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Which Renovations Are Worth It?

From a financial point of view, the answers can be surprising.

A woman installing a wood floor in a home.

For many of us, getting a new pool is more exciting than adding a new front door.

From a financial perspective, however, not all home renovations are created equal. New features that offer excitement and instant gratification might not pay off as well as a more financially-driven, nuts and bolts approach to remodeling. So when it comes to prioritizing how to renovate your home, there's a balance to strike between what you desire - and what's ultimately best for your home's value.

To help clarify this, let's examine some renovations that are typically worth it - and those that might not return enough value.

Best Major Investment: Bathrooms And Kitchens - But Only If You Spend Wisely

Why do renovations on bathrooms and kitchens offer a good return on investment? Because those are the areas where homeowners are naturally drawn. We spend a lot of our time in our bathrooms and kitchen, and substandard rooms are a major turnoff for buyers. On the other hand, beautiful kitchen and bathroom spaces can cover a multitude of other sins during a showing.

It's true that a kitchen or bathroom remodel isn't an inexpensive undertaking. And if you let costs spiral, your return on investment could wind up being rather dismal. So remember: Bathrooms and kitchens are important showpieces, but you have to manage costs carefully to maximize your return.

Worst Major Investment: Swimming Pools

Everyone loves a swimming pool, right? So why do they offer a sub-par return on investment? Many potential homebuyers are put off by the maintenance requirements that come with a pool. Others with small children may be concerned about safety issues. And there are always legal liability issues for the owner of a pool that can be difficult to predict or understand.

So while it's possible that a pool makes your house more attractive to some, the expense of installing one is accompanied by the fact that a large portion of the buying market views a pool as a burden, rather than an asset.

Best Budget Investment: A New Front Door

According to research, a new front door adds just under 97 percent of your cash outlay to the value of your home, so almost every dollar spent is recouped right away. It's important to ensure the door is aesthetically pleasing and secure - a door that doesn't match the archetectual style of the home and neighborhood can reduce you home's curb appeal.

Best Recreational Investment: Outdoor Deck

A smart renovation option that offers great bang for your buck is a wood deck, which on average returns around 87 percent of your investment. It's not cheap, however, with a price tag that can extend well into the five figures.

Best Green Investment: New Windows

Not only will a set of new, energy efficient windows do their part for the greater good of the environment, they'll also lower your monthly energy bill while raising the value of your home. Even better, you may qualify for tax credits. Windows return about eighty cents on the dollar.

Best Budget Green Investment: Attic Insulation

If you can't foot the bill for new windows, new attic insulation offers many of the same benefits while keeping upfront costs low. It will also pay for itself when it comes time to sell.

The Takeaway

Not every home renovation offers the same kind of return on investment. To maximize the value of your home, prioritize investing in improvements that will pay for themselves over the long run.