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If you’re considering updates to a real estate investment property, you might be wondering which rehab project is the best use of your money. How much of the cost could you recoup through rental or sale revenue?
Remodeling magazine can help you answer that question. The publication released its 2021 Cost vs. Value Report, which reveals the average cost for 22 remodeling projects, as well as the value retained when the property is sold.
Which real estate rehab projects retained the most value at resale?
The top real estate project for recouping your cost in 2021: garage door replacement. At an average cost of $3,907, the improvement nets an average of $3,663 at resale. That means nearly 94 percent of the cost is recouped.
The project with the second-highest return on investment (ROI) is manufactured stone veneer. This exterior addition, costing an average of $10,386, can recoup 92 percent of the cost at resale.
Eleven of the top 12 projects on the list were exterior projects – likely due to the unique circumstances of 2020, according to the report’s authors.
“The trend of exterior replacements outperforming larger discretionary remodeling projects has been accelerated, no doubt, by a year in which COVID has made people reluctant to have contractors inside their homes, but yearning to improve outdoor spaces. It’s been a year when we’d expect decks to reign supreme, but the data doesn’t track what’s most popular.”
A significant barrier to recouping cost for many projects was due to pandemic-induced material shortages.
“Material costs, especially for decking and pressure-treated framing lumber, went through the roof in 2020, bringing down the return despite the project’s value. The effect on ROI of rising material costs is shown across the board for all projects, with the ROI for all projects down an average of 3 percentage points. The wood deck project shows the greatest decrease in ROI (-10.3 percent) and the highest increase in material costs (+13.6 percent).”
Here’s the entire list from the 2021 Cost vs. Value Report:
(Click to view larger)