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Which Home Improvements Add the Most Value? Kevin Casteel, CFP®, Trust Officer, Financial Planner, Commerce Trust Company and Angie Ackerman, Vice President, Private Banking Relationship Manager, Commerce Trust Company
July 2, 2020

With people staying inside their homes more these days, many are running out of options to fill spare time. It’s only natural to look around your house and jot down a list of home improvements to help you stay busy. But before you start lining up projects, here are a few things to consider to ensure you’re getting the most value from upgrades—not all renovation investments yield equal payback.

INVENTORY AND PRIORITIZE THE PROJECTS.
Depending on the age and upkeep of your home, you could end up with numerous improvements to tackle.
■ Assign repairs that ensure safety as a higher priority over those that simply change aesthetics.
■ Be cautious of renovations that might “over improve” your home compared to other properties in your neighborhood.
■ Keep in mind projects often lead to other unexpected issues. Your renovations could cost an additional 20% to 30% due to unforeseen circumstances. Decide if you need to hire a contractor. If so, get at least three bids and verify references from homeowners for previous work done.

BUILD EQUITY AND VALUE INTO YOUR HOME.
If your home doesn’t need structural repairs, basic updates likely will provide the most value.
■ Never underestimate the value of a fresh coat of paint—it may add the most bang for your buck to rejuvenate a bedroom or common space.
■ Consider modest kitchen and bath remodels. Avoid deep personalization and extravagant features that could deter as many buyers as they attract.
■ Adding versatile square footage to unfinished areas will likely increase value. For instance, turning a basement into a second living room can add great functionality. Adding a bathroom to unused space also could pay off.
■ Energy efficiency upgrades such as windows and doors to insulate problem areas and smart devices to monitor energy consumption could add value and save on future heating and cooling costs.
■ Certain improvements (from minor to major renovations) can add immediate impact to your home. Here are a few examples of some of the most popular projects with the highest average return on investment (ROI).

Minor improvements:
- Replacing exterior front door or garage door (94.5% ROI)i
- Interior paint (107% ROI)ii

Major improvements:
- Window replacement (69%-72% ROI)i
- Upscale bathroom remodel (57% ROI)i
- Siding replacements (75%-78% ROI depending on material)i
- Upscale kitchen remodel (54% ROI)i

Substantial improvements:
- Minor kitchen remodel (78% ROI)i
- Wood deck addition (72% ROI)i
- Universal design bathroom (62% ROI)i

Decide how long you plan to stay in your home. While there are many projects that will help increase home value with immediate impact, others don’t provide the same kind of returns. The rules can change if you plan to stay in your home for an extended period of time or if this is your “age-in-place home.” Weigh your future enjoyment and needs with the cost of the project.

Determine how to pay for the renovations. If you’re facing financial uncertainty in this economic environment, make sure you’re spending from current cash flow or a cash surplus. Avoid depleting your emergency fund or neglecting to plan for home emergencies.
With interest rates at historic lows, home equity lines of credit also are an attractive option for financing. Depending on the terms of an existing first mortgage, a refinance cash-out mortgage may be a solution if you can reduce your existing interest rate and/or reduce the term of an existing mortgage. Consider talking to an advisor who can help you explore your financing options.

i 2020’s Smartest (and Dumbest) Remodeling Projects: What Pays Off vs. What You’ll Regret By Jennifer Kelly Geddes. Jan 15, 2020 
ii The paint colors that can boost your home’s value By Teresa K Traverse. January 9, 2018 

Past performance is no guarantee of future results, and the opinions and other information in the commentary are as of June 19, 2020. This summary is intended to provide general information only, may be of value to the reader and audience, and is reflective of the opinions of Commerce Trust Company.

This material is not a recommendation of any particular security or investment strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional. Commerce does not provide tax advice or legal advice to customers, and while we may provide information or express general opinions from time to time, such information or opinions are not offered as professional tax or legal advice. Consult a tax specialist regarding tax implications related to any product and specific financial situation. Diversification does not guarantee a profit or protect against all risk.

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed, and is subject to change rapidly as additional information regarding global conditions may change.

Commerce Trust Company is a division of Commerce Bank.

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ABOUT THE AUTHOR

Kevin Casteel Trust Officer, Financial Planner Commerce Trust Company
Kevin is a financial planner with The Commerce Trust Company. He is a member of the financial advisory services team, a dedicated financial planning practice within Commerce Trust that provides objective financial advice to clients.  Following a thorough assessment of a client’s unique situation and thoughts regarding wealth, Kevin develops holistic and coordinated plans to help clients meet their short-term and long-term goals as well as take full advantage of various planning, tax, and investment strategies along the way.

His areas of focus include planning for financial independence, retirement, divorce, executive compensation, estate preservation, and business succession. Kevin joined Commerce Trust in 2015 after starting as a Commerce Bank Trainee/Credit Specialist in 2014.

Kevin received his Bachelor of Science in business administration and finance from Southern Illinois University Edwardsville. Kevin enjoys playing golf and baseball.

ABOUT THE AUTHOR

Angie Ackerman Vice President, Private Banking Relationship Manager Commerce Trust Company

Angie is a private banking relationship manager at Commerce Trust Company. As a member of the private client team and an experienced, tenured private banker, she and her dedicated client support staff are responsible for ensuring each client’s experience with Commerce Trust exceeds expectations.

Angie’s specific responsibilities include management of our clients’ day-to-day banking, cash management, and credit needs, while also helping them navigate the wide array of our financial services to find the solutions that best fit their needs. 

With more than 25 years of banking experience, Angie joined Commerce in 2019. Angie earned her Bachelor of Science in communications from the University of Missouri-Columbia. Angie is a board member of the March of Dimes.  
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