Refreshing a backyard, adding a new patio, or creating a landscaped garden oasis can transform your home’s exterior appeal. Although many borrowers associate home improvement loans with interior upgrades, these loans can frequently fund outdoor renovations as well—anything from fencing and decking to elaborate landscaping. Yet it’s important to confirm your lender’s policies and gauge how best to plan and finance such projects without incurring needless costs.
For an overview of typical renovation borrowing uses and eligibility, see What Are Home Improvement Loans? A Beginner’s Guide to understand standard rates, terms, and the general scope of such loans.
What Is ROI in Home Improvements?
ROI refers to how much of your renovation cost you’re likely to “recoup” through the added value it brings to your property.
- Calculating ROI
ROI = Profit ÷ Cost of the Project
In home renovations, “profit” here typically means any increase in your home’s market value attributed to the project. If a new conservatory costs you £10,000 and adds £10,000 to your property’s value, that’s a 100% ROI. - Why 100% ROI Isn’t “Extra Money”
A 100% ROI doesn’t mean you gained more money than you spent. It simply means your expenditure matched the added value. You haven’t lost funds, but you also haven’t netted extra cash from the renovation alone—unless you later sell or refinance.
Example: Suppose you spend £8,000 on landscaping and your home’s market value rises by £6,400. That’s an 80% ROI because the “profit” is £6,400 and the cost was £8,000 (6,400 ÷ 8,000 = 0.80, or 80%). You didn’t fully recoup your outlay, but you improved your property’s appeal and secured some added value.
Differentiating “Added Value” from Actual Profit
Homeowners often hear about “profit” in renovating. In everyday finance, profit usually refers to the amount you keep after recouping all costs. But in home improvement terms, ROI is based on the added value’s relation to your project’s expense.
- Added Value vs. Net Profit
- Added Value: How much the renovation increases your home’s potential selling price.
- Net Profit: The extra cash you’d have left after recouping the expense.
If your project costs £10,000 and increases home value by £10,000, you’ve achieved a 100% ROI, but net profit is effectively £0 beyond your initial outlay.
- Why 100% ROI Isn’t a Windfall
If you spend £10,000, and the property’s value also rises by £10,000, the money invested is now reflected in your home’s higher valuation. You haven’t earned an extra £10,000; you’ve simply kept pace with what you spent, stored as equity in the property.
Examples of Common Projects
Below are a few everyday scenarios that clarify ROI percentages and what they mean for homeowners.
- Conservatory with 100% ROI
- Cost: £10,000
- Added Value: £10,000
- Explanation: You break even purely in terms of financial outlay vs. property value increase. The project may also bring intangible perks like extra living space or better natural light.
- Garden Landscaping at 80% ROI
- Cost: £5,000
- Added Value: £4,000
- Explanation: Your landscaping budget falls short of full recoupment if you were to sell. However, you now enjoy a better outdoor environment and some of that cost is reflected in the property’s raised appeal.
- New Roof with 63% ROI
- Cost: £6,000
- Added Value: £3,780
- Explanation: The new roof might not fully repay its cost in added property value if you sold soon, but it protects your home and could help avoid larger repairs later—offering intangible benefits beyond pure ROI figures.
Beyond the Numbers: Low vs. High ROI Projects
Some renovations yield a ROI below 100%—meaning your property’s value doesn’t increase enough to cover your spend. That isn’t necessarily a bad investment.
- Essential Maintenance
Replacing a worn roof might prevent leaks and deeper damage, preserving overall home integrity. Even if it only returns 60–70% of its cost in market value, ignoring the repair could lead to bigger bills. - Enhanced Lifestyle or Cost Savings
Energy-efficient upgrades (windows, insulation) may only fetch 70–80% ROI in resale value but significantly lower your utility expenses and make the home more comfortable. - Curb Appeal
Sometimes, simple improvements (e.g., painting, power-washing) might not show massive direct ROI percentages, but they shorten the selling time or impress prospective buyers, indirectly protecting your home’s market position.
Why Understanding ROI Matters
Grasping these figures helps homeowners plan renovations with eyes open—knowing you might recoup a large share of your outlay or that certain projects are more about practicality than direct financial returns.
- Budgeting for Renovations
If a project has a 70% ROI, decide whether that intangible 30% “loss” is worthwhile for comfort, safety, or personal taste. - Evaluating Loan Amounts
If you borrow heavily for a low-ROI project, you might carry more debt relative to your home’s increased worth, making short-term reselling or refinancing more complicated. - Balancing Emotional and Financial Gains
Some renovations primarily enhance daily living—like a luxury bathroom or elaborate garden design—without fully repaying themselves in property value. That doesn’t negate their worth if you intend to enjoy them for years.
Tips for Evaluating Home Improvement Projects
- Research Local Market
A loft conversion might recoup 90% in one region but only 60% in another. Location influences whether buyers value certain improvements. - Obtain Multiple Quotes
Overpaying for labor or materials lowers your ROI by raising project costs. Competitive quotes keep spending aligned with typical rates. - Consider Long-Term Ownership
If you plan to stay for decades, intangible benefits (enjoyment, lower utility bills, property protection) can outweigh a short-term ROI figure. - Consult Professionals
Estate agents or appraisers might predict how your chosen upgrades fit buyer preferences, clarifying potential future value.
Squaring Up
ROI in home improvements measures how much your home’s market value rises relative to your renovation spending. While a 100% ROI indicates the project costs and added value are evenly matched, it doesn’t translate into extra profit beyond recovering what you’ve spent—unless your property sells above that baseline. Meanwhile, a sub-100% ROI doesn’t necessarily mean a poor choice if the renovation improves daily living, avoids bigger repair bills, or suits long-term personal goals.
Key Takeaways:
- ROI vs. Profit: A project that raises value by the same amount you spend achieves 100% ROI, but you haven’t netted an extra profit beyond your original outlay.
- Practical Examples: Conservatories, landscaping, roofing upgrades—each might show different ROI percentages, reflecting how market value responds to improvements.
- Intangible Benefits: Even a 60–70% ROI project can justify its cost if it enhances safety, comfort, or potential energy savings.
- Plan Carefully: Combining ROI awareness with personal enjoyment or property maintenance needs leads to more balanced renovation decisions.
Before launching a project, weigh the numerical return against what you genuinely need or value in your home. This balanced approach ensures you’re neither chasing inflated profit myths nor overspending on purely aesthetic elements with minimal equity boost.
Additional reading:
- Secured vs. Unsecured Home Improvement Loans: Which Should You Choose? if you need financing for a project.
- Budgeting for Home Improvements: Planning Before You Borrow to align project scope with your financial situation.
Disclaimer: This content shares general guidance and is not tailored legal or financial advice. Always consider both the financial ROI and the practical, intangible benefits when deciding on major home improvements.
