Real Estate Investing 101: Things to Know About Your Home's ROI

Real Estate Investing 101: Things to Know About Your Home's ROI

  • Team Armstrong
  • 09/21/22

Your home isn’t just where you live — it’s a significant investment and tool to build wealth over time. In almost any market, a home’s value will increase or appreciate and add more equity to your investment.

Markets will fluctuate over the years and in turn will affect the value of your home. You might not have control over what happens in the market at any given time, but there are things you can do to boost your home’s return on investment (ROI) regardless of what’s happening in the market. Whether you are ready to sell your home soon or simply want to determine what upgrades will have the best ROI when it is time to sell, let’s explore your options.

What is my home’s ROI?

Your home’s ROI can only be determined once you sell it. The ROI is a way to measure your profit upon selling your home and after deducting the initial purchase price, any home renovations completed, taxes, insurance, closing costs, and other expenses associated with the home. The ROI value is represented as a percentage, taking the investment gain or sale price of the home, divided by all the costs mentioned above.

A good ROI varies and depends on many variables and different markets. An ROI of about eight percent is good, with ten to twelve percent being even better if you can achieve it.

When is an upgrade worth it?

When you want to upgrade and make some renovations to your home, keep in mind that not all renovations are equal. Just because you update an area of your house doesn’t mean that it will translate to a higher ROI.

Adding a pool or excessive carpet will not have a positive impact on your ROI. So unless you want these items for your own use or pleasure, they aren’t worth adding prior to selling your home. The market varies on which renovations are most likely to increase the value of your property. The best way to understand your particular market is to meet with your real estate agent who can help narrow down what renovations are the best investments.

Let’s say your home is worth $900,000 and you want to add $25,000 in home improvements. Will that result in a selling price over $925,000 to make it worth your time and money? If you can sell the home for $960,000 then adding those upgrades is definitely a boost to your ROI.

Home improvements that will increase value

1. Curb appeal

The first glimpse of a house, whether it is from an online photo or someone standing in front of the house, is known as curb appeal. If your yard desperately needs weeding and tree trimming — or paint is peeling off the home’s exterior — fixing these issues can increase your home’s ROI. Hire a landscaper to trim the trees and cut the grass. If there are obvious patches in the grass, have them filled so they don’t stand out.

Pressure wash the driveway and walkway so they look clean. Along the walkway and in front of the house, consider adding a few planters with flowers and lay fresh mulch to add color.

If the paint on your house is in good condition, a good pressure washing will make a big difference when it’s time to sell. Also, examine your front door and garage door. Replacing or cleaning them will benefit your ROI because they’re some of the first things a potential home buyer will see.

2. A fresh coat of paint

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If pressure washing won’t do the trick in sprucing up your home’s exterior, consider painting it. Anything on the front exterior of the house will have a huge impact when it comes time to sell. The same is true for the interior. If the walls show dirty smudges, holes, and faded spots, paint them to give a “fresh and new” impression. When you do repaint, use light and neutral colors such as white, gray, and beige; bold and bright colors can turn buyers away.

3. Update hardware and fixtures

An easy way to give the interior of your home a new look is to replace the old hardware, including door knobs, switchplates, handles on the kitchen cabinets, and bath vanity cabinets.

Are the light fixtures and ceiling fans dated? Those are easy things to update that buyers will notice and appreciate.

4. Minor renovations in the bathroom and kitchen

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You don’t need to fully gut your bathroom or kitchen to increase your ROI. Minor updates to both of these rooms prove to have huge benefits. Of any rooms in the house, improving the bathroom and kitchen will result in the highest return on your investment.

Replacing the cabinets or vanity with modern hardware will give an instant makeover. Due to the time and monetary investment, it isn’t always cost-effective to repaint your current cabinets. If your cabinets are in good condition but the countertop isn’t, consider investing in a new countertop to impress buyers.

If the floors are in poor condition, replace them with luxury vinyl planks that look great and aren’t a big expense.

5. Update siding, windows, and the roof

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Replacing old siding, windows, and the roof will have a very positive impact when you’re ready to sell. New siding is a key visual point that is part of the curb appeal. If it obviously needs repair or replacement, don’t let it go.

Installing new windows to replace very old ones can be a selling point as well — insulated windows will decrease the monthly utilities.

Although a new roof can be a costly investment to a home, it can also garner you a higher selling price. This is worth exploring if the roof is more than fifteen years old.

Enlist the help of a realtor

If you are ready to sell your home and need the expertise of a real estate agent to help determine what renovations are best for you, contact the Armstrong team.

Armstrong Realty has the experience to help you navigate the selling or buying of your home from start to finish. When looking for Rancho Mirage, Indian Wells, or South Palm Desert homes for sale, contact Armstrong Realty to get started. Whether you're seeking a serene desert retreat or a luxurious Indian Wells home for sale, they'll assist you every step of the way.

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*Header photo courtesy of Shutterstock

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