A Step-by-Step Guide to Increasing Home Value
Updated: December 15, 2023
Advertising & Editorial Disclosure
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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%).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
sources
- ENERGY STAR. "Benefits of ENERGY STAR Qualified Windows, Doors, and Skylights." Accessed March 3, 2023.
- Federal Housing Finance Agency. "FHFA House Price Index (HPI) Quarterly Report." Accessed March 6, 2023.
- Joint Center for Housing Studies of Harvard University. "Leading Indicator of Remodeling Activity (LIRA)." Accessed March 6, 2023.
- Journal of Real Estate Finance and Economics. "Valuing Curb Appeal." Accessed March 7, 2023.
- National Association of Home Builders. "NAHB Identifies Top Features and Design Trends for 2022 Across Generations." Accessed March 7, 2023.
- National Association of Home Builders. "What Home Buyers Really Want." Accessed March 7, 2023.
- National Association of REALTORS Research Group. "2022 Remodeling Impact Report." Accessed March 6, 2023.