When selling your home, the right upgrades can help attract potential homebuyers and boost your sale price. Adding energy-efficient features, investing in a finished basement to add square feet, or updating with hardwood floors and a fresh coat of paint are all simple ways to increase value and appeal. Outdoor living spaces are also a big draw for today’s buyers, so don’t overlook them as you consider your average return. Simple, smart improvements go a long way. To learn more about what it takes to get a great return on your investment, we tapped Liz Young, Founder & CEO Realm (the one-stop destination for homeowners looking to renovate that provides expert guidance, reliable contractors, and a customized plan for your remodel).
How to Calculate Recoup for a Home Improvement Project
"For homeowners looking to maximize the value of their property, it’s important to understand the recoup of specific home improvement projects," highlights Young.
Recoup is calculated as [ (Home value increase due to project) / (Cost of project) ], but to put it more simply, it measures the percentage of each dollar spent on your home improvement project that gets added to your home’s value.
This is notably different from return on investment (ROI). ROI can be a little more challenging to understand, as [ (Home value increase due to project - cost of project) / (Cost of project) ].
"The reality is that most home improvement projects won’t recoup what they cost, but they can still improve the sellability or make it a more enjoyable place to live," she noted. If you are focused on maximizing recoup, here are the projects you should focus on:
1. Bathroom Remodels
If you’re looking to get the most bang for your buck, start with bathroom updates. "Many homebuyers prioritize updated bathrooms because they’re one of the most frequently used spaces," shares Young. "An outdated bathroom can give the impression that the whole house is outdated, whereas an attractive and functional bathroom gives the appearance of a well-maintained home."
She breaks it down further, noting that a full bathroom remodel costs $16,524 on average, with a 112% recoup. "This means that not only will you make back the money you spent on your bathroom renovation, but you’ll earn an average profit of nearly $2,000."
She adds that half bath remodels also offer good returns on investment, with an average price of $8,256 and a recoup of 77%. "Essentially, for every dollar spent on your half bath remodel, you’ll recover 77 cents in added home value."
2. Accessory Dwelling Units (ADUs)
"ADUs have grown increasingly popular in recent years, with an average cost of $212,473 and a recoup of 71%," shares Young. "It’s worth noting that the recoup does not factor in any rental income, and the average ADU generates more than $10,000 of rental income each year."
In addition to having a high recoup, potential buyers think ADUs are a great choice because they can add significant flexible living space, whether they’re used as a rental, a WFH office, or as a living space for aging parents.
3. Kitchen Renovations
"Major kitchen remodels are among the most popular home improvement projects, with over 60,000 kitchen remodel permits pulled in the US in 2023 alone," shares Young. "The average price of a kitchen remodeling project is $55,168, with an average recoup of 55%—though this number can vary depending on where you live."
She adds, "Though this isn’t the highest recoup, kitchen upgrades can be very attractive to prospective homebuyers. And, if you’re staying in your space, having a kitchen that is highly functional and attractive can enhance your daily life."
Tips for Maximizing Recoup Value
No matter what type of renovation project you’re doing, be mindful about the potential recoup:
- Focus on the quality and functionality of your spaces, rather than luxury upgrades. "Homebuyers typically prioritize updates that are well-done and practical over extravagant features that might not suit their taste or needs," reminds Young. As you scope the costs for details like stone veneer or lighting fixtures, consider if these elements will affect your position in the real estate market.
- Research local market preferences and recoup trends before starting a home improvement project. Have you checked the average resale in your area? "The value of a renovation can vary depending on where you live and what buyers in your area are looking for," notes Young. "For example, while ADUs are highly popular on the West Coast, particularly in California, Oregon, and Washington, they are not yet as popular in regions like New England. It can be challenging to research these trends on your own, but by working with renovation advisors, such as Realm, you can access recoup data tailored to your home to make highly informed decisions."
- Invest in timeless designs that will age well. Whether you're doing structural improvements or a minor remodel, you'll have a better chance at achieving substantial returns if you make good choices with your updates. "It can be tempting to jump on the latest design trend you’ve seen all over social media, but these trends can quickly become outdated and turn off prospective buyers in the future," shares Young. "Take the millennial pink trend of the 2010s as an example. It’s safer to go with neutral color palettes, simple fixtures, and classic cabinetry or tiling. These timeless designs will ensure your home feels current for years to come and maintains its resale value."
