When you take a look around your home, you might find yourself considering a variety of home improvements and renovations. These ideas often serve two purposes: increase your enjoyment of your home and raise the property value for when it’s time to sell.
As you consider these ideas, you might wonder which will actually improve the value of your property. Your home should be comfortable and inviting to you and your family while you live there, but it’s a good idea to get familiar with the home improvements that will boost your home’s value when you’re ready to move on.
What Is Home Equity?
First, let’s be clear about what home equity is. Simply put, home equity is the difference between what you owe on your mortgage and what your home is currently worth.
When you sell your home, the equity you have will be the amount paid to you (after fees and closing costs are deducted). You can increase your home’s worth – and, in turn, your equity – by renovating or improving certain areas.
Which Home Improvements Improve Its Value the Most
When it comes to home improvements, it can be tough to determine which will bring the greatest resale value to your property. Some upgrades bring a bigger return than others; so if you’re considering an upgrade, take a look at our list of potential improvements that increase a home’s value …
#1 - Renovations
Renovations, which involve updating the cosmetic aspects of a room, are a great choice for improving your home’s value – and giving you a fresh-looking living space to enjoy as well.
Kitchen and bathroom renovations add a lot of value, as these areas are ones homebuyers often focus on the most. Consider minor remodeling jobs like painting, swapping light fixtures, switching out faucets, or updating your kitchen backsplash or bathroom mirrors. Not only do kitchens and bathrooms attract people looking to buy a home, they appraise well when it’s time to sell.
While you certainly want to enjoy the look of your home while you live there, if you plan to sell in the next few years, consider making cosmetic updates that are on trend with what homebuyers desire.
A smart way to find out what’s new in home design is to visit open houses of new builds in your area or view online listings for new homes near you. Builders keep a close eye on trends, but they also need to appeal to many different aesthetic tastes. New homes typically set a good example of how to use neutral design elements that will appeal to a broad range of people. Speaking with local real estate agents about the latest colors, features and innovations can be helpful as well.
Beware that home remodels – which are different from home renovations – don’t always produce a positive return on investment. They typically involve changing the layout or structure of rooms entirely and have a hefty price tag. If you plan to list your home for sale in a few years, be particularly careful – you could spend far more than the increase it brings in your home’s value.
#2 - Outdoor Upgrades
Upping the curb appeal of your home has a lot of benefits. Beyond your personal pride and enjoyment of new trees, flowers and other landscaping, how your home looks from the outside can be a big selling point for home buyers – or a big detractor when it comes to home value.
Upgraded landscaping, including firepits, gardens, and outdoor lighting can give you a big bang for your buck. These changes make a positive impression on home buyers, especially when they look at online photo galleries or virtual tours of homes for sale. In some areas, well-maintained landscaping can increase property value 5-15%.
Bigger projects, like retaining walls, patios and decks, add value to curb appeal as well – as long as you keep a close eye on costs. If you’re capable of building a quality deck yourself, it can provide a large return at relatively low expense. Whether you take the DIY route or pay a professional to do a big-ticket upgrade like a deck, make sure it’s done well and meets all your local code requirements.
Many homeowners ask if a pool is a worthwhile investment in a home’s value. It’s certainly an expensive upgrade, and you should be careful to factor in the maintenance costs. But some experts say adding a pool could add 5-8% to the value of your home. And don’t forget all the fun your family will have with it in the meantime as well!
#3 – Additional Living or Work Spaces
Putting an addition on your home isn’t cheap, but increasing your home’s square footage can add tremendous value to your property.
Adding a garage could create an 81% return on investment, and extra living space can add about 5% to your home’s value. Extra space is almost always a welcome sight in a buyer’s eyes.
#4 - Smart Devices
Smart devices make our lives easier and more convenient, and they can boost your property’s value at the same time by increasing safety, energy efficiency, and even just enjoyment for the people who live there.
Video doorbells, smart locks, connected garage door openers, and smart smoke and carbon monoxide detectors all enhance safety.- Smart thermostats and Wi-Fi-enabled sprinkler system controllers can bring you (and the future owners of your home) valuable cost savings by making energy-efficient shifts in your routines automatically.
- Smart lighting and sound systems might not be necessary in a home, but they bring a lot of fun that can get buyers excited.
When it’s time to sell, be sure you take precautions to protect both yourself and the new homeowner by transferring or changing smart device passwords and disabling access to personal information.
Balance Your Own Needs With Potential Resale Value
As you consider potential upgrades for your home, remember to strike a balance. Invest in renovations, re-models, or enhancements that make you love your home even more than you already do. At the same time, if part of your motivation for home upgrades is potential resale value, it’s smart to think about which changes will result in a bigger check for you when someone buys your property.
For more information about home improvements that bring the most value in your specific area, use the cost vs. value calculator assembled by Remodeling Magazine. It’s a helpful tool as you evaluate improvements that will help you sell your property when the time comes.
If you’re planning more than cosmetic changes and need funds to accomplish a big remodel or improvement, talk to a Guardian Mortgage team member about a construction loan.
CONTACT A LOAN EXPERT