This Is Really the Only Reason You Should Make Home Improvements


Two people smiling while eating at a kitchen counter.

Image source: Getty Images

There may come a point when you decide it’s time to remodel your home. Maybe you’re tired of your outdated kitchen and want to give it a refresh and some new appliances. Or maybe your bathrooms could use new countertops and fixtures because your current ones are worn.

No matter the project at hand, it’s important you find a cost-effective way to finance your remodel if you can’t simply pull money from your savings account to pay for it outright. That could mean borrowing against your home via a home equity loan or HELOC, or taking out a personal loan for renovation purposes.

But if you’re going to renovate, it’s important to do so for the right reasons. And if your goal in renovating is to increase your home’s value, you may not want to go that route.

Renovate for yourself, not for a profit

If you own a home you plan to live in for many more years, then renovating it could make plenty of sense. That way, you’ll enjoy a more comfortable living space. But that’s really the only good reason to renovate — for your own enjoyment. If you renovate with the goal of boosting your home’s resale value, you’ll likely wind up disappointed.

See, most home renovation projects won’t help you turn a profit. They’ll add resale value to your home — but at a cost to you that exceeds the resale value they allow for.

For example, you might spend $30,000 on a kitchen remodel, and that might add $25,000 of resale value when you go to sell your home. But in that case, you’re not coming out ahead financially. If anything, it means you’ll end up down $5,000.

According to Remodeling Magazine’s most recent Cost Vs Value report, even the most cost-effective home improvement — garage door replacement — only allowed homeowners to recoup about 94% of their investments. And minor kitchen remodels only allowed homeowners to recoup about 72% of their costs.

That’s why you really shouldn’t remodel if your only goal is to raise your home’s value and make money. In that case, there are better ways to make money, like investing the cash you’d spend on renovations in stocks or other assets with a more solid history of generating strong returns.

There’s nothing wrong with a hybrid approach

Perhaps you want to fix up your kitchen for your own enjoyment, but you’re also hoping that in doing so, you’ll add resale value to your home. And that’s totally fine. Chances are, if you renovate, it will result in a higher sale price on your home down the line.

The point, however, is that you shouldn’t look at home renovations as money-making investments, because chances are, you won’t recoup 100% or more of your costs when making renovations. What you might do, however, is make it so your home is more attractive and comfortable — and that alone is something worth spending your money on.

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