You've Been Warned: You'll Lose Money On These Home Improvement Projects
When considering home improvement and renovation projects, many homeowners are under the impression that such updates and add-ons are always good investments that will pay for themselves once the property is eventually sold. Unfortunately, that's not always the case. In fact, many home improvements won't even come close to reimbursing owners at the time of sale.
According to a 2022 analysis by real estate company Redfin, the average American home changes hands approximately every 12 years, but every homeowner's situation is different. If you're confident that you've found your forever home, enjoy your time there as much as possible and don't hesitate to personalize it with your dream kitchen, smart home technology, or energy-efficient appliances.
That said, some homeowners may need to sell their properties earlier than others, so if you're not sure, it's best to be conservative when choosing what areas of your property to update or improve. It's easy to go overboard, impart excessive personal tastes, or even embrace home trends that might turn buyers away. With that in mind, here are some of the biggest financial risks when it comes to home renovation.
Inground swimming pools
Unless you live in a place with a continually warm climate, like Florida, installing an in-ground swimming pool can be a very personal choice and thus, a questionable move. To begin, pools require considerable maintenance and upkeep — either by a hired professional or by the new homeowner — as well as covering in the off-season. Even if maintenance is self-performed, chemicals and other equipment like brushes and filters will still need to be purchased periodically.
Next, the space required for a pool will reduce the size and the functionality of your backyard for other endeavors like playing sports. Further, swimming pools may be viewed as a hazard or danger to families with young children. Though building codes for swimming pools typically require safety provisions, such as a fence with a high-mounted latch to keep children out, there's nonetheless the constant concern of accidental harm.
Opinions vary regarding the return on investment of installing a backyard inground pool, but it's certainly no more than 50% and as low as 15%, according to some sources. In any case, a pool isn't a great return. For enhanced outdoor living, experts recommend that you consider a patio or deck instead.
Upgraded mechanical systems
Prospective homebuyers will expect that certain standards be met, like a working furnace, water heater, and air conditioner in warmer climates. However, there's no need to go overboard upgrading with the latest and greatest energy-efficient units unless you plan to remain in the home for a long enough time to recoup the expense through energy savings.
To be clear, a home's mechanical systems, including HVAC, plumbing, and the electrical system, should be in good condition and function properly, lest you run afoul of the home inspection process that many buyers insist upon while the deal is in escrow. Significant condition issues that turn up as part of a home inspection may result in buyers asking for repairs, a monetary credit for repairs, or backing out of the deal altogether in a worst-case scenario.
If your mechanical systems are in good condition, albeit a little old, replacing them will be a poor investment if you intend to sell your home in the near future. Energy-efficient, high-tech components may be buzzworthy in the now, but the smart move is to let the new owner of the home decide if that's something they want or need.
Luxury kitchen remodel
You might be surprised to see a major kitchen remodel on a list of home improvement projects that don't pay off when it comes time to sell. After all, don't all buyers want a clean and modern kitchen? While an updated kitchen likely will distinguish your home from competing properties, and could help it to sell faster, you probably won't get a dollar-for-dollar return on your investment.
That's particularly true if polarizing or exotic materials are selected for your kitchen remodel, like pricey natural stone countertops in wild colors. Ditto for significantly changing the kitchen's layout, which will require complicated mechanical modifications to the plumbing and electrical. On a more basic level, some homebuyers will prefer simple white cabinets while others gravitate toward warm natural woods. The point is that if selling your home is in your near future, it's probably smarter to leave your kitchen as is and let the next owner decide exactly what they want.
Instead, consider updating less expensive aspects of your kitchen that could use freshening up. A brand new faucet for the sink, for example, or some new lighting can bring a splash of new life to an older kitchen at a low cost.
Remodeled bathrooms
Much like a new kitchen, bathroom remodeling will seldom pay back the expense in full when it comes time to sell. If you truly can't live with your harvest gold or avocado green bathtub for another day, then by all means replace it. However, making such home upgrades speculatively with an eye toward increasing your home's value can be a gamble. Consider, an upscale bathroom remodel in 2023 resulted in the sixth-worst resale value of 23 different remodeling projects, per Remodeling market data — recouping, on average, 36.7% of the renovation's cost.
An alternative to a bathroom remodel, opt instead to make your existing bathroom look as good as possible. Moldy or discolored grout can be cleaned or re-colored, either professionally or with a do- it-yourself kit. Also consider replacing plumbing fixtures, lighting, and bathroom accessories, like mirrors, towel bars, and shower curtains, with attractive but reasonably priced new units.
Major outdoor flourishes
Whether you're planning to sell your home or remain there for a long time, curb appeal is important to be sure. A well tended lawn that's free of clutter reflects positively on a home's owner and lifts the whole neighborhood with a sense of pride. Similarly, buying a few bags of fresh mulch and planting some well-placed shrubs or flowers for a pop of natural color right before putting your home up for sale is a sure-fire strategy to impress prospective buyers before they even walk in the front door.
However, with this said, avoid such extravagances like fountains, gazebos, permanent fire features, or even putting greens for practicing golf unless you're positive you're going to be living in the home for quite a while. The same goes for outdoor kitchens. While you might enjoy grilling and/or cooking outside, not all buyers will share that enthusiasm. Also, gardening might be your jam, but excessive landscaping can be a turn-off to potential homebuyers looking for minimal property upkeep.
In summary, there's no need to take all the fun out of home ownership and modernizing or making your property more luxurious. Just know that certain home improvement projects should be made for reasons of personal enjoyment and not from an investment standpoint.