Homeowners currently in the market are all too familiar with this question: Should you renovate or sell? And if you renovate, how can you increase your home value—and not just waste money on unneeded changes?
When deciding whether to remodel or list a home “as-is,” there are multiple factors to consider. What’s the expectation in your market? How much work does your property need? And is your local market hot… or slowing down?
However, even in hot markets, some properties sell quickly while others linger for months on end. There may be a cause: The sellers didn’t pay attention to needed repairs. Increasing home value isn’t a one-size-fits-all solution. Each property is different.
Here’s what might work for you.
First: Know What Home Improvements Really Offer a Return on Investment
Porch.com and Homes.com found that doing smaller renovations to your kitchen could get you the biggest bang for your buck. A minor kitchen remodel can end up costing homeowners an average of $22,507 and net a home improvement return on investment of $18,123 or 81 percent. Although a bathroom remodel was referred to as a “must-have” for selling potential, an asphalt roof costing around $22,000 could result in more for your efforts (68 percent) compared to a bathroom remodel (63 percent), where you’ll likely see less return.
Since today’s buyer favors a fixer-upper, sellers should focus on low-maintenance home improvement projects to ensure the best investment. In fact, Homes.com finds 48 percent of homeowners suggest a kitchen remodel adds the most value to a home, with three in 10 homeowners agreeing a kitchen remodel is essential to get a home off the market.
On the other hand, homeowners also see importance in a bathroom remodel and retouching of interior paint. Survey respondents emphasized these renovations as best to increase the potential of a home sale.
Although homeowners believe a minor kitchen or bathroom remodel will give sellers an edge in the market, those renovations may not equate to the best return on investment.
Increase Home Value by Adding Interior Space
If your property already has four-plus bedrooms, you probably won’t get a ton of return on investment (ROI) for adding one more. But turning a one-bedroom into a two-bedroom—or two into three—can bump your listing into the next price tier.
Before embarking on any of these renovations, apply for the proper permits, and work with the inspector to make sure your room is up to code. Nothing is worse than finishing a pricey renovation… only for the deal to fall through because of an overlooked problem, like too-low ceilings.
1. Add a bedroom
If your home only has two bedrooms, you can add a lot of value with another bedroom—but only if the house has enough square footage. (If you have more than three bedrooms, sometimes you can afford to lose one.)
Why is it so important to have at least three bedrooms? Most families who have kids want at least three bedrooms, even if they only have one child. Often, the third bedroom is used as an office. If you have a house with two decent-sized bedrooms and can only make a small third bedroom, it’s probably worth doing.
There are several things to consider. First: Unless you plan on building an addition (a significant, often unwarranted expense), something’s gotta give. What are you willing to sacrifice?
The best scenario is when your house has a bonus room. All you need to do is add a door and a closet and maybe a wall and you’ve got a bedroom.
Also be on the lookout for extra-large living rooms. Some houses—particularly older ones—are poorly laid out. Taking a slice out of a large room to add a bedroom can make sense.
2. Convert the garage
Garage conversions usually look awkward, even if you replace all the siding in front. Indeed, a study by G. Stacy Simans and David A. Macpherson found that a garage added 13% to a property’s sales price, while an additional bedroom added only 4%, assuming square footage remained constant.
That being said, there are times when garage conversions make sense, especially for real estate investors
There is a large subdivision called Ruskin Heights in Kansas City, where virtually every property is a three-bed, one-bath ranch. Many of the tenants in this area are on Section 8. Since Section 8 bases payment on number of bedrooms, many investors converted the garage to an additional bedroom.
Some homes have two bedrooms and both an attached and detached garage, or a two-car garage. In these cases, it would sometimes make sense to convert the garage.
3. Finish the basement or attic
Many appraisers won’t count bedrooms, bathrooms, or square footage in finished basements—even walkout basements. Instead, they just check a box titled “finished basement” and give you a little adjustment.
However, buyers and renters sure do consider finished basements, and adding room may boost your sales value. But we don’t recommend adding a basement or finishing attics before listing. Because the ROI on these projects isn’t great, this is something you should only do if it makes sense for a rental or if you personally plan on living in the property for a while and will enjoy the space.
Just make sure any bedroom you put in a basement has an egress window in case there’s a fire.
4. Add bathrooms (or make a half bath whole)
Some half bathrooms are really small, and there’s just nothing you can do. But if there is extra space, it’s a good idea to finish it. That expense will almost always pay for itself. A full bathroom adds 24% to the price, whereas a half bathroom only adds 15%. That’s a big home improvement return on investment!
After all, people spend a lot of time in the bathroom. So adding an extra bathroom proportionate to number of bedrooms in the home can make your listing much more appealing to potential renters or buyers. And if you’ve got the room, it’s worth adding a shower, even if you’d have to move the toilet and replace the flooring to do so. (No need to install a tub—but we do recommend having at least one in the house so that parents can bathe their children.)
As for adding a full bathroom: Unless it is a huge house, skip this expense unless there’s only one bathroom. Like all things real estate, though, this varies by location. In lower-end neighborhoods, it would generally not make sense. But in higher-end neighborhoods, it very well might—especially if there’s a large master bedroom without a bath.
When adding a full bathroom, use double sinks. These really attract buyers and renters. Consider choosing a light, trendy color palette, too.
5. Open up the kitchen
Nothing sells a house like the kitchen—and a confined, closed-off kitchen simply won’t do. Sometimes, there’s no easy way to add space to a kitchen. But you can still make it feel open by removing a wall to the living or dining room. This project could be as simple as cutting a rectangular pass-through. (You can even add a bar top for an added bonus!)
6. Provide extra storage
If a house lacks a garage and a basement, consider adding a backyard shed. People like their stuff and need storage. You can buy a shed from Home Depot of Lowes for less than $1,000, and a lot of prospective renters and buyers will need this extra space to sign on the dotted lines.
No money or space for a shed? Extra closets, built-in shelves and wardrobes can make even a smaller property feel larger.
Consider Curb Appeal
Never underestimate the power of aesthetics. Even small things can make a big difference. After all, what’s a cool kitchen or bathroom or nice flooring if the outside looks like crap?
Cut the grass, take the garbage out, and pull the weeds that are six feet tall. For a rental property, don’t spend a lot of money or time—just make sure your siding is in good shape, your landscaping is maintained and your walkway is clear. A poorly-kept exterior can make renters worry about how likely you are to address any repair needs they might have while living in your property.
Consider refinishing your driveway if it’s covered in cracks and holes.
If you’re selling, though, take a little more time. Pay attention to paint and landscaping. Paint the front door a bright, cheerful color that complements the siding, and refresh the lawn (if you have one) by overseeding and watering thoroughly.
Renovate the Kitchen
If you’ve got the budget, go beyond opening a wall to revamp the entire kitchen. That’s where the most people spend most of their time, which is why we really want to make it nice. Even a minor kitchen remodel can thrill home buyers and increase your resale value. A nice kitchen is key to getting top dollar for your space.
Buyers and renters prefer lighter colors, so we recommend white cabinets with light countertops. (A white quartz countertop is a fantastic option.) Very modern, very sleek—and neutral, so it won’t offend anybody. All buyers can design their kitchen around neutral whites.
If you need to replace the appliances, opt for black appliance models. These often cost the same as white appliances, but are perceived as higher-quality. You can also mix-and-match stainless steel and black appliances, such as installing a stainless steel stove in the same kitchen as a black dishwasher.
Remember: There’s no need to add an upscale kitchen unless that’s expected in your neighborhood. Don’t spend money on ultra-fancy appliances—you won’t get it back. However, energy-efficient appliances will likely be seen as a bonus.
Install New Flooring
Buyers love seamless floors. One common pet peeve: When there is one type of flooring in the kitchen, another type of flooring in the living room, and another type of flooring in the bedrooms and upstairs, etc. One flooring throughout the whole house makes the space feel seamless and gives the house flow. It feels bigger and brighter—and that’s what you want when trying to sell a property or find a tenant.
The best option, in most scenarios: hardwood floors. Not only does it look more modern than carpeting, it’s also easier to clean, and—if you’re renting the property—it relieves tenants from the risk of losing their security deposit on accidental spills.
Flooring outlet stores often carry basic hardwood options at reasonable prices. If this is still out-of-range relative to the neighborhood and price point of the home, either look at luxury vinyl planks or bamboo flooring or buy heavyweight dark carpeting, which doesn’t show stains or wear as easily.
Focus on Quick Updates
No time for major renovations? Small interior updates can impact buyers’ impression of your property, creating a return on investment from even small home improvements. Consider:
- Smart home features. A smart thermostat, HomeKit-connected lightbulbs, or other smart-home technology give a home a minor boost.
- Updated lighting fixtures. Replace the ugly chandelier over the kitchen table with something inexpensive and sleek.
- New door locks. Adding a smart lock or even a numerical keypad can impress buyers. And as a bonus, a smart keypad can make showing the house so much simpler.
The major takeaway: Some upgrades improve your return on investment more than others. Consider your options carefully, and when in doubt, speak with a trusted real estate agent, mentor, or mastermind group about your next steps.
Any items you’d add to this list?
Let me know with a comment!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.