In addition to making your home more comfortable, stylish, and efficient, home renovations can increase your property value. Here's where to start.
The best home renovation projects make your home a better place to live. But renovations can enhance more than your home’s livability. They can make your home more valuable, and more attractive to homebuyers if you decide to sell — if you choose the right renovations.
So what are the home renovations that increase value the most? Let’s find out.
What's in this Article?
Start in the kitchen and bath
Home renovations that increase resale value
Other renovations to consider
How to pay for upgrades
Renovate with buyers in mind
Best home renovations that increase value? Start in the kitchen and bath
Before you renovate, think about your goals. Are you customizing the home to your tastes so you’ll enjoy living there more? Or are you planning to sell the property soon and want to get as high a sale price as possible?
If the latter is your answer, you can increase your home’s value when you add features that buyers want. A bathroom or kitchen remodel is usually at the top of that list.
“Large and spacious kitchens and luxury master bath suites are among the top items,” said Joe Pessolano, a branch sales manager for Fairway. “These are big items for many buyers.”
Greg Sandler, a senior vice president at Fairway, agreed.
“Updating to trendy cabinets and countertops are quick and easy upgrades which yield an incredible return on investment,” he said.
Home renovations that increase resale value
With that advice from Sandler and Pessolano in mind, here are some home renovations that tend to boost resale value for most homeowners. How much they affect the sale price will depend on the extent of the renovations, as well as your real estate market and trends in your area. But these are all solid bets for making your home stand out to potential homebuyers.
1) Kitchen remodel: Return on Investment (ROI) 54-72%
In its 2021 Cost vs Value Report, Remodeling magazine found that the ROI on a kitchen remodel averages 54-72%. What’s with the wide variance, you might ask? It has to do with the extent of the remodel. A minor kitchen remodel yields the highest average ROI at 72.2% because you’re putting less money into the renovations, but getting more value out of them.
“Updating to trendy cabinets and countertops are quick and easy upgrades which yield an incredible return on investment.”
Greg Sandler, Senior Vice President at Fairway
A major kitchen remodel, including putting in a new tile floor or breaking down walls to add some more square feet to the space, will cost you a lot more in labor and materials. It may be worth it if the kitchen is seriously outdated or has issues with mold, asbestos, or other toxic hazards. But if it just needs a little bit of modernization or moderate aesthetic upgrades, you’ll probably get the most bang for your buck by sticking with a minor renovation plan.
Consider these modern additions that can generate a nice return on your investment:
- A designated coffee station
- New granite or quartz countertops
- Modern cabinets that use space efficiently
- A new backsplash
- Gas cooking ranges
- Spacious, modern refrigerator
- Built-in, under-cabinet garbage and recycling containers
- Under-cabinet lighting
- An extra sink or pot filler
- Power outlets along a built-in island and countertops
Buyers are often wowed by modern conveniences in the kitchen, and that wow factor can lead to higher purchase offers when you list your home. Even a minor kitchen remodel can yield results if you focus on elegance and convenience.
2) Bathroom remodel: ROI 55-60%
As with kitchen renovations, minor bathroom remodels have higher ROIs than major overhauls, though the variance is less when it comes to bathrooms.
You don’t have to gut the entire bathroom to improve its comfort and function. Even these simpler improvements can go a long way:
- New paint: A new coat of paint can make a room feel years newer. The interior design website realhomes.com suggests layering different shades of white or combining pale pinks with bolder grays for a fresh look
- A new shower door: A clear glass door, rather than a frosted one, can give the impression of more space in a small bathroom
- Removing and replacing old caulk: This DIY project creates new, clean lines and makes the tub and shower look newer
- A new ventilation fan: Modern fans pump out more air and steam with less noise than older ones, and good ventilation helps reduce mold growth
- New cabinets and countertops: Replacing outdated, chipping, or poorly hung cabinets and countertops is a relatively quick way to enhance value, Sandler noted
- Replacing old faucets: Another way to improve the aesthetics of your bathroom on a budget, but look for a current design. For instance, single-lever faucets are popular right now
- Replacing mirrors and light fixtures: These upgrades can be done in a day, and they can create a warm, modern feeling in the room
- A heated bathroom floor: This is a bigger renovation, but it can be a nice luxury feature for homebuyers (assuming you’ve already tackled the bathroom basics)
“Large and spacious kitchens and luxury master bath suites are among the top items. These are big items for many buyers.”
Joe Pessolano, Fairway Branch Sales Manager
Sprucing up your bathroom with these fixes and upgrades can add to your home’s value without racking up tens of thousands of dollars in contractor costs.
But if your bathroom hasn’t been touched in decades — if it’s still layered from floor to ceiling in powder blue or mint green tile from the 1960s, for example — you may be looking at a total renovation.
Even then, you may get a good return on your investment. A newly remodeled bathroom, complete with modern, energy-efficient fixtures, neutral colors, and warm lighting can be very attractive to homebuyers who are looking for a truly move-in ready property.
Knowing they won’t have to gut the bathroom themselves not only saves them money, but it may also help them envision living in the home (which is key to persuading them to buy).
3) Roof replacement: ROI 61%
Replacing a roof is one of the biggest expenses homeowners incur, which is why buyers, real estate agents, appraisers, and inspectors will scrutinize the roof’s condition during a sale.
If the roof on your home is old and has clear signs of needing repair, you may want to invest in a replacement before you list it. The ROI on a roof replacement with asphalt shingles is 60.7%, and if you don’t have it replaced, you may have to accept a lower sale price.
Homebuyers may be unwilling to meet your asking price if they anticipate spending upward of $20,000 on a new roof soon after closing.
4) Window replacements: 67-69%
New windows are costly to purchase and have installed, so a house full of new replacement windows can be very attractive to homebuyers, especially those on a budget. The return on investment for both wood and vinyl replacement windows hovers between 67-69%, with the ROI on vinyl being slightly higher.
New windows are also more energy-efficient than old ones, which has two benefits. One, they can help maintain temperatures within the home and reduce your energy bills while you live there. Two, they’ll appeal to eco-conscious homebuyers.
Millennials in particular are keen to outfit their homes with energy-efficient appliances and features, and newly replaced windows can start them out on the right foot.
5) Garage door replacement: ROI 94%
On the scale of home renovations, replacing a faulty garage door is a fairly moderate expense, with the job averaging about $3,900. And the ROI on this fix is excellent, with the national average being 93.8%.
Fixing that old garage door makes that space more easily accessible and useful, for you and your potential buyers. Everything you can do to make the home move-in ready can help bring in the offers. The fewer fixes and renovations buyers need to make, the better a home looks.
Other home renovations to consider
Finishing the basement or bonus space
There’s nothing quite like adding more square footage to your home.
If you have open, unfinished space in your basement, above your garage, or in the attic, you could create more living space without expanding the footprint of your home.
But what should you do with the extra space? Start by addressing what your home is missing.
If one more bedroom would set your house apart in your neighborhood, this is your chance to add it. Just be sure it has closet space, easy access to a bathroom, and proper ventilation.
Entertaining spaces are also popular, so you might turn the basement into a man cave (or the female equivalent), complete with a minibar and half bath, suggested Phil Ganz, a senior loan officer with Fairway.
You can also turn it into a home office, which could be very appealing to homebuyers who work from home and want a dedicated work space to encourage work-life separation.
Landscaping and curb appeal
Your home’s first impression contributes to its value. So enhancing the view from the curb can pay off financially.
There’s a lot you can do in this regard — for instance, replace part of your vinyl siding with stone veneer to create a sense of elegance and solidity. The ROI on adding a manufactured stone veneer is 92%, according to Remodeling.
If stone isn’t popular in your area, a vinyl siding replacement can take years off the look of a home, especially if the old siding looks faded or dirty. The ROI on new vinyl siding is 68.3%.
Maybe you’re on a tight budget before selling, and you’re looking for less costly investments. There’s plenty you can do to increase the curb appeal for minimal cost.
Consider adding a trail of stone pavers around your garden or leading to the front door. Putting in stone pavers is much easier than pouring a concrete sidewalk, and it can add more dimension to the front yard.
Speaking of the front door, take an objective look at yours. If it’s a drab color or the finish is chipping, consider repainting it before you list your home. But when you do any painting, whether it’s on the home’s interior or exterior, keep your market in mind. It’s often better to choose warm, neutral paint colors if you plan to sell.
Selecting bright or unusual colors may make the space feel more unique or authentic to your tastes, and if you’re staying in the home, that’s fine. But you don’t want to miss out on potential homebuyers because they were put off by garish colors or fixtures.
There are lots of budget-friendly additions for updating your landscaping and outdoor spaces as well. Adding solar-powered lanterns along the front path, planting flowers around the mailbox, putting in planter boxes on the windows — all of these are fairly inexpensive and can make a house feel like a home.
If you plan to sell the house eventually, but will continue living in it for a while, consider upgrades that will increase your enjoyment of it and make it appeal to homebuyers. Think an outdoor living space, complete with fire pit, stone pavers, and a dedicated grilling space.
Assuming your finances allow, adding a deck to the property can get you a 63-66% return on your investment.
How to pay for upgrades: The best home renovation loans
Even if you don’t have enough money in savings to pay for your home renovations, you can find sensible ways to pay for your improvements. Options may include:
A home equity loan
A home equity loan lets you borrow against your home equity and receive a lump sum of cash you can use toward renovations.
For instance, if your home is worth $300,000 and your current mortgage balance is $200,000, you have $100,000 in home equity.
When you borrow against this value, you may qualify for lower fixed interest rates compared to personal loan rates, since the loan is secured by your home.
Home equity line of credit
A home equity line of credit (HELOC) also mobilizes your home equity, but with a twist. Instead of receiving a lump sum of money from your loan, you’d get a credit line, much like a credit card, but potentially a lower, variable interest rate.
Home equity lines of credit can work well for homeowners who have a to-do list they plan to tackle incrementally. With a HELOC, you pay only on the amount of credit used. So if you take a HELOC for $50,000 and you’ve only used $10,000 of it, interest would only accrue on that $10,000 and your monthly payments would go toward that balance. The remaining $40,000 would still be available for future projects, but no interest would accrue on the unused portion of the HELOC.
A cash-out refinance can also convert home equity into cash for home renovations. But in the process, you’d also refinance all of your mortgage debt into a new loan.
Let’s say you own a home valued at $300,000, and you owe $200,000 on your mortgage. A lender approves you for a cash-out refinance loan of $240,000. The first $200,000 would be used to pay off your existing mortgage, and you’d receive the remaining $40,000 in cash that you could use toward renovations, minus closing costs and fees.
Keep in mind that a cash-out refinance increases the amount you owe on your home and it can extend your repayment timeline and overcall costs over the life of the loan.
Related reading: How to Get a 100% Cash-out Refinance VA Loan
Home equity loans and cash-out refinances work only when you’ve already built equity in your home. If you bought the home recently, you may not have enough equity built up to qualify.
In this case, you could use a personal loan from a bank, credit union, or online lender to finance your home improvements.
But since lenders can’t use the value of your home as collateral, you’ll likely pay higher interest rates than you would with a home equity loan or HELOC.
Purchase + renovation/refinance loans
If you are buying a new home, rather than preparing to sell a current one, and it needs renovations before you move in, some loans allow you to combine your home purchase and home renovation costs into a single mortgage.
You can also use these loans to refinance an existing mortgage on your current home to add funds for home improvements. The loan amount includes the payoff of your current mortgage and the cost of renovations.
You’ll have to be well organized to make these types of loans work for you. Lenders must approve your contractor and your renovation plans before you close on the home, so there is extra legwork involved before you can be fully approved for the loan.
The FHA 203(k) loan is a popular product that combines financing for purchasing and renovating your primary residence. You can also use a conventional alternative, Fannie Mae’s HomeStyle® loan, which is eligible for second homes and investment properties as well as primary residences.
The funds for the renovation in these types of mortgages are held in an escrow account and are drawn down in phases as work is done. The lender or another party works with the contractor to confirm the work is being completed as documented in the bid document. Once confirmed, funds are sent to the contractor until work is complete.
If you are 62 or older, you may be able to finance your home renovations with a reverse mortgage loan.
Reverse mortgages let you borrow against your home’s value but they do not require monthly payments, as long as you pay your property taxes and homeowners insurance and maintain the property. Instead, the loan comes due when you sell, move out, or pass away.*
You can use a reverse mortgage to finance key renovations to the home, then pay off the loan when you sell the house to downsize or relocate to a new town.
Home renovations that increase value FAQs
Does renovating a home increase its value Yes. Renovating a home can increase its value if you invest in upgrades that appeal to homebuyers. In most cases, buyers prefer homes with modern kitchens, updated bathrooms, and adequate living space. Homes that have been renovated to meet market trends and demand may see higher sale prices.
What increases home value the most? Bathroom and kitchen remodels are high-value upgrades that can raise a home’s value, as they are appealing to homebuyers. Adding a bathroom or master suite, replacing a roof or garage door, and replacing old siding can also increase a property’s value.
What brings down property value? Several factors can lower a home’s value, including a cooling housing market or a downturn in the local or national economy. As for home-specific issues, a lack of basic maintenance and serious issues with the foundation, roof, HVAC system, plumbing, or other core features can reduce a home’s value. You also may inadvertently decrease a home’s value by adding amenities that are not desired in your area. For instance, adding a pool in colder climates may limit the number of potential buyers, due to safety concerns, extra maintenance, and a short timeframe to enjoy it.
Renovate with buyers in mind
The home renovations that increase the value of a home the most are tried and true fixes, such as bathroom and kitchen remodels, room additions, new decks, and a new roof. If you’re renovating with an eye to the market and you’re not sure what homebuyers want most in your area, talk to your real estate agent. They can tell you what local buyers expect to see and which features will really add value to your home.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.