How Much Do Renovations Increase Your Home Value?

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Home renovations can be expensive affairs, especially recently, as the cost of labor and materials has risen. Though they are expensive, renovations can repair damaged areas, update old or outdated aesthetics, replace aging fixtures in kitchens and bathrooms, bring new functionality to unused rooms, or add completely new rooms in the form of house additions.

These home upgrades can increase the quality of your daily living experience by adding comfort, convenience, or utility. But do home renovations increase property value? If so, how much do renovations increase home value, and what renovations add the most value? Does adding a room increase home value?

These are some of the questions you may have if you are a homeowner planning to sell your house soon. First, it’s important to understand how much work, which is often expensive, can increase the value of your home.

In this article, we’ll explore whether upgrades and renovations can increase the market value of your house, discuss which renovations you can make to your home to increase the value, and highlight the improvements that increase home value the most.

The Value of Renovations: Should You Make Some?

Renovations have been getting expensive lately, thanks to inflation, shortages, and delays. It would be no surprise to anyone paying attention to the recent events impacting the supply chain and prices that a homeowner may second guess their decision to make renovations any time soon. Factor in the uncertainty of the housing market and rising interest rates, and homeowners may start to worry.

Not every improvement makes a 100% return on investment (ROI), either. Some renovations may even be detrimental to the house value or cost you more money than you’ll get back for your efforts if home buyers perceive the changes as ugly, over-personalized, outdated, or at odds with the neighborhood’s aesthetic. The quality of the materials and the finished product also factor into value. If a renovation was made with shoddy materials and poor workmanship, it may be detrimental to the house’s value.

However, if you plan and execute well, making home improvements can increase the value of your house through both curb appeal and a higher list price. Curb appeal can attract buyers. An increased house price resulting from renovations can bring a return on your renovation investment when the house sells. 

Which Renovations Add the Most Value?

If you are making renovations for the purpose of selling your house in the near future, it’s important to prioritize renovations that add value. Many home buyers will want the house to be move-in ready and do not envision tearing out tile or carpeting, changing the colors of the walls, or replacing fixtures. Therefore, if you are looking to get the most return on your investment, consider using:

• Neutral colors
• Plain tiles
• Standard plumbing fixtures
• Standard lighting fixtures

If you are considering making larger renovations, such as the ones discussed below, make sure you understand how they will impact the value of your home before you start demolishing. 

How Much Does Adding a Bedroom Increase Home Value?

Adding a new bedroom is generally a good investment. Depending on your area, the price of the house could increase by as much as $50,000 from adding a bedroom. However, the increase in your home value will be determined by the size and type of bedroom you add. Two of the bedrooms that have the greatest potential return are attic bedrooms and master suites: 

• Attic Bedroom: Your house may have hidden value if it has an attic, and even more so if it’s finished. You can add a bedroom to the real estate listing if you renovate the attic to be an extra bedroom. However, make sure you are adhering to any laws your area has regarding attic bedrooms. For example, a bedroom may need a window, more than one egress, or a minimum amount of square footage.
• Master Suite: How much value does a master suite add? A master suite is a bedroom that has a bathroom, so the cost of adding a master suite will be much higher than just adding an additional room. You can expect to get back about 52% of your investment at the house sale by adding a master suite.

It’s also important to consider the renovation costs associated with adding a bedroom to your home. On average, you can expect to pay $140 per square foot for the addition of a bedroom. So before you add a new bedroom, research the expected increase in the value of your home to ensure you’re getting a positive return on your investment. 

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For example, if the price of the house is estimated to rise $50,000 because of a bedroom addition, and the cost of a 300-square-foot bedroom is $42,000 (300 square feet x $140), then you would recoup 119% of your renovation costs. However, if the same house’s value only increased by $25,000, then only 59% of the renovation cost would be returned at the house sale.

How Much Value Does Adding a Bathroom Add?

An additional bathroom adds an extra number to a house listing that can greatly change buyer perception. Instead of a “3/1,” meaning three bedrooms and only one bathroom, a “3/2” on a listing, or three bedrooms and two bathrooms, could really grab a buyer’s attention. This is especially true if most of the other houses in the area have fewer bathrooms than your listing.

How much does a half bath add to home value? A half bathroom is a bathroom without a shower or bath. This kind of bathroom can often be found on the lower floors of a house and can be used as a guest bathroom or additional bathroom in a basement. However, a half bath can still add to the real estate listing as a decimal, such as 1.5 baths.

Based on data from 20 markets, a bathroom addition can increase the home value by 5.7%. However, the average resale value added will be dependent on your area. For example, the value can be increased by 8.4% in Atlanta, Georgia.

Will Finishing a Basement Add Value?

Finishing a basement could add value to your house in the form of the square footage of living space. Only finished basements can be added to the square footage on a real estate listing. Finished basements could add square footage to a listing and potentially attract more buyers. Be sure to check the laws in your state and locality about whether rooms below grade can count toward square footage.

Whether the square footage of the finished basement is added to the real estate listing or not, a finished basement can help attract buyers on usability alone. Some buyers may want a finished basement to be used as a playroom for their kids or a game room.

How much value does a basement add? Finishing a basement can increase the value of your home by 6.6% on average and up to 10.6% if you live in Portland, Oregon.

Should I Renovate My Kitchen?

The decision to renovate your kitchen could be based on any number of factors, but the most important factor is the age of your kitchen. If your house has its original kitchen, complete with an outdated look, ancient fixtures, or a lack of updated appliances, then updating your kitchen may be an intelligent choice. After all, a renovated kitchen can increase your home value by 4.8%. 

However, the kitchen renovation is one where you must be wary. With today’s fancy appliances and expensive countertops, cabinets, and light fixtures, it’s easy to let your renovation budget far exceed the increased home value it brings. Make sure you plan your kitchen renovations carefully to maximize your profit. 

Does Adding a Pool Increase the Value of My Home?

A pool may add appeal for some buyers and can increase your home’s purchase price. Be careful, however, because a pool may take some appeal away from the house in the eyes of buyers in some markets. Some buyers may want to avoid the extra expense and effort required to maintain a pool, especially in lower-priced markets where budgets may be tighter.

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However, adding a pool in some markets, particularly in the southern states, may increase your home’s value. Pools can increase a house’s value in wealthier neighborhoods where pool maintenance can be contracted out, and people can be hired to maintain and repair the pool. A pool may increase the house value by an average of 7.3%.

Does Adding Another Room Increase Home Value?

If you’re putting up a wall and making one room into two rooms, the overall square footage of the house will be the same. However, you will have increased the number of bedrooms that appear on the real estate listing. Each room will be smaller, but the total number of bedrooms will have increased, and the home’s value may go up. 

Before you begin, consider the cost of your new addition. An addition will require a lot of work in a variety of areas, such as:

• Foundation
• Roofing
• Electrical
• Carpentry
• Insulation
• Siding

The typical cost of a 20-foot by 20-foot addition is around $48,000, with the low end being as low as $15,000 and the high end being as high as $80,000. The materials, cost of labor, and location will factor into the price. In general, considering the costs of the renovation and the increase in the price of the house, the payback will only be around 56% of the cost of the renovation. 

>>DISCOVER: How to Add a Room to a House Without Breaking the Bank

Does Adding Square Footage to Your Home Add Value?

Adding square footage can increase the value of your home by adding living space and reducing the buyer’s cost per square foot. Increasing above-ground livable square footage may increase the value of your home by an average of 5.3%.

Building on additional rooms, such as bedrooms and bathrooms, may increase the value of your home slightly more than simply adding additional square footage because of the added benefit of seeing them on the real estate listing.

Estimating Home Value After Renovation

You can estimate home value after renovation by using the same methods real estate agents use to estimate the potential sale price of the house. The after-repair value will differ by area, so you should research your local real estate market to make effective calculations.

To estimate your post-renovation home value, you will need to know:

• The comparable sales, or comps
• The range of costs that you may pay for each proposed renovation
• The typical return you may see from each proposed renovation 

Calculating Return on Investment for Home Improvements

Unfortunately, calculating the ROI will only ever be an estimate, as you will know what a buyer may pay for your house once you get an offer. However, by calculating the cost of the renovations and the expected list price of your home, you can get a fairly accurate estimate of your ROI. 

There are online calculators that you can use to estimate the ROI of certain home improvements. These calculators also provide estimates based on specific markets, which may help you get a more accurate estimate than one based on overall market trends. 

So Are Home Renovations Worth It?

How much do home improvements increase value? What adds the most value to a home? These are the questions every homeowner asks before undertaking a large home improvement project. The answers to those questions depend on a few factors, such as:

• Local real estate market stability
• Specific home improvements completed
• The potentially high price of the projects

As we’ve seen in the sections above, some renovations can add value to your house in either curb appeal or a price increase. Whether or not you’re able to get a full return on your investment may depend on the total cost of your renovations and the total sale price of your home in the future. 

Whether you’re doing renovations now or considering them in the future, you’ll need a straightforward platform to get the best price. On FastExpert, you can easily find the top neighborhood real estate agents to assist you with your home sale.

Compare agents and read client testimonials and reviews to find the agent who can help you get the best price for your house and the highest ROI for your home improvements. Visit FastExpert today to find your expert real estate agent.