The True Value of Home Renovations: Return on Enjoyment (ROE) vs. Return on Investment (ROI)
When considering a home renovation project, many homeowners focus on the potential return on investment (ROI). However, it’s essential to consider not just the monetary value, but also the quality of living value. In this blog post, we will explore the concept of Return on Enjoyment (ROE) and how it can be a more meaningful metric for evaluating the value of home improvement projects.
Home Renovation ROI: An Overview
Typically, homeowners look at the potential ROI to determine the value of a home renovation project. This approach might cause you to underestimate the actual value that the improvement brings to your life. Toillustrate this point, let’s look at some examples of renovation projects and their respective ROI percentages:
A minor kitchen remodel ($35,000) with a 70% return on investment
A major kitchen remodel with midgrade selections ($72,000) yielding a 59% ROI
A major kitchen remodel with high-end selections ($143,000) resulting in a 65% ROI
These numbers demonstrate that you might not receive a full return on your investment immediately after completing the renovation. However, focusing solely on these percentages can be deceptive.
The Importance of Return on Enjoyment (ROE)
Instead of only considering the ROI, it’s valuable to look at the Return on Enjoyment (ROE) – the satisfactionand improved quality of life you gain from living in a renovated space. By focusing on ROE, you can make more informed decisions about your home renovation projects and prioritize improvements that genuinely enhance your living experience.
Examples of ROE
Consider the following scenarios:
Your current house is too small for your growing family, but you love the location.
You hate the layout and design of your kitchen.
The small builder-deck on the back of your house isn’t inviting.
Investing in renovation projects that address these issues can significantly improve your enjoyment of your home. In turn, this enjoyment may encourage you to stay in your house longer, allowing you to build equity and benefit from the appreciation of your home’s value over time. Additionally,the immediate increase in ROI after completing the work can translate to a higher sale price if you eventually decide to move.
Long-term Benefits of ROE
When you invest in home renovations that enhance your enjoyment of your living space, you reap the rewards for years to come. You get to appreciate and utilize the improvements daily, making it an investment in both your property and your overall well-being.
Factors to Consider in Home Renovation Projects
While focusing on ROE is crucial, there are additional factors to consider when planning your home renovation project:
Avoid “building yourself out of the neighborhood” – Be mindful of spending too much on renovations and pricing your home out of the market in your area.
Look at the long-term benefits of yourinvestment – If you plan to stay in your home for an extended period, it makes sense to invest in renovations that will improve your quality of life and increase your home’s value over time.
Keep in mind that the cost of remodeling will likely increase in the future – The construction industry has always experienced rising costs, even during recessions. Waiting for a project to become more affordable may never happen, so it’s worth considering investing now.
Conclusion: Balancing ROI and ROE in Home Renovation Decisions
Ultimately, finding the best balance between ROI and ROE is essential when deciding on a home renovation project. It’s crucial to consider not just the potential financial return but also the improvement in your quality of life.
As you contemplate your next home improvement project, keep in mind both the monetary value and the value it brings to your daily living experience. By giving equal importance to ROI and ROE, you can make informed decisions that not only enhance your home’s value but also enrich your life in the long run. Remember, a well-executed home renovation project can transform your living space into a more comfortable, functional, and enjoyable environment – and that’s an investment worth making.