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ACE Your Home Improvement: The Top 10 Improvements That Add The Most Value

The Home Improvements That Are Worth The Money

Introduction

Ace Your Home Improvement. The top 10 improvements that add the most value to your home
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With so many popular home improvement shows on TV, it’s easy for most people to think that every upgrade or renovation project they take on is going to add instant value to their home. However, that may not always necessarily be the case. To know what adds or subtracts value, we first have to establish how a home gets valued.  

Land value vs. house value

When thinking about how to value a home there are two key elements to factor in: the land and the house itself. In theory, provided you are in a desirable or up and coming neighborhood, the land value should be biased towards increasing. The house, on the other hand, is a structure that gets older and depreciates every day, so there is a lot of maintenance work that needs to be done to maintain its value.  

How your home is valued

The main method of valuation whether it’s your Zillow “Zestimate,” a real estate agent or an appraiser is through comparable transactions. Your house will be compared to other homes that have sold recently by looking at: 

  • The location
  • The square footage of the house
  • The lot size
  • Number of bedrooms
  • Number of bathrooms

Zillow claims that most “Zestimates” are within 10% of the home’s value.  Let’s break down what that means as far as investing in your house.  

Zillow may estimate that your house is worth $500,000 due to the factors we referenced above.  We know from Zillow’s claim that most fall within 10% of this Zestimate. That allows us to create a bell curve with $450,000 on downside ($500,000 less 10%) and $550,000 on the upside ($500,000 plus 10%). Similarly, appraisers will try to establish a baseline price using the same metrics mentioned above and evaluate the condition of the house for deductions or additions to the baseline value. 

How you can “ACE” your home improvement

When you think about how to allocate your money on home improvements, based on the valuation criteria above, there are three areas to focus on.  

  • Increase the baseline value
  • Eliminate deductions from baseline and create additions to baseline 
  • Reduce your ongoing monthly expenses 

To achieve this, we believe in ACE:

  • Adding living space
  • Cosmetic improvements 
  • Energy Efficiency 

The main method you have to increase your baseline value is to increase the usable square footage. After that, cosmetic improvements can potentially go a long way to improving your home’s value. Consider the example above. If the greatest range of outcomes lie between -10% and +10% of your baseline, then a house sitting at $450,000, or -10%, can see a 22% increase in value to $550,000 with cosmetic improvements.  

These changes don’t put cash back into your bank account however, unless you sell your house or decide to refinance at a higher home value and pull some cash out. So, if you want improvements that will decrease your monthly expenses then focusing on energy efficiency is the way to go. 

Adding Living Space 

1. Finishing the Basement

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A finished basement can do wonders for a home. Not only does it give your family an extra space to spread out and entertain, but it can also be used to produce additional bedrooms, bathroom, and storage space.

According to an analysis from Home Advisor, the average cost to finish a basement can range anywhere from $6,000 to $34,000, while adding a bedroom and bathroom can cost an additional $70,000. This has a lot to do with the size of the space, the scope of what needs to be done, and how much of it you’re able to do on your own. However, it’s been quoted that finishing your basement will give you a return of 70 to 75 percent of your investment

With the high recoup value and potential for years of enjoyment that you’ll get out of it, a finished basement should absolutely be near the top of your list of next projects. Besides, in many states, a finished basement counts towards the total quoted square-footage thus increasing your home’s baseline value when it’s put up for sale or refinanced. And remember that an additional bedroom and bathroom will push the house to be valued against bigger, higher value homes. Therefore, having it finished will definitely help increase the value and enable you overall to catch a higher offer than you would have before the renovation.

2. Finishing the Attic

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If you’ve got a house that has an unfinished but accessible attic, then you may want to consider converting it into additional living space, provided it complies with building codes and regulations. Much like finishing your basement, a finished attic can be used as a:

  • Bonus room
  • Office
  • Guest bedroom
  • Studio

The average cost to convert an attic into living space is around $60,000 – $80,000, with 53 to 65 percent expected to be recouped on a sale. But let’s consider our example above of the $500,000 home. If we assume that the house is 3,500 sq. ft before the attic renovation then the house is being valued $142/sq.ft. Now, if we assume that the attic adds 500 sq. ft of living space to the home, ignoring the potential value increase from an additional bedroom and/or bathroom, then that 500 sq. ft would increase the home’s baseline value by over $71,000 (500 sq. ft * $142/sq. ft). That increases the recoup percentage to 90 – 115%. So while there are a range of outcomes and you have to navigate building codes, it is worthwhile exploring your options with your attic.  

3. Adding a Deck

Add deck to increase home value
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This doesn’t technically increase the baseline value, since anything not heated by the same system as the main house is typically not counted. However, there’s no easier way to add space to your house and promote outdoor living than to add a deck on to your house. Not only will it give you a quiet place to rest and relax, but it’s also a terrific place to host parties and entertain guests.

Building a deck is a very modestly priced project. For the construction of a 16-20 foot wood deck, you can expect to spend $14,000 on professional construction and materials. However, it will add about $10,000 to the value of your home, recouping a little over 70%. 

While it might be tempting to build your deck out of composite instead of wood since it will last longer and retain its color, unfortunately, the ROI will not be as good. The same deck as above built out of composite will cost you $20,000 and recoup only $13,000; a yield of about 65 percent. Unless you plan to stay in the house longer than 5 years and would like to keep the maintenance as low as possible, consider sticking with wood.

Cosmetic Home Improvements

4. Updating the Exterior

Washing or replacing vinyl siding is a high value home improvement
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This is the first thing people see when they come to visit or even just drive by. And if you do plan on selling your house, you’ll want to use it to create that “wow factor” that can really win over prospective buyers (and home appraisers).  

The good news is that when it comes to the exterior of a home, there’s not a lot of investment required to make it look fresh and maintained. And, according to HGTV, you can recoup as much as 95.5 percent of it back when you go to sell.

For example, consider such improvements as:

  • New vinyl siding. Estimated cost around $14,000 with $10,700 expected back in a sale.
  • Pressure wash your existing vinyl siding instead. If your siding is still in good enough condition but just dirty you can spend a fraction of the price to replace the siding and create a similar impact.
  • Replace the garage door. Expected cost around $3,700 with $3,500 expected back in a sale.
  • Replace the front door. This is expected to cost close to $1,900 with $1,300 of value in a sale. 
  • Repaint the shutters and trim work. $30 for a gallon of paint which covers 400 sq. ft.

While it’s okay to pick out designs and colors that will make your house unique, remember not to get too eccentric with your choices. Nice, neutral colors with a pop of color will not only make your house look timeless but also give it a well-deserved personal touch.

If you’ve got any outdated features such as old awnings or wrought-iron railings, consider removing these as well. Doing so and replacing them with more modern features can instantly make your home look more up to date.

5. Landscaping

Landscaping and lawn care is high return home improvement
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Speaking of curb appeal, there’s nothing that makes a house look like a million bucks more than a well-groomed lawn. Lush, green grass and rows of blooming plants can do more than just add beauty and character to your home. They also send a message that “the owner of this house cares about it”, and that’s exactly the headline you want when you’re trying to win over buyers at resale.

Although not all landscaping projects are equal, some real estate experts say that focusing on the most important aspects can give a return on investment of 200-400 percent. According to landscape economist John Harris, it may even contribute to as much as 28 percent of your home’s overall value.

What are the most beneficial areas to work on?

  • Add edging and fresh mulch around your plants to give these areas definition. Mulch also serves to keep moisture on your plants which can help prolong their lifespan. Mulch can run you around $40-$50 and create $1,000 worth of impact.  
  • Cleaning up your lawn. Mow it, use fertilizer, and pluck out any weeds. Also, be sure to work on any dead or yellow spots.
  • Plant perennial shrubs and trees that will bloom at different times throughout the year and keep coming back next season. Allow enough spacing between them so that they don’t over-crowd one another as they mature.
  • Add an irrigation system. Though having sprinklers will cost you some money upfront, the impact that it will have on the appearance of your lawn can be priceless. 

The good news about landscaping is that it’s definitely one of the easier DIY projects you can take on. Plus, you can get a strong sense of satisfaction and accomplishment that comes with knowing you did it yourself.

6. Remodel the kitchen

Remodeling your kitchen can add a lot of value to your home
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For most people, the most important space in the house is the kitchen. According to a survey by Realtor.com, 80 percent of the respondents listed it as their top must-have when looking for a new home.

With that in mind, it might seem like you’ll get the absolute best return on your money by focusing all of your energy on the kitchen and making every improvement possible. However, that may not always be the case.

For a major upscale kitchen remodel, the cost can be as high as $135,000. But at the time of sale, high-end upgrades were only able to recoup about $73,000, or 54 percent. By contrast, the average cost of performing a more minor kitchen remodel is about $23,500. With a recoup estimate over $17,000, that’s a much healthier 77 percent.

What are the kinds of things you should focus on if you’d like to keep the kitchen remodel light and cost-effective?

  • Upgrading to energy-efficient appliances.
  • Painting or refinishing your cabinets.
  • Painting the walls.
  • Adding a new tile backsplash.
  • Changing out the light fixtures.
  • Replacing the floors with tile or hardwood.

Again, when it comes to where to start, think functionality first with a secondary emphasis on making it look the way you want. 

7. Installing Hardwood Floors

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If you just love the look of natural, sturdy hardwood floors in a home, then you’re not alone. According to a recent survey conducted by the National Wood Flooring Association, 66 percent of them said they would choose hardwood floors when asked what they would choose for their dream home.

The good news is that the cost of decent hardwood floor material has not only come down in price but has also become much easier to install than ever before. Nearly every major home improvement store carries some variety of engineered product that looks just as good as solid hardwood but costs as a fraction of the price.

According to the National Association of Realtors, the installation of new wood floors costs $4,700 on average. However, sellers can expect it to add as much as $5,000 to their resale value, making it one of the few higher priced improvements that pays for itself.  

8. Remodeling a Bathroom

Remodeling a bathroom is a high value home improvement
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The bathrooms in your house might be some of the smallest spaces you have. But don’t underestimate them. When it comes to eventually sell your house, the attractiveness of your bathroom can do wonders to win over buyers.

The range for remodeling a bathroom is around $21,000 to $35,000, with the amount being recouped in a sale ranging from $14,000 to $20,000. Upgrades will include improvements like: 

  • Ceramic tile floors plus a tile surround
  • New chrome fixtures
  • A single-lever shower handle
  • A standard white toilet 
  • A solid surface vanity counter
  • New light fixtures

You might get some great ideas from social media for other changes. But buyer beware. High-end finishes, frameless shower doors, tiled walls, and freestanding tubs will look incredible, but will not return as much value as you might expect (56.3 percent). 

Also keep in mind that most people are remodeling the bathroom to replace worn out surfaces, finishes and materials. One area where you can save is improving your current tiles by glazing them. This keeps one expense down and has the potential to add a lot of value. 

Energy Efficiency

If you want improvements that are going to pay you back immediately then energy efficiency needs to be your area of focus. The beauty of these investments is that because they can drop your energy cost drastically there is a real cash return. This allows you to borrow money to pay for the improvements, increase the return, and not worry about the increased leverage on your home because of how much cash you are saving because of the lower energy bills. This is why a home energy audit is one of our favorite places to start when evaluating your home. Here are a few things that a home energy audit takes into consideration.

9. Adding Energy-Efficient Insulation

Home insulation is a high return home improvement
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Though you may not be able to physically see this improvement, it’s definitely one that you’ll feel. 

Adding fiberglass insulation to an older or drafty house can make a world of difference in its comfort. Plus, it can dramatically reduce your energy consumption needs and reduce your bill.

The average national cost of installing blown-in insulation in an attic is $1,268. However, it’s been estimated that it will increase the home’s retail value by as much as $1,482 for a whopping ROI of 117 percent.

Of course, there are plenty of other ways you can insulate your house too:

  • Checking for drafts in the HVAC connections.
  • Adding weatherstripping to doors, windows, or attic entrances.
  • Putting insulation around your pipes.

Many of these improvements can be done by yourself with relatively inexpensive materials.

10. Add Energy-Efficient Windows

Energy efficient windows are a high value, high return home improvement
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If you’ve got an older home or have noticed the area around the windows to be drafty or even damp, then it may be time to consider upgrading.

All-new vinyl windows aren’t cheap. For the average 2,450-square-foot house, they will run you about $22,500. However, it could be an investment that’s well worth your money. New window replacements can recoup as much as 71 percent of their initial cost when the house is resold. 

BUT, this underestimates their impact! In addition to making your house look sharp, new windows can also have a positive influence on your energy bill. The U.S. Department of Energy estimates that you’ll save between $101 to $583 a year by replacing single-pane windows in your home depending on where you live. Even if you’ve already got double-pane windows, replacing them with ones according to the latest energy efficiency standards could save you $27 to $197 per year.

Bonus! 11. Replace your HVAC 

Upgrading your HVAC is a high return home improvement
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While this is not the sexiest of home renovations it is potentially one of the most impactful. As a starting point, the National Association of Realtors survey points out that an HVAC replacement will recoup 85% of the approximately $8,500 investment.  What this doesn’t account for is that upgrading from an older unit to a new one can save you $700/year.  That means if you sold after two days of owning that HVAC you will have recouped the full 100%.  

Summary

You’ve got a lot of options when it comes to home improvement. Not only will these be upgrades that you and your family can enjoy for years to come, but they can also be enhancements that will entice future buyers when you finally decide it’s time to sell. 

Before starting your next home improvement, keep in mind how your home gets valued and then “ACE” your improvements. 

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