Understanding ROI on home improvements — what the data actually says
This article is for educational purposes only and is not a substitute for professional advice. Local codes, regulations, and best practices vary by region.
ROI (return on investment) for home improvements is data homeowners use to justify spending. You spend $30,000 on a kitchen remodel and it returns $24,000 in resale value. That’s 80% ROI. People use this to decide what improvements are worthwhile.
Understanding ROI is useful, but it’s easily misunderstood. ROI only matters if you’re selling. If you’re staying in your home, enjoyment matters more than resale value.
What ROI actually means:
ROI is the percentage of your investment returned when you sell. You spend $50,000 on a bathroom remodel. The home sells for $40,000 more than comparable homes without the remodel. That’s 80% ROI ($40,000/$50,000).
Factors affecting ROI:
Market conditions. In a strong seller’s market, improvements return more. In a weak market, improvements return less. A bathroom remodel might return 70% in one market and 50% in another.
Quality of work. A $20,000 kitchen done professionally returns more than a $20,000 kitchen done poorly. Quality matters.
Scope and feasibility. A kitchen remodel that matches the home’s style and value returns more than one that’s wildly over-improved. A $100,000 kitchen in a $300,000 home returns well. A $100,000 kitchen in a $400,000 home might not.
Age and maintenance. If the improvement is new and well-maintained at resale, it returns more. If it’s damaged or deteriorating, it returns less.
Home value and market. Improvements in appreciating markets return more than those in declining markets.
Typical ROI by improvement:
Paint and basic updates: 80-100% (simple, high return)
Flooring (if replacing worn flooring): 70-100% depending on material (good return)
Exterior updates (siding, roof): 70-100% depending on necessity (good return)
Kitchen remodel: 60-80% depending on scope (good return)
Bathroom remodel: 50-70% (moderate to good return)
HVAC replacement: 50-70% (moderate return, but necessary)
Insulation and energy upgrades: 50-100% depending on climate (variable return)
Windows: 50-80% (moderate to good return)
Deck or patio: 50-75% (moderate return, enjoyment factor)
Pool: 20-50% (poor return; people don’t value as much as cost)
Finished basement: 40-60% (moderate return)
Adding a room or bathroom: 60-80% depending on execution (good return)
Whole-house renovation: 50-70% (depends on extent and market)
These are rough estimates. Your specific situation varies based on location, market, quality, and home value.
Misconceptions about ROI:
“If it has good ROI, I should do it.” Not necessarily. If you’re staying in your home, enjoyment matters more than ROI. A remodel you don’t enjoy because you did it for ROI is regrettable.
“If it has poor ROI, I shouldn’t do it.” Not necessarily. A pool has poor ROI (20-50%) but if you’ll enjoy it for years, it might be worth doing. ROI only matters if you care about resale value.
“Expensive improvements return more.” Not true. A $100,000 kitchen might return 60% while a $40,000 kitchen returns 80%. Moderation in spending often returns better percentages.
“My improvement will always return X%.” Not true. Your specific improvement in your specific market might return more or less. These are averages, not guarantees.
When ROI matters:
You’re planning to sell within 5 years. Resale value matters. Improvements that return high percentage of cost make sense.
You’re trying to decide between improvements. If you have $30,000 to spend and must choose between kitchen improvements (75% ROI) and pool (30% ROI), kitchen makes financial sense if selling soon.
You’re getting financing. If you’re borrowing for improvements, higher ROI improvements make sense financially.
When ROI doesn’t matter:
You’re staying long-term. Enjoyment and function matter. ROI is irrelevant.
The improvement solves a problem. If your kitchen doesn’t work, fixing it is necessary regardless of ROI.
You’re doing it for personal enjoyment. If you want a pool and will enjoy it, poor ROI doesn’t matter.
The rule of thumb:
For improvements you’re doing for resale, aim for 70%+ ROI. For improvements you’re doing for yourself, ignore ROI and focus on enjoyment and function.
Calculate ROI for your situation:
Research typical improvement costs in your area. What does a kitchen remodel cost? Bathroom? Flooring?
Research how much these improvements add to home value in your market. Ask your real estate agent or look at comparable sales.
Calculate: (Value added) / (Cost) = ROI percentage
This tells you what to expect in your specific market.
Reality checks:
ROI is useful data but not a law. An improvement might return 75% on average but return only 65% in your specific transaction. Or return 85%.
High-end improvements don’t always return high ROI. That $150,000 gourmet kitchen might add only $90,000 to value (60% ROI). A solid $50,000 kitchen might add $40,000 (80% ROI). The percentage return is often better with moderate improvements.
Well-executed improvements return better than poorly executed ones. Quality matters.
Timing matters. If you do an improvement and the market deteriorates before selling, returns decrease.
Personal improvements (things you love but aren’t mainstream) might have poor ROI. That unique color scheme or layout might reduce resale value even if you love it.
The practical approach:
If selling within 5 years, research ROI for planned improvements. Focus on high-ROI improvements (kitchen, bathroom, essential repairs).
If staying long-term, ignore ROI. Do improvements that make your home better for you. Enjoyment is the return.
If uncertain about timeline, do necessary improvements (roof, plumbing, electrical) first. Then do improvements you’ll enjoy living with. Balance necessity, enjoyment, and eventual resale value.
ROI is useful information for selling homeowners. For those staying, it’s background noise. Focus on what you actually want to live with.
© The Whole Home Guide