it makes to sense to stick with the home you have, even if your needs change. Your kids don't want to leave their school district. Or the costs of selling, moving and buying again make changing houses too expensive. But some home renovations can make you more comfortable today and provide a decent return on investment when you sell.
See today's mortgage rates for home improvements
When it's all about you
Some homeowners only care about how a home improvement will affect their quality of life now. The return on their renovation investment doesn't matter to them.
If that describes you, your only concern about your home improvement is affordability. And finding the right contractor to make it happen. That's fine, of course, but it would be nice get what you want or need today and also get at least some of your money back later on. For most homeowners, the return on investment is a factor in their home renovation choices.
Update this, not that
Which home improvements add most value when you sell? This depends on your region and even your neighborhood. But here are the general principles to keep in mind when evaluating the best home improvements.
Curb appeal is king. Exterior improvements that don't cost an arm and a leg return a high portion of your investment back to you. That means new paint or siding, new exterior doors and cleaning up the yard pay off handsomely. However, over-the-top landscaping and in-ground pools usually do not.
Bedrooms sell houses. That's why real estate agents list the number of bedrooms first when they advertise properties. Everyone expects homes with more bedrooms to cost more. One of the best remodeling projects you can undertake is turning attic space into a bedroom. Converting empty space into "living space" instantly creates a lot more value per square foot.
Some of the best return on investment comes from modest projects. It's always easier to recoup the cost of refaced kitchen cabinets, new flooring and paint than it is for a high-end kitchen gut job.
It's smart to correct obvious deficiencies. Buyers notice outdated kitchens and worn flooring. Freshening up your space without going overboard makes your property more marketable.
Be careful with energy-related improvements. While Energy Star appliances, efficient windows and siding costs can largely be recouped, more unusual upgrades like geothermal heating systems may be risky. It depends on what's normal in your area and the degree of acceptance that system enjoys.
Energy-efficiency updates are also popular (and can be profitable). For example, the latest survey found that trading our an old, fossil-fuel-burning furnace to electric heat pump for the heating and cooling of a 2,000 square foot home would return 66.1% of the initial $18,800 outlay, so you might not only save money on energy but get two-thirds of your cash outlay back when you sell, too.
You'll want to be careful about financing energy-efficiency projects using a Property Assessed Clean Energy (PACE) loan. Available in a few states, these liens are structured for repayment as a special tax assessment and paid as part of the property taxes, and the positioning of this lien can complicate a potential buyer's ability to get financing to buy your home.
Related: Are Solar Panels Worth It?
Top home improvement returns by region
Which renovation projects offer the highest return on investment depends on where you live. Here's a rundown of the best home improvements for adding value, according to Remodeling Magazine's 2024 Cost vs Value Report, which compares costs versus returns at the time of sale for 23 remodeling and home improvement projects. Check the report for local costs for these and 20 other common updates and renovations.
New England
- Garage door replacement, cost recouped: 314.7%
- Entry door replacement, steel, cost recouped: 188.1%
- Manufactured stone veneer, cost recouped: 151.7%
Mid Atlantic
- Garage door replacement, cost recouped: 203.6%
- Manufactured stone veneer, cost recouped: 158.6%
- Entry door replacement, steel, cost recouped: 158.6%
South Atlantic
- Entry door replacement, steel, cost recouped: 198.9%
- Garage door replacement, cost recouped: 189.5%%
- Manufactured stone veneer, cost recouped: 150.2%
East South Central
- Garage door replacement, cost recouped: 172.8%%
- Entry door replacement, steel, cost recouped: 153.2%
- Manufactured stone veneer, cost recouped: 141.4%
West South Central
- Manufactured stone veneer, cost recouped: 220.1%
- Entry door replacement, steel, cost recouped: 163.2%
- Garage door replacement, cost recouped: 149.0%%
East North Central
- Entry door replacement, steel, cost recouped: 161.8%
- Garage door replacement, cost recouped: 152.3%
- Manufactured stone veneer, cost recouped: 112.2%
West North Central
- Garage door replacement, cost recouped: 158.4%
- Entry door replacement, steel, cost recouped: 152.5%
- Manufactured stone veneer, cost recouped: 111.2%
Mountain
- Entry door replacement, steel, cost recouped: 185.2%
- Garage door replacement, cost recouped: 174.4%
- Manufactured stone veneer, cost recouped: 124.3%
Pacific
- Garage door replacement, cost recouped: 250.7%
- Entry door replacement, steel, cost recouped: 249.9%
- Manufactured stone veneer, cost recouped: 203.5%
You might be surprised to learn that some common improvement projects don't add as much future value you might think. Adding a bathroom to your home, for example, might only return about 35% of your cost to you when it's time to sell. That said, the convenience of having another bathroom for your family may well outweigh concerns about any return on your expenditure.
Related: Most Homeowners Need Loans to Pay for Home Improvements, Says Study
Home improvements can add to the "basis value" of your home. "Basis" is the value of your home used for the purposes of calculating future capital gains taxes. Essentially, when you sell your home, your gain (profit) or loss for tax purposes is determined by subtracting its basis (original calculated value when you bought it) plus the cost of any improvements from the sales price (plus sales expenses, such as real estate commissions). Because of this, it's important to keep good, accurate records when you are doing home remodeling projects.
If return on investment is your prime consideration, find your region in Remodeling Magazine's report. That breaks down the most and least popular improvements by region, state and even city. And it can help you decide which home renovations add most value.
With home values very high, it's likely that you'll be able to finance home improvement or renovation projects using the equity in your home. You can estimate the amount of equity in your home and based on historic home price trends even forecast when you'll have enough to cover expensive projects.
Using a home equity loan or home equity line of credit to "buy, build or substantially improve" your home may make the interest you pay on a home equity loan tax deductible, helping to lower the total cost of your renovation, too.
This article was revised by Keith Gumbinger.
