6 Renovations to Boost Your Home Value
Whether you're selling your home or want to enjoy it more, home improvements can help.MoneyGeek
If you’re considering selling your house, you have to think about it from a buyer’s perspective. You may walk through the rooms and be reminded of all the happy times you’ve had in the home, but a prospective buyer will be looking at it more critically. You want the property to measure up so it sells fast at a great price.
A great way to do that is to invest in home improvement projects that will increase your home's value, but you may want to upgrade your home even if you don't plan to sell anytime soon. A renovated space may also be more comfortable and satisfying to live in, which is a big consideration if you plan to stay in the home for years to come.
No matter your reason for renovating, you're not alone. According to the Joint Center for Housing Studies of Harvard University, more than $400 billion a year is spent on home remodels, renovations and repairs in the U.S.
Whatever your reasons for renovating, it's essential to think strategically about which rooms or attributes you're going to renovate. Depending on when your house was built or when it was last renovated, you may consider major structural updates. But you can even make small home improvements to increase the value of your home if you simply want to make it stand out.
The trick is choosing renovations that future buyers may want or need versus cosmetic upgrades that are nice to have.
How much do home improvements increase value?
The return on investment a home improvement project will bring varies by the type of renovation you make. If you add a stone veneer to your house, you’ll probably just about break even when you sell. Put in a new bathroom, and you’re likely to earn back about 60% in the sale price. Kitchen and bathroom remodels offer investment returns above 70%, so you want to keep those in mind when it comes time to list your property.
Adding a wooden deck or putting in a steel frame entry door has some of the highest renovation returns, while backyard patios and master suites are lower. That doesn't mean you shouldn't implement those changes, especially if you plan to live in the house for a while and have been envisioning your dream suite for years. You just want to be aware of the financial benefits of different options.
While you won't necessarily recoup the full cost of the individual renovations, the upgrades will make the house more attractive to buyers. A modern, move-in ready space is more likely to sell for the asking price, or at least close to it, than a house that will need repairs and aesthetic overhauls as soon as the new owners move in.
Here are some home improvements to consider that can help you get the most bang for your buck.
1. Replace the roof
Return value: 107% of renovation cost
Putting on a new roof can earn you a big return on your investment, according to the National Association of Realtors (NAR). Because the roof is one of the most critical elements of a house, it's going to be a top concern for buyers. A bad roof can be a deal breaker. You have two options when it comes to a leaky or unreliable roof. You can opt against replacing it and sell the home as-is, knowing you'll get a lower sale price. Some banks will not extend financing to a home that needs a roof replacement, however. If you replace the roof you are potentially making your property more competitive in the market.
2. Install or refinish hardwood floors
Return value: 106% of renovation cost
The cost to install or refinish hardwood floors depends on the type of the wood, the size of the area being floored and labor costs. The NAR found that newly-installed hardwood floors have an ROI of 106%, while homeowners who refinished existing hardwood floors broke even. If your carpet hasn’t been replaced in several years or your floors are scuffed up, you may want to invest in this feature before selling. Buyers really notice floors and new or refinished floors really add a “wow” factor to your home.
3. Spruce up your kitchen
Return value: 59% of renovation cost
Spending on kitchen renovations has gone up in recent years — 2018 saw a 27% increase from the previous year. The price for a kitchen renovation can go into the tens of thousands of dollars, but you don't need to install all new appliances or gut the entire room to give your kitchen a facelift. Prices depend on whether you opt for a midrange or luxury upgrade, but there are several cheap kitchen renovations you can make to increase your home's value relatively quickly. Painting outdated wooden cabinets with a soft, neutral shade or updating the drawer handles and cabinet knobs with modern fixtures goes a long way toward making the space feel fresh.
4. Boost the bathroom aesthetic
Returned value: 67% of renovation cost
While you can freshen up a bathroom for a few thousand dollars, if you want to give your bathroom a substantial overhaul, focus on high-value additions to the bathroom that will make an impact on buyers. These might include ensuring that the plumbing and electricity are in good condition and that the main features are aesthetically pleasing and highly functional.
For renovations on a limited budget, you can reglaze your tub and put in fresh caulk to give it a fresher look, according to HGTV. Swapping out your shower doors for a trendier style can also provide the room new life and make it more appealing to prospective buyers.
5. Upgrade your appliances
Returned value: 52% of renovation cost
Another relatively cheap way to renovate is to take stock of your current appliances. If your oven and fridge have been with you since the 90s, it's an excellent time to consider an upgrade — especially since buyers may be turned off by dated fixtures.
You don't have to spend a lot of money on brand new, top-of-the-line models. A basic General Electric appliance package including a dishwasher, microwave, refrigerator and stove can be found for around $2,500, while a custom made refrigerator can cost over $5,000 by itself and a handmade, cast iron stove from English company AGA would cost approximately $14,000–$18,700 depending on the color. An appliance package from top-of-the-line appliance manufacturer Viking will run you at least $12,000. Check out second-hand appliance shops and online listings to find deals on gently used, new-to-you appliances with the functionality buyers will expect. Opt for matching, energy-efficient options to increase your home's competitiveness.
6. Add on a deck
Returned value: 82% of renovation cost
The cost to build a deck varies depending on how big it is and the materials you use. Prices range from about $15 a square foot up to $35 a square foot, according to HGTV. If you have an existing deck that just needs some reinforcing or a new finish, your return on investment may be much higher since the costs are lower to turn the space into a standout element of the home.
Decks and porches are great to have because they can help buyers envision their lives at the house. When they can picture themselves entertaining or relaxing in the space, it makes the home more appealing.
Know your neighborhood
If you plan to sell your home after renovating, talk with your real estate agent before you make any plans. A good local agent will know what types of homes are most popular in your area and can help you determine which features are most likely to attract multiple offers.
Your agent can also give you a sense of roughly how much money buyers in your area are willing to pay, even for recently updated properties. People might like the idea of that stone fire pit or recessed lighting you installed, but that doesn't mean they're willing to take out a higher mortgage to purchase your house just because you paid to have them installed. It's essential to have a realistic sense of how much you can get for the house before you invest in renovations.
How to pay for renovations
You have a few options when it comes to covering renovation costs:
- Home equity loan or home equity line of credit (HELOC): These options allow you to borrow against the equity you already have in the house. A home equity loan enables you to leverage the equity you have in your home by taking that equity in a cash-out transaction to pay for renovations. A HELOC acts as a line of credit against your equity to be used as needed while renovating.
- Home renovation loan: If you don't want to take out a home equity product or refinance, you might consider an FHA 203(k) or Fannie Mae HomeStyle loan. These are low down payment loans that can be used to cover significant home renovation costs.
- Credit cards: Maybe you're focusing on relatively small projects, like replacing a bathtub or installing new kitchen cabinets. You may want to put the costs on a credit card that gives you cash back bonuses or other rewards. Make sure you can pay down the balances quickly, so you avoid taking on high-interest debt.
Is a house renovation worth it?
Home renovations — especially big ones, like replacing a roof or adding a deck — require a substantial financial investment and time commitment. But if you're serious about getting a good price for your house or simply want to enjoy your space, a renovation can undoubtedly pay off in the long run.
Casey Morris is a writer for MoneyGeek.