that catches their eye. And because many buyers value a home that is move-in ready, refinishing your hardwood floors could add a polished look to the house, making such a project high in cost recovery.

According to HomeAdvisor, homeowners have spent as little as $600 and as much as $4,200 to refinish their hardwood floors. This figure varies widely based on cost of labor, room size, the condition of your floorboards and many other factors.

Whatever the cost, the NAR reports that this improvement earns homeowners their costs plus a 47% return on their investment (ROI). This improvement project also earns a perfect Joy Score of 10, as 100% of surveyed homeowners reported having a greater desire to be home since completing the project.

New Wood Flooring

Maybe you’ve grown tired of your hardwood floors and are after an entirely new look. If so, you may choose to install new wood flooring rather than refinishing your existing flooring. While this improvement is the more expensive option –costs ranging between $2,485 – $6,784 – you may be looking at a hefty ROI. Surveyed homeowners recovered their costs plus an 18% ROI. This project earns a Joy Score of 10.

Insulation Upgrade

A well-insulated home stays warm during chilly winters and cool in the sweltering summer heat. A home without proper insulation means higher heating and cooling costs, and an uncomfortable living experience. So, upgrading your home’s insulation before selling will likely appeal to a prospective home buyer.

How much will this improvement cost you? You can usually expect to pay $1,400 – $6,300. But the good news is that even the more expensive insulation projects typically have an ROI of 100% or more. That’s because of the energy cost savings and the resale value. The Environmental Protection Agency (EPA) estimates that homeowners can save an average of 15% on heating and cooling costs by air sealing and insulating their homes.

It’s no surprise, then, that the NAR reports an 100% ROI and a Joy Score of 10 among homeowners who upgraded their insulation.

Basement Conversion to Living Area

Transforming a dark, damp basement into a bright, livable space may be just the improvement that leaves a buyer sold on your home! After all, a basement is a versatile space with endless living possibilities. Home buyers could envision this space as an additional bedroom, den, home theater and more.

The cost of this improvement project will depend much on the existing condition of your basement, as well as additional costs of labor, permits and more. Experts at HomeAdvisor report that the average cost of remodeling a basement is $12,208 – $33,298. However, a high-end remodel can cost $50,000 or more.

The NAR found that homeowners received an 86% ROI with a Joy Score of 9.7. Keep in mind, though, that your ROI will depend on the type of basement remodel and its purpose.

Closet Renovation

Closet spaces can be an overlooked and undervalued feature of a home. But renovating the closets in your home can add a spacious and luxurious look that impresses a buyer seeking organizational space.

The cost of this project, as always, will depend on size, construction details and closet features. But custom closets can cost $1,055 – $2,921 on average, with large installations ranging over $20,000.

The NAR reports surveyed homeowners recovering 83% of their costs with a Joy Score of 10.

Honorable Mentions: Interior Renovations  

Some interior renovations prove to be quite expensive with a lower return on investment. But since no dollar amount can compare to the enjoyment you could feel in an updated home, you may do well to consider these home improvements.

Complete Kitchen Renovation

The kitchen is a focal point of your home. It is likely where you prepare nutritious meals and spend quality time by yourself or with loved ones. So, it may be reasonable to invest in a complete kitchen renovation, despite the potentially significant cost.

Installing a new kitchen could cost $5,000 – $125,000, with HomeAdvisor citing the average cost by location as approximately $62,000. This figure depends greatly on the type of appliances you choose along with their associated utility costs, as well as any luxury finishes you may desire.

While the cost of a complete kitchen renovation is usually not justified unless you plan on living in your home for at least 5 more years, this project earns an impressive Joy Score of 9.8.

However, if you would like to upgrade your existing kitchen, this less costly improvement also earns a 9.8 Joy Score with homeowners typically receiving a 67% ROI. 

Full Bathroom Upgrade

Like upgrading your kitchen, a full bathroom upgrade can vary greatly in cost. HomeAdvisor reports that most homeowners spend $6,610 – $16,619 on a complete tear-out and replacement of all bathroom walls, fixtures and appliances. However, a large or primary bathroom can cost $28,000 or more.

While being quite the investment, a beautiful, modern bathroom will likely stand out to home buyers, as well as contribute to a more enjoyable hygienic routine. This improvement earns a Joy Score of 9.6 with a 71% ROI.

Many homeowners are looking for ways to make major improvements to the home. One way to do this is through a cash-out refinance.

A cash-out refinance allows homeowners to refinance their existing mortgage loan and turn the home equity they have into cash. In this way, many homeowners have been able to use their home equity to fund costly renovations.

The Top 5 Exterior Home Improvements

We’ve now considered some interior renovations that can yield a high cost recovery and increased levels of homeowner enjoyment. But exterior improvements are also worth considering since they are often the structural basis of your home. Not to mention, before even stepping foot inside your home, interested buyers will likely peruse the outside of your property.

Make sure your home is structurally up to date, more environmentally sustainable and oozing of curb appeal with these top five exterior home improvements.

Source: National Association of REALTORS^® 2022 Remodeling Impact Report

Roofing

There are many reasons to consider new roofing when improving the exterior of your home. Not only can a new roof increase your home’s resale value and curb appeal, but it can also protect the health and safety of those living in the home.

Since a roof in optimal shape keeps moisture out of the home and regulates the home’s climate, buyers and homeowners should give considerable attention to the quality of a home’s roof.

HomeAdvisor reports that the national average price to install a new roof is about $8,786, with most homeowners spending $5,627 – $11,975. As always, this cost will vary for each homeowner based on house size, location and other roof-specific factors.

You may also decide to repair your roof rather than replacing it altogether. If so, you might expect to spend $380 – $1,680.

A new roof could be an exterior renovation project that offers a high cost recovery. In fact, the NAR reports that homeowners recovered 100% of their costs with a Joy Score of 9.2.

Garage Door

While a new garage door isn’t exactly a necessity, it’s an inexpensive improvement that could make your home stand out to interested buyers. A new garage door can offer increased security, better safety features, lower energy bills, less maintenance and improved curb appeal.

On average, you can expect to spend $700 – $2,500 on most new garage doors. However, price will vary based on the materials used, design, level of customization and more.

NAR found that homeowners reported a cost recovery of 100% along with a Joy Score of 9.0.

Fiber Cement Siding

Fiber cement siding is a material made up of sand, cement, water and cellulose fibers. It is fire-resistant, extremely durable and considered to be one of the most affordable exterior siding materials for homes. Home buyers may be drawn to this siding’s elegant wood-like appearance that gives the home a distinct look.

HomeAdvisor estimates that you’ll pay $6,549 – $21,493. However, some homeowners have spent as much as $39,000, and others as little as $1,500. Prices will vary.

This exterior improvement project earns a Joy Score of 7.9 with a cost recovery of 86%.

Vinyl Siding

So, how does vinyl siding compare to fiber cement siding? When looking to improve the exterior of your home, which siding material should you choose? Either could be a viable choice since they are both protective materials that boost curb appeal.

You will find that while vinyl siding is typically lower in cost, low maintenance and energy efficient, it also can be more difficult to install and wear out within 10 years.

Fiber cement siding, on the other hand, can be a bit more expensive and requires more maintenance. However, it is also easier to install and can last up to 50 years. Really, it all comes down to what features you value as a homeowner.

You can expect to pay $6,104 – $16,901 for vinyl siding. With an estimated 82% cost recovery, a vinyl siding installation project earns a Joy Score of 7.9.

Vinyl Windows

Adding new windows to your home can be a worthwhile investment. Windows bring natural light into your home and help save energy. And depending on the type of framing material you choose for them, new windows could add a finished yet functional look to your home’s exterior —one that will likely stand out to buyers!

Vinyl windows could be an excellent choice! HomeAdvisor reports that new window installation costs could range anywhere between $2,976 and $9,729, with some high-end installations costing $28,000 or more. Vinyl windows specifically range from $250 to $600, making them a cost-effective choice. They also require little maintenance and are extremely durable. However, they’re often not as sturdy or attractive as wood.

This exterior home improvement earns a Joy Score of 9.6 with a 67% cost of recovery.

Honorable Mention: Landscaping Projects

Last but certainly not least, you might consider a landscaping project to boost curb appeal and attract buyers. Your yard will be the first thing a prospective buyer sees. Since first impressions count, you want to make a good one.

Landscaping project costs typically fall in the $300 – $16,300 range, depending on the specific task. Whatever the cost, showing your outside space a bit of TLC could be well worth the investment.

There is no Joy Score for this improvement because it’s not a capital one; however, no numerical value can quite accurately capture the happiness that a beautiful yard can bring to yourself and future residents of your home!

The Bottom Line: The Best Home Improvement Is The One That Will Add The Most Joy To Your Life

When you hear the words “home improvement,” you think of a space that can be updated for your maximum enjoyment. And while it’s important to consider the cost recovery of home improvement, be sure that any project you take on will be one that makes home a better place.

If you’re ready to start a home improvement project, we’d love to help you out! for a cash-out refinance!