How to Increase Home Value: Tips to Plan & Pay for Improvements

Here's a look at some common remodeling and replacement projects, along with their average estimated cost and how much they're worth at resale time. We separate the projects by those that recoup all or most of their resale values, and those that don't recoup as much.

Source: National Association of the Remodeling Industry and National Association of Realtors.

Source: Remodeling Magazine

Remodeling projects underscore just how much emotion and subjectivity is involved in homeownership. Rare is the renovation that will allow you to recoup every penny you've spent - but that's not necessarily the point. When it's time for a new roof, to name one example, you replace it because it keeps out rain and birds, not because you expect it to enhance your crib's resale value on a dollar-for-dollar basis.

For a modestly priced project such as building a deck, you gain enjoyment and utility, so it's up to you to decide if you'll use the new feature enough to merit the expense. For six-figure projects like constructing a two-story addition, the calculus becomes more compelling: If a $176,000 investment yields only $125,000 in resale value, maybe it makes more sense to move.

But homeowners embarking on a remodeling project rarely focus on the resale value of the renovations, says Dan Bawden, president of Legal Eagle Contractors in Houston and past chairman of the National Association of Home Builders' Remodelers council. Homeowners who plan to sell in a year or two typically focus on cosmetic improvements rather than major overhauls. And homeowners who are investing in major renovations typically plan to stay put for five to 10 years.

"The motivation for doing the remodeling project in your home is based on lifestyle reasons, not so much resale," Bawden says. "For example, most homeowners are remodeling their kitchen because it is outdated and the appliances are starting to fail. Most never even ask me about the resale value."

Renovation projects may not always seem to make sense when you're just looking at resale values, but they'll likely make your home more appealing, which can help entice buyers.

If your home improvement project involves little more than painting a few rooms or replacing an old fridge, it's simple to put it on your credit card and pay off the balance next month. But if you're gutting the kitchen — and you're not getting an insurance check to cover the costs — the financial calculations get more complicated. For a major project, you'll want to consider a home equity loan or a refinance, and you'll need to stick to the budget you set for yourself:

There are two primary options: a home equity loan or an entirely new mortgage for a larger amount. Which one is right for you? "That's the million-dollar question," says Whitney Fite, president of Angel Oak Home Loans in Atlanta. "It's very specific to your scenario." If you have plenty of equity in your house, and if your mortgage dates to the years when rates were below 4 percent, go with the home equity loan, Fite says. But if you don't have much equity, or if your loan terms aren't especially favorable, consider refinancing. Fite recommends the Fannie Mae HomeStyle mortgage, which lets you refinance based on the projected value of your home after renovations. An appraiser will look at the plans for your project before signing off. Once you're approved, the extra cash is held in an escrow account to pay the contractor.

Construction projects are notorious for running over budget. Sometimes a contractor discovers termite damage or toxic mold. A more common budget buster happens when homeowners decide to upgrade their choices — to fancier countertops, for instance, or a snazzier sink. "The psychology of spending on remodeling projects is a fascinating one," Bawden says. If you're spending $10,000 on a bathroom renovation, why not upgrade to the $300 towel bar? That reasoning is typical, but it also causes budgets to balloon. "It will happen, so expect it," Bawden says. If you're disciplined about spending, however, you might suffer remodeler's remorse. Bawden recalls one client who replaced everything in a bathroom except for the tired-but-functional tub, then later regretted not spending the extra money, because the tub suddenly was an eyesore. If your to-do list includes a number of small projects, try to hire one handyman to do all of them — by making things more convenient for him, you could save on labor costs.

Sweat equity and elbow grease are part and parcel of the American dream. And nothing boosts pride of ownership like successfully executing a home improvement. Here are some projects you might be able to tackle yourself:

DECORATING

PAINTING

WOODWORKING

LIGHTING

KITCHEN

FLOORING

APPLIANCES

Maybe trips to The Home Depot and Lowe's aren't your thing. Perhaps you're so busy with work and family obligations that there's no time in your schedule to devote multiple hours to a project. It could be that you're upgrading old wiring, replacing your roof or tackling another risky project that's potentially dangerous and requires true expertise. Or perhaps your project requires moving a load-bearing wall and relying on workers from multiple trades. Whatever the reason, there's no shame in hiring a pro to do the dirty work for you. Be warned, though, that reliable help is hard to find. Ask neighbors and friends for referrals. And if you're embarking on a major project, seek three bids.

Bawden suggests starting with a search of the Better Business Bureau's database, which assigns letter grades to companies. Also check Angie's List, Google and Houzz. Your local builders' association also can provide a list of contractors and tradesmen who are licensed, insured and reputable. "The bad guys do not belong to the trade association," Bawden says. When you've found a strong candidate, get him or her on the phone and administer Bawden's 11-question contractor test, which includes queries about a remodeler's experience and professionalism.

Once you find a competent, friendly worker, maintain a good relationship. Refer him to friends and neighbors. Keep in mind that different jobs require different workers. A handyman can handle a variety of small projects, such as patching drywall, installing ceiling fans or replacing doors. Electricians and plumbers focus on specific parts of your house. And for a major project such as an addition or a full-blown gutting of an old home, a general contractor can oversee construction and bring in specialists such as architects, carpenters and drywallers.

A home improvement project can require an intense but finite period of work, but a homeowner's toil never ends. To protect your investment, you must constantly attend to certain tasks. Some of the most common maintenance projects include:

How do you keep your home safe and secure? Here are four common hazards and tips for combatting them.

Emergency Preparedness