Fixing up a house can be profitable, but investing a few hundred dollars in repairs and upgrades may not add thousands of dollars of value to your home. In fact, the average return on your remodeling investment is 20 percent or 30 percent less than you spend. Whether you profit from fixing up a home depends on the project, how well you manage costs relative to the resale value and your long-term plans for your home.
If your house needs immediate repairs, such as electrical rewiring, plumbing work, or roof repairs, determine the cost of these repairs first. Avoid making less urgent repairs until these big projects are completed. If necessary repairs alone cost more than you can afford, it may not be worth it to fix up the house.
You don’t want to own the most expensive home in a neighborhood and you don’t want to own the most outdated. Either situation makes it very difficult to sell the home for its full value. Instead, you'll see the most return on your investment when you make renovations that place your home on an even keel with comparable homes in your neighborhood.
To determine your return on investment, take a look at the market in your area. Have your home appraised and compare its value to the sale price of houses in your area that already have the improvements you want to make. Calculate the price at which you need to sell your home to recover your investment. If this value makes your home more expensive than the other comparable homes in the neighborhood, then you most likely won’t be able to get back the money you invest in a remodel.
"Remodeling" magazine's 2013 Cost vs. Value Report shows that the highest returns come from replacing your home’s doors, garage doors, windows and siding. Also, the addition of a deck shows a high return. These outside renovations improve your home's curb appeal and makes it more attractive to potential buyers. Indoors, a minor kitchen remodel offers the most lucrative return on investment -- an average of 75 percent. The addition of an attic bedroom also shows a high return. Low cost projects, such as fresh paint, updated light fixtures and new grout, make your home look updated and are almost always worth the investment.
Fixing up a home involves more than just making a profit. If you are fixing up the house to live in it and enjoy it for several years, you can make upgrades without considering return on investment. However, if you’re planning on selling the house, you'll need to consider whether you can recover your investment through the upgrades you make.
Rebecca Desfosse earned her bachelor's degree in interdisciplinary studies from Boston University in 2009. She is a writer and researcher in the fields of family, parenting, frugal living, health, beauty, fashion and style.