A Step-by-Step Guide to Increasing Home Value

Home improvements don’t just help improve your home's livability — they can also increase its value. Learn which home upgrades can add the most significant value to your home, which projects to avoid, how to plan home improvements, and what financing options are available.

Home Improvement by the Numbers

 

Home improvement projects can increase your home's value. However, it's important to remember that remodeling costs and the added dollar value depend on the type of project. Here are some key facts and figures about home improvement to keep in mind:

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The top reasons why homeowners remodel are to upgrade worn-out surfaces, finishes and materials (30%), to add features and improve livability (20%) or they feel like it’s time for a change (16%).

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The cost of home improvement projects varies, depending on the type of remodeling. A complete kitchen renovation costs an average of $80,000. Meanwhile, a kitchen upgrade may cost you around $45,000. The cost estimate for a bathroom renovation is $35,000.

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The added dollar value depends on the type of home improvement project. For interior remodeling, hardwood floor refinishing has the highest estimated recovered cost at 147%. This is followed by new wood flooring (118%), insulation upgrade (100%), basement conversion to living area (86%), closet renovation (83%), attic conversion to living area (75%), complete kitchen renovation (75%), bathroom renovation (71%), kitchen upgrade (67%), adding a new bathroom (63%) and adding a new primary bedroom suite (56%).

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Among exterior remodeling projects, a new roof and new garage door have the highest estimated cost recovery at 100%. Following these are fiber cement siding (86%), vinyl siding (82%), vinyl windows (67%), wood windows (63%), steel front doors (63%) and fiberglass front doors (60%).


Steps to Planning a Home Improvement Project

There are various factors to consider when organizing a home improvement project. Aside from determining the right upgrades, you also need to consider your finances.

Finding the right strategies to boost the value of your home requires proper planning. Below is a simple step-by-step guide to help you spend more wisely and decide how you can best improve your home.

1
Determine your goals

Figuring out what you want to achieve helps determine which updates are worthwhile and would maximize returns. For instance, homeowners who plan on selling their property quickly may have to focus on efficient home improvement projects. On the other hand, if you prefer to focus on building your home equity and have no plans of selling the home anytime soon, you may opt for major renovations.

2
Set a budget

The next step is to research potential expenses. You can search online to see the average costs in your market. Take note of necessary permits, labor costs and building materials. It would also be best to allot extra money for unexpected costs. Getting cost estimates from professionals can help you set a budget.

3
Figure out the right home improvement or renovation project

Choose the right home updates based on your budget, goals and needs. You can also search for inspiration to get ideas regarding how you want the end result to look.

4
Find the right contractor

You may need to hire a team of professionals. Get personalized quotes and compare rates. Additionally, you should check the contractors’ experience, licenses and insurance certificates.

Ask for references you can contact to verify the credibility and expertise of the contractor. Discuss the payment schedule. It’s usually not a good idea to pay in full upfront unless the contractor offers a significant discount for doing so.

5
Create a timeline

Once you have chosen a team, it’s time to come up with a schedule. Determine your desired start date and expected completion date. Consult your contractor about how long it will take to complete each portion of your home improvement project. Ask them about each step and which are expected to be done first.

When creating a timeline, include the time you need to clean out the area. Consider delivery time for materials. Take note of holidays the team may take off.

6
Prepare your home

Before starting the project, prepare the project area. Clear it out if necessary. If you’re planning a major overhaul, figure out whether you can stay at home or if you need to find a temporary place to eat and sleep.

7
Talk to a trusted real estate agent

If you’re planning on selling your home anytime soon, consider talking to a local real estate agent. Ask them about home improvement projects that could help boost your chances of selling.

An illustrative image of a list of home upgrades that add the most value.

Home Upgrades That Add the Most Value

The best home improvement projects depend on specific needs and circumstances. Generally, ideal upgrades are those that add the most value to a home.

According to the National Association of REALTORS Research Group (NAR), common interior remodeling project costs can range from $2,500 to $172,500 on average. Recovery costs for such upgrades can be anywhere between $2,500 and $100,000. For common exterior remodeling projects, renovation costs average $2,000 to $48,000. Cost recovery for these is approximately $2,000 to $30,000.

Before beginning your home improvement project, research the necessary permits. Consider these when calculating expenses.

Adding Beauty

How your home looks adds to its appeal. The buyer’s first impression is established as soon as they see the exterior of the property, so you should make sure to maximize your curb appeal.

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    Boost curb appeal

    Investing in your curb appeal is a worthwhile project as it helps grab the attention of potential buyers. You can start with simple steps like planting flowers in the front yard or hiring a landscaper. Check all doors and windows, replacing them if necessary.


    In a study published in The Journal of Real Estate Finance and Economics, curb appeal accounts for up to 7% of the sale price of a home.

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    Remodel the kitchen or bathroom

    Kitchens and bathrooms are among the most critical areas in a house. Giving these rooms a facelift by replacing old appliances and repainting cabinets can significantly improve the value of your home.


    Based on the NAR’s analysis, the average cost of a kitchen upgrade is $45,000. The expected recovery cost is $30,000. A complete kitchen renovation typically costs $80,000, with a 75% expected recovery cost. Meanwhile, a bathroom renovation costs $35,000 on average, and its recovery cost is 71%.

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    Repaint

    A new coat of paint can go a long way toward freshening up your home’s look. The right color can also make it more attractive.

Adding Space

Increasing the square footage of your home can lead to a higher home value, as bigger homes tend to be worth more. The latest data from the National Association of Home Builders (NAHB) show that the percentage of single-family homes with patios is up to 63%, emphasizing the increased desire to add usable space.

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    Finish your basement or attic

    Consider turning your basement or attic into a habitable space. You can use it to accommodate guests or create a recreational room. Having that extra room makes your home more appealing to buyers, which further boosts its value.


    The average cost of converting a basement into a living area is $57,500, but its estimated recovery cost is 86%. Turning an attic into a living area may cost you $100,000. That said, you can expect a $75,000 increase in dollar value. These estimates are based on the NAR’s Remodeling Impact Report.

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    Build a home office

    Another common remodeling project is adding a new home office. According to the NAR, 33% of homeowners who decided to do this project wanted to add features and improve the livability of their homes. Meanwhile, 25% said adding a home office improves their organization and allows them to customize the space to suit their personal taste.

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    Additional dwelling unit

    An accessory dwelling unit (ADU) refers to a secondary suite or additional living space that has electricity, running water, a kitchen, a bathroom and a sleeping area. You can use it to accommodate visitors or earn extra income by renting it out. This also adds value to your home.

Making the Home More Energy Efficient

Lowering energy costs helps you save money in the long run. Upgrading your home to make it more energy efficient will add value to your home and can be a selling point.

Energy efficiency is among the most desired features in a home, according to the NAHB Special Study for Housing Economics. Approximately 83% consider energy-efficient windows an essential or desirable feature. Also included in the most wanted list are energy-efficient appliances (81%) and lighting (80%).

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    Consider high-efficiency windows, doors and skylights

    ENERGY STAR-certified features, such as windows, doors and skylights, help lower energy bills by 12% on average. This could attract potential buyers and increase your home’s value.

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    Choose energy-efficient appliances

    Replacing old appliances with efficient alternatives can further increase your home’s energy efficiency. If you’re not sure where to start, you can ask your utility company or a certified energy auditor to conduct an assessment and determine which part of your home wastes energy.

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    Consider solar energy

    If you have the budget for it, consider adding a solar energy source to your home. It lowers your energy bills while reducing your carbon footprint. Additionally, you may get tax incentives.

Reducing Maintenance Costs

Home improvement projects that make it easier to maintain and clean may also add value to your home. Many home buyers consider maintenance when purchasing a home. If a property requires constant maintenance and is challenging to clean, it may lose its appeal to prospective buyers.

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    Change floors

    If your home has easily stained carpets, consider replacing them with hardwood floors. This type of flooring is more durable. Although new wood flooring may cost you $5,500, the NAR estimates its recovery cost to be 118%.

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    Inspect the roof

    The roof of your home is its first line of defense against external factors. It’s crucial to conduct regular inspections. This could prevent water damage, animal infestation and structural damage. According to the NAR, new roofing is expected to cost $12,000. However, the estimated dollar value is also $12,000. That means a 100% return.

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    Replace an aging HVAC

    Older heating, ventilation and air conditioning systems may not be as efficient as they used to be. In some cases, they may do more harm than good. They may require more frequent repairs and are prone to major breakdowns, which can cause damage to your home.

Adding Smart Technologies and Features

Although installing smart technology may not always ensure a higher home value, it can help make your home more attractive to potential buyers. Finding the right features can also enhance the safety and security of your home.

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    Install a programmable thermostat

    A smart thermostat allows you to control the temperature within your home, even if you’re away. This can help with energy costs. It also enhances the livability and comfort of your home.

    Put in a home security system

    Having a home security system can help increase your home value as it provides better protection. You can start by installing motion sensors, cameras and alarms. Additionally, this can help you get a home insurance discount.

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    Update safety gadgets

    Having additional devices, such as carbon monoxide and fire detectors, helps ensure the safety of your home and family. Depending on the gadget, you may be able to install it yourself.

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UNDERSTAND HOME APPRAISAL

A home appraisal will give you an idea of how much your home is worth. Although appraisers are often hired during the home-buying process, you can also benefit from one if you plan on selling your home sometime soon. Understanding what they typically look for in a property can help determine the right home improvements to increase your home value.

Renovations That Can Bring Home Value Down

There are various reasons why a homeowner may consider home improvement projects. For some, it’s simply to improve its aesthetic and functional qualities. Others do it to increase their home’s value before selling it.

Regardless of the reason, it’s important to ensure that the renovations you’re making are suitable for your needs and circumstances. You should also understand that there are upgrades that can decrease your home value.

1
Luxury upgrades

Choosing luxurious additions to your home may add to your comfort level. However, these may not be as appealing to others. For instance, a backyard pool may give you an extra area for recreational purposes, but it requires frequent maintenance.

2
High-end landscaping

Landscaping can help improve curb appeal and attract the interest of prospective buyers. However, overly done landscaping may have the opposite effect, as buyers may only see it as too difficult to maintain.

3
Garage conversions

In some cases, it makes sense to convert a garage into a different type of room, like a home gym, game room or family room. However, it may not be a good selling point. Many buyers may put a high value on having a garage for their vehicles.

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Paying for Home Improvements

Financing is one of the most crucial factors homeowners need to consider when deciding on home improvement projects. If you have set aside sufficient money for the renovations, then paying for the project isn’t an issue.

If you don’t have enough cash, you’ll have to find an alternative financing option. You can start with cash-out refinances, home equity lines of credit, personal loans or credit cards. Compare your options well. Find out interest rates and payment terms.

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    Cash-out refinances

    If you have been paying a mortgage for quite some time, you may already have significant home equity. You can use this to apply for a cash-out refinance. This is a type of loan wherein you take out a larger loan to refinance your mortgage balance and get cash back from the lender. You can also get a longer repayment term.


    This is a good option for expensive home improvement projects. However, you have to make sure you’re getting a good rate. Some cash-out refinances may have higher interest rates than your previous mortgage.

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    Home equity line of credit

    A HELOC is another type of loan that taps into your home equity. The loan amount is calculated by subtracting the remaining mortgage payments from up to 85% of your home’s appraised value. Keep in mind that a HELOC uses your home as collateral, so you’re putting your property at risk.

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    Personal loan

    If your home equity isn’t enough to cover renovation costs, consider taking out a personal loan. You can get a significant amount without collateral. However, these may have higher interest rates.

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    Credit card

    Generally, you wouldn’t want to use your credit card to finance a major renovation. You can, however, use it for more affordable expenses. You may also find low-interest credit cards that could help you manage your payments better.

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Value on a Budget: Ways to Save Money on Home Improvement

Home remodeling or renovation can be very expensive. Fortunately, there are ways to lower costs and save money.

Below are some money-saving tips and strategies you may find helpful when planning your home improvement project.

1
Stick to a budget

Track your expenses. Make sure you’re not going over the budget you initially set. Keep all receipts for easier accounting.

2
Do some projects yourself

Determine if there are certain areas you can do yourself. This may include minor decorations, putting up safety devices and cleaning up before and after the renovation. Keep in mind that there are improvements best left to professionals, such as electrical and plumbing enhancements.

3
Reuse materials

Reuse and recycle materials whenever possible. For example, if your kitchen cabinets are still in good condition, it would be better to repaint or resurface them instead of replacing them. If you already have hardwood floors, opt for refinishing.

4
Choose materials carefully

There are a lot of materials available. Choosing the right ones is important. Focus on durability and maintenance requirements. Consider the style of your home as well.

5
Find reputable professionals

Don’t hire the first contractor you encounter. Shop around and compare skills, expertise and rates. Ask them about their work schedule and timeline. It would also help to check your state’s labor office, as there may be specific contractor licensing requirements.

6
Claim tax benefits

Some home improvements may lower your taxes. For example, you can get energy tax credits for installing qualified energy-generating systems like solar panels and geothermal heat pumps.

Ask the experts:

What are the most effective home upgrades for increasing property value?

Founder and Affiliate Broker at The Pargh Team, Nashville, Tenneseee

Several home upgrades can significantly increase property value and attract potential buyers. Here are some of the most effective upgrades:

  • Kitchen Renovation: Upgrading the kitchen can add substantial value to a home. Focus on modernizing appliances, refreshing cabinets or countertops and improving the overall functionality and aesthetic appeal.

  • Bathroom Remodel: Renovating bathrooms, especially the master bathroom, can greatly enhance a home's value. Consider installing new fixtures, updating tiling, improving lighting and adding energy-efficient features.

  • Curb Appeal Enhancements: First impressions matter. Invest in landscaping, exterior painting, repairing the roof, updating the front door and enhancing the overall curb appeal. A well-maintained exterior attracts potential buyers and adds value.

  • Energy-Efficient Upgrades: Installing energy-efficient features such as LED lighting, smart thermostats, energy-efficient windows and solar panels can lower utility bills and increase the property's appeal and value.

  • Finished Basement or Attic: Converting an unfinished basement or attic into a functional living space, like a guest room, entertainment area, or home office, can significantly increase usable square footage and home value.

  • Adding a deck or patio: Outdoor living spaces are highly desirable. Adding a deck, patio or porch expands living space and provides an area for entertainment, which can greatly enhance a property's value.

  • Open Floor Plan: Opening up living spaces by removing non-load-bearing walls can create a more spacious and inviting environment, increasing the home's perceived value.

  • Smart Home Technology: Incorporating smart home features such as smart thermostats, security systems, door locks and lighting can appeal to modern buyers and potentially increase a home's value.

  • Updated Flooring: Replacing outdated or worn flooring with modern options like hardwood, laminate or tile can significantly improve a home's overall look and feel.

  • Fresh Paint: Applying a fresh coat of neutral-colored paint throughout the house can give it a clean and updated appearance, making it more attractive to buyers.

Founder and Affiliate Broker at The Pargh Team, Nashville, Tenneseee

Most renovations are a wash at best. Most cost more than their resulting increase in property value. Here are a few that actually net a positive increase in property value:

  • Clean your home. No one likes dirt.

  • Empty your home as much as possible. It will make your home appear bigger.

  • Depersonalize your home. If your family pictures are hanging on a wall, your buyers can't psychologically imagine the home belonging to their families.

  • Make sure everything is in good repair. You can hire an InterNACHI-certified inspector to inspect your home as if the inspection were being done for a buyer. The report can act as a punch list of issues for you to address.

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Additional Resources

There are various factors to consider when conducting home improvement projects. Finding the right resources and tools can help in managing the process.

  • Department of Housing and Urban Development: Learn about different federal loan programs for homeowners in need of financial assistance for the rehabilitation, improvement and repair of their homes.
  • Fannie Mae: Find out what a HomeStyle Renovation loan is and whether you’re eligible to apply.
  • HomeZada: Get organized and manage your home with the help of this platform. Schedule and keep track of home maintenance, plan your remodeling projects or create a home inventory.
  • NAIC Home Inventory App: Record all your belongings using the National Association of Insurance Commissioners (NAIC) Home Inventory App. Create categories for easier tracking of items. Get advice on disaster preparedness and access information about insurance claims.
  • Pinterest: Get inspiration and tips for home improvement projects.
  • USA.gov: Learn about government programs aiding with home repairs and improvements.

About Nathan Paulus


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Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.


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