Boost your home’s value (and your everyday enjoyment) with these renovations

If you’ve decided to stay in your home a little longer than you initially planned at purchase — the market these days! — you may be considering a home renovation. Perhaps you need a little more square footage or simply want to upgrade the look of key spaces. Either way, investing in your home can add value. But how much value will it add, and will you be able to recoup your investment when you eventually sell? Here are the improvements that are worth it.

Will adding square footage increase your home’s value?

At the most basic level, an addition can add value to your home because home prices are calculated by cost per square foot. But there’s one big variable: Your neighborhood.

Real estate agent Tom Hughes with Compass says that a home addition must “make sense and be homogenous in the neighborhood, if at all possible.” Planning an addition that is exponentially larger than all of the other homes in your neighborhood isn’t a good idea. The best place to be is in the middle, Hughes says, with plenty of larger and smaller homes in your neighborhood for comparison.

While your city will regulate how much of your lot you can build on (a factor known as lot coverage), adding on so much that you have essentially no yard left is also a risk. “Everyone wants a yard,” says Hughes.

Do certain room additions add more value than others?

When buyers search for homes, the bedroom and bathroom count is often one of their most important criteria — and having more bedrooms and bathrooms opens you up to a wider pool of buyers whenever you do choose to sell. But deciding whether to add a bedroom and bathroom or something like a secondary living room is largely subjective. It depends on how you plan to use your house.

The key is creating usable, functional space — and this is really more of a marker of the quality of the renovation than the type of room you add on. Finishing out an attic and adding air conditioning may add square footage, but if that space isn’t functional or the ceiling is too low for comfort, its value is diminished. “You need to make sure it’s good square footage, [that] it’s a seamless addition,” says Hughes. “You want it to be where you can’t tell where the old part stops and the new part begins.”

An attic renovation may seem like an easy way to add a bedroom or even an upstairs office or playroom, but it’s rarely as simple as it seems. “If we’re going to add on a second floor, we [usually] cannot work with the existing attic,” says Chris Black, president and owner of Blackline Renovations. “A lot of people will walk up there and say, ‘Oh, there’s so much space up here; look how high the roofline is.’ [But] it’s not.” Structure must be added to fully support a floor and the roof typically must be raised, too.

Hughes notes trends in buyers preferences, like how remote work has made home offices a desirable feature. But the difference between a home office and a bedroom is simply the addition of a closet, so you may consider just adding a bedroom and using it as a home office. And it can snowball from there. “If you’re going to add on a bedroom, [you] might as well add a bathroom,” Hughes says.

Whichever type of room you decide to add on, Black says it’s worth it to add storage space in your design plan, especially because it’s typically low cost if you’re already renovating. “[Storage is] undervalued and everyone wants it,” he says, noting that this is especially true in neighborhoods with older homes.

Does adding a garage or guest house increase value?

“I always value [a secondary structure] at about a half of what the square footage of air-conditioned space in a house would give you,” says Black, noting that while the addition of a new structure or renovated garage can have benefits, it’s not a one-for-one comparison to the main home. “It’s not going to give you the same return on value that square footage in the house is going to give you.”

Plus, a new garage, guest house or addition over an existing garage is going to cost you just as much as adding onto your main house. “A lot of people ask about [these renovations] and very few people move forward,” Black adds.

Does an outdoor living space add value?

Hughes has observed that buyers do value outdoor living spaces, particularly covered patios. “It’s almost expected now,” he says. Creating an appealing space outside could add value down the line. Hughes calls out seating areas, cooling features and built-in televisions as especially attractive elements.

Do cosmetic updates add value?

“Statistically, you get most of your money back on kitchens and primary bathrooms,” says Hughes. “Those are two incredibly important rooms that people look at when purchasing a home. It’s a good return on investment for those two, long-term.”

But still, many of these changes are subjective, and their precise value depends on a future buyer’s style matching your own. And if you’re not planning to sell for a decade, it’s possible that the changes you make now won’t be fashionable then.

Black says it’s very difficult to determine exactly how much value an interior cosmetic update will add to a home. “It’s easy to put a lot of money into something that doesn’t add value,” Black says. “No one’s going to pay more for newly painted walls or a refinished floor.” Instead, those updates are part of the baseline for listing your home — ensuring you don’t take a knock on offers because of those relatively minor issues.

But just because an update might not recoup all of its cost in the long run doesn’t mean you should skip it. “If it’s in your budget to make improvements to your home, do it, enjoy it,” says Hughes. “People will do it at the last minute, right before they list, and someone else gets to enjoy it.”

How to calculate if your home improvements will recoup their value

When Black works with clients who are adding square footage, he determines what the existing house will be worth for one to 10 years after the improvements. This number is compared to the cost of the addition to determine how long it will take a homeowner to recoup the value by selling the property. “The majority of jobs that we do where they add square footage, you’re underwater for a year, maybe two years, depending on how you finance it,” says Black, noting that home prices will go up by the amount of square footage added plus the appreciation of the home year-over-year. Many homes, he says, appreciate 5-10% each year. “The longer you’re in there, the better.”

But it’s important to know that this comparison is assessing the value of the house versus what the owner pays into the house by making improvements. Market changes, buyer preferences and a host of other variables will impact the ultimate value of your home down the line.

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