When considering home improvements there are two important rules to bear in mind. The first is that cost does not equal value and the second is that real estate markets are micro in nature. What may be expected or accepted in one neighborhood may not work in another.
Part of owning a home is making it your own. Especially with older homes there’s a lot of updates to consider for comfort as well as value. A well thought out strategic approach to home improvements can help improve the quality and your comfort as well as the value.
With home improvements you must understand what is considered of value in your immediate neighborhood or market area. This is crucial so you spend your money wisely on improvements that will have the greatest impact on your home’s value.
Let us talk about what it means that real estate markets are micro in nature. Although there’s a lot written about the real estate market from a national perspective this has mostly to do with statistical and cumulative data, average and median prices and such.
Real estate markets are much smaller and unique. While it can be a certain section of a city, it can also be just a subdivision or a particular school zone. Whatever the size, it is your neighborhood with all of its endearing and quirky characteristics. Therefore, blanket advice for home improvements that increase value for homes across the entire country is unrealistic.
Cost does not equal value
The term cost does not equal value simply means that buyers in the market are not always willing to pay additional money for a home equal to what you spent on improving it.
When the cost of a home improvement project does not increase the value of your home it may not be a prudent financial investment. This is especially true if you anticipate selling your home in the not too distant future. The most common example is a swimming pool where the cost almost always exceeds the value it adds. It only makes sense to invest the $40,000 or more if you and your family truly enjoy the benefits of a pool and plan on staying in the home for a while.
With all that being said, here are three home improvement projects most likely to increase your home value.
1- People buy Kitchens
The kitchen is one of the main areas of the home in which families gather. An updated kitchen will grab a potential buyers attention.
When it comes to updating a home, focusing on the kitchen has always paid dividends. Replacing the appliances, countertops and backsplash is the most common and least expensive way to give your kitchen a face-lift However, if the cabinets are sub-par then its best to replace them before spending any money on those granite counter-tops.
According to the cost vs. value report for 2018 the national average recouped for a mid-range minor kitchen remodel was 81.1-percent.
For buyers, a good indicator of an updated kitchen is walking in and seeing natural stone countertops and stainless steel appliances. In 2019, quartz countertops will continue to compete with granite in popularity. While stainless steel appliances can run the gamut in prices, moderately priced good quality appliances are your best choice to augment the modern updated look of the kitchen without breaking the bank.
2- Luxury Master Bath
Master bathrooms don’t have the same clout as kitchens but a dated master bathroom definitely beckons updating if you want to be competitive in your market. Turning your master bathroom into a spa-like retreat will provide a luxurious space for you to enjoy or will lure in buyers if you’re planning to sell in the near future.
A rather nifty suggestion in a Consumer Reports article suggests updating with an energy efficient low-flow shower head and an L-shaped design for the shower area. This will help eliminate an expensive frameless shower door.
A note of caution is to plan carefully since a master bathroom done wrong is rather unforgiving and could become a costly mistake.
3- Adding square footage within what’s reasonable for your neighborhood
In today’s market, millennials have had to opt for older, smaller homes due to rising prices. As you outgrow your space and if property conditions allow, adding on another bedroom, bathroom or family room could be a feasible option.
The cost vs. value report indicates the following national average costs for additions:
- Mid-range bathroom addition cost $47,427
- Upscale bathroom addition cost $83,869
- Master Suite addition cost $130,986
The additional space will open your home up to a greater pool of buyers. Your market will determine exactly how much of the cost will be recuperated or increase the value of your home.
While it’s okay to go a little bit over in size you don’t want to be an outlier in square footage for the neighborhood.
Factoring the costs of permits and construction and understanding how much the value will increase after the new addition is key to determining your ROI.
Some Final Thoughts
Try to concentrate your efforts towards completing one entire project at a time. This will yield greater return than random small updates all over the house. For example, instead of replacing some kitchen appliances, changing the flooring in a couple of rooms and updating some light fixtures, you’re better off putting all that money towards updating what you can in the kitchen or installing new floors on the entire first level.
Before you run out to Home Depot and jump into home improvements with the intention of adding value to your home, make sure you’ve covered all maintenance items. You don’t want to add value through updates only to have it deducted for condition.
If your intention is to sell, update with good quality materials and neutral colors. Attend some open houses in your neighborhood to get some design ideas that work for your market.