The 9 Best Ways to Add Value to Your Home

By John Persinos
December 14, 2010

I started the list below as a synthesis of information I've gleaned from a number of recent conversations with real estate experts and agents.

But before we get started, let's review a few construction caveats.

First, you obviously want to do a quality job, but if your chief aim is to boost the value of your home, keep everything in perspective.

It's easy to spend six figures on a new space-age kitchen, but unless you live in a neighborhood of million-dollar mansions, you'll never recoup your cost. Here's the bottom line: Your home improvement project must jive with the economic realities of your neighborhood.

Second, if the goal is boosting the value of your home for eventual re-sale and profit, you must make decisions with your head, as an investor, not with your heart. That doesn't mean using cheap materials or cutting corners, because buyers will spot cut-rate work and you wouldn't want to live with chintzy construction. But it does mean thinking twice about ultra-upscale touches that are tempting but not completely necessary.

[Many homeowners (wrongly) think that using top-of-the-line materials is a guaranteed way to boost their home value. For the truth behind more renovation wive's tales, check out our slideshow Adding Value to Your Home: Nine Changes You Think Add Value, but Don't.]

A final note: If you choose to go forward with any of these nine projects, it's absolutely crucial to do your homework and find a contractor who comes recommended and bonded. Horror stories abound of fly-by-night contractors who do shoddy work, bust the budget and take forever to finish. Get recommendations from friends whom you trust and, once you've chosen a contractor, get everything in writing.

Without further ado, here are nine time-tested projects that homeowners tend to profit from down the road:
 

1) Adding a Bathroom

Housing surveys show that bathrooms exert the biggest effect on a home's value. The greater the disparity between the number of bedrooms and bathrooms in your home, the more that adding a new bathroom will leverage the costs of your improvement. If your budget is tight, consider adding a half bath, which still does the trick. Also, old and rusty fixtures never look good to potential buyers. If your bathroom looks tired, consider a full-scale renovation (or at least a good sprucing-up).

2) Remodeling the Kitchen

Kitchens are high on the list, too. However, remember not to go too crazy on the ultra-upscale finishes or imported Italian tilework. Unless you're Wolfgang Puck and cooking is your undying passion, it's unwise from an investment standpoint to turn your kitchen into a work of art worthy of a TV show set.

#3) Finishing the Basement

Basements are some of the most overlooked rooms out there. A lot are plain, empty, unused spaces that are rarely visited. So why not take advantage of all that extra space? One of the latest renovation trends has been transforming dusty basements into inviting entertainment areas. If you live in a flood plain, real estate agents and builders recommend that you also install an automatic sump pump and, instead of carpeting, lay down mold-proof ceramic tiles.

4) Upscale Aluminum Siding

Instead of cheap-looking siding that makes your house look like a tin can, there are many types of siding on the market that remarkably resemble real wood. Aluminum siding also conveys insulation properties and obviates the need for constant painting.

5) Adding a Wooden Deck

Prospective buyers love to imagine themselves on a deck, enjoying cocktails and barbecuing in the blue-and-grey of twilight. However, before you add a deck, scrutinize your property tax provisions. Certain expensive neighborhoods might sock you with additional property taxes because of your deck, thereby negating the investment. This caveat also applies to second stories and garages.

6) Replacing Aging or Damaged Windows

This is a good move, not just for aesthetic reasons. Old windows can leak heat and let in cold ai Indeed, under current IRS rules, you can claim up to a $1,500 credit, within a single tax year, if you install energy efficient windows.

#-ad_banner_2-#7) Renovating an Attic into a Bedroom

Like basements, attics are another great example of forgotten space just going to waste. If you've got a generous amount of room in your attic, consider making it into an additional bedroom. This is a cost-effective way to add a new room, which appeals to families with children. It also makes your home more energy efficient, because bedrooms must be insulated.

8) Adding a Second Story

This is a big project. Check all of the building codes and make sure you have a reputable contractor. Also check your zoning laws and any local historic designations that might get in your way. And don’t forget, as soon as you seek that building permit, the local authorities might see fit to jack up your property taxes. And finally, keep an addition within the perspective of your neighborhood. Enlarging your home typically pays off, but not if the surrounding dwellings are more modest. Otherwise, it makes your house look out of place, as if it's on steroids.

9) Adding a Garage

This especially makes sense if no garage exists. Many home buyers have at least one car, and even if they don't, agarage can serve as a great place to store that unsightly lawn mower taking up room in the yard. As with adding a second bathroom, this pays off if most homes in your neighborhood already have garages.