Best Home Improvements for Added Value

How to determine the return on your home improvement investment

The best and most valuable home improvements will reward your investments of money and time with higher home value now and at the time you sell your home. In each of the past 15 years, over one million homeowners spent more than $10,000 on a kitchen, bath or other major remodeling project, according to Harvard University's Joint Center for Housing Studies. And experts say such home improvements are generally a good investment. 

But tackling a home improvement project does not always mean an increase in the value of your home. While some projects will increase a home's value, others may have the same payback as a losing lottery ticket. Before you open your checkbook, there are a few things you should consider to make sure the end result produces a return on your investment--in both time and money.

Diy home improvementGetting A Return On Your Home Improvement InvestmentValue check: Before deciding how much to spend on a major improvement, get an estimate of the current value of your home. With such websites as AOL Real Estate, you can get started by entering your street address to get a current estimate of what your house might sell for in today's market, as well as the prices that similar homes have recently sold for in your neighborhood. By comparing these prices with renovation estimates, you'll avoid over-improving your home in relation to the neighborhood, a common and costly mistake.  The best home improvements add value while keeping your home price competitive for the neighborhood.

Motive check: Basically, there are two reasons to make major home improvements: pleasure or necessity. If you're not planning to move for 10 years or more, you'll have more time to enjoy your improvements and might not be as concerned about getting a return on the investment. However, if you're improving your home to ultimately add to its resale value, you'll need to prioritize and focus on the improvements that will pay off at sale time.

Reality check: Before calling in contractors, get a realistic estimate of what your project might cost by using one of the many available online cost estimators. Most provide an approximate cost of the most common home improvement projects along with data localized to your zip code to adjust for geographic cost differences. Having these numbers in advance of your contractor's first visit also helps sort out the serious pros from amateurs just wanting to take a shot at your wallet.

Profit check: According to the National Association of the Remodeling Industry, the top five remodeling projects are kitchens, baths, other interior rooms, additions and window replacement. And Remodeling Online reports that even though the average minor kitchen remodel will cost about $15,000, you'll see a return on that investment of 88 percent. Plus, fixing up that tired bathroom can deliver an 81 percent return if the house is sold within one year from the time the work is completed.

Even if your home improvement budget isn't up for these big projects, smaller ones can also pay big dividends. A new deck or patio, for example, may be the cheapest way to add to your outdoor living space and therefore the most valuable home improvement you can make with the budget and space you have. Replacing kitchen appliances with ones that are Energy Star-rated can reduce utility expenses and help protect the environment. Even something as small as replacing 25 percent of the incandescent light bulbs in your home with compact fluorescents can reduce total electric lighting costs by an amazing 50 percent.

Time check: According to the Joint Center for Housing Studies at Harvard University, the best home improvement projects to tackle depend largely on a home's age as well as personal situations:

  • On average, most new home purchasers typically spend twice as much on home improvements during the first two years in a home as those who do not move. Buyers of homes sold by the household's age 65 or older spend twice as much during the first two years after purchase as those sold by households less than 35 years of age.
  • After the initial spending burst cased by a new home purchase, expenditures move up until a home reaches 25 to 30 years of age, a time when major systems start needing replacement. At this point, annual expenditures peak average around $1,800 before retreating and beginning a new cycle.
  • Households that are increasing in size are more than likely to take on projects that enlarge or reconfigure the living space within a home, such as when needing space for a parent, child or spouse.

Considering all of these elements will help you to choose the best home improvements for your house, allowing you to create and maintain reasonable budgets for the projects you choose and enjoy a great return at sale time.