When it comes to real estate, you have likely heard the term R-O-I or Return on Investment. It’s a pretty important, yet misunderstood word. One concern with R-O-I is about wanting a solid monetary return for your money. The ubiquitous question is what improvements can a homeowner make that will give them the best bang for their buck? The answer may not be so cut and dry.
The Joy Score
There is another aspect to ROI that is often overlooked but just as important to consider. The National Association of Realtors calls it the “joy score. Americans spent $420 billion in 2020 on remodeling their homes, according to the National Association of Realtors (NAR) Research Group. But can money really buy happiness?
Unlike other investments, we live in our homes. It’s where we make memories, have family meals, read our children bedtime stories, host New Year’s Eve gatherings and, in some cases, run our businesses. That’s why when we are prioritizing home improvement projects, you might want to factor in the value it will bring to our home AND the enjoyment it will bring to our lives.
Our own April Crigger-Hudson shared with us a very informative report published by the NAR Research Group. The report covers three aspects of remodeling:
- Typical cost of the project
- How much value it adds to the home upon resale
- The Joy Score
The Joy Score is a rating from 1-10, with 10 being highest. It’s based on how much the homeowner enjoys the space, how much it makes them want to use the space or stay at home, and the sense of accomplishment for having completed the project.
We pulled out a few examples from the NAR report. Keep in mind, all numbers are estimates.
Remodeling Return on Investment
Hardwood Floor Refinishing
- Cost estimate: $3,400
- Estimated cost recovered at sale: $5,000
- Value recovered from project: 147%
- JOY SCORE: 10
New Wood Flooring
- Cost estimate: $5,500
- Estimated cost recovered at sale: $6,500
- Value recovered from project: 118%
- JOY SCORE: 10
Add New Bathroom
- Cost estimate: $80,000
- Estimated cost recovered at sale: $50,000
- Value recovered from project: 63%
- JOY SCORE: 8.2
Kitchen Upgrade
- Cost estimate: $45,000
- Estimated cost recovered at sale: $30,000
- Value recovered from project: 67%
- JOY SCORE: 9.8
New Roof
- Cost estimate: $12,000
- Estimated cost recovered: $12,000
- Value recovered from project: 100%
- JOY SCORE: 9.2
Garage Door
- Cost estimate: $2,000
- Estimated cost recovered at sale: $2,000
- Value recovered from project: 100%
- JOY SCORE: 7.9
New Siding
- Cost estimate: $18,300
- Estimated cost recovered at sale: $15,000
- Value recovered from project: 83%
- JOY SCORE: 7.9
Insulation Upgrade
- Cost estimate: $2,500
- Estimated cost recovered at sale: $2,500
- Value recovered from project: 100%
- JOY SCORE: 10
We found a couple of interesting patterns in the report.
- Projects that make the home prettier (new siding, kitchen remodel) have a high joy score from the seller, but are not always as important to the buyer and therefore have a lower ROI. Yes, that includes upgrading your kitchen.
- Buyers are more impressed with improving the fundamentals, like getting a new roof, upgrading the insulation and refinishing existing hardwood floors and sellers seem to enjoy those equally.
We believe 2023 is going to be an even bigger year for remodeling and renovating our homes. We know how the market works and we know what appeals to buyers and we know where our home sellers should and shouldn’t put their money when they go to sell. Only you can choose what you want to enjoy in your home.
When the Joy Score is Not a Factor
You might be the type of homeowner who hasn’t made any improvements for yourself. Maybe you’ve decided you’re fine with the way things are and will make necessary changes when it’s time to sell. In that case, you’ll want to just look at the monetary ROI for any home projects.
You can watch April Crigger-Hudson every Wednesday, when she hosts Market Watch on our Facebook and Instagram pages.
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