How To Increase Home Value: A 4-Step Guide
Miranda Crace6-minute read
October 30, 2020
When it’s time to sell, every homeowner wants to get the most out of their home. Buyers like to see renovations, updated decor and new gadgets during viewings, but which improvements are worth the cost and will deliver the greatest return on investment? This guide collects everything you need to know into four simple steps.
Step 1: Determine Your Goals For Increasing Home Value
Before getting started on home renovations, know when you plan on listing your property. The answer to that will determine where you should focus your energy.
If you want to sell quickly and for top dollar, you’ll need to do quick home improvement projects. These include things like light landscaping or installing updated lighting fixtures.
If you want to focus on building equity and don’t plan to sell for another 10 years, then you may have time to do a major overhaul, such as remodeling the bathroom or installing solar panels.
Step 2: Create A Budget
Once you’ve set a timeline for your sale and decided on the scale of projects, it’s time to create your budget. Determine how much you want to spend before starting any DIY or professional renovation jobs.
Home decor experts say you can expect to spend anywhere from $15 – $60 per square foot on an average renovation project, while kitchen and bathrooms can cost $100 – $250 per square foot. To get the most bang for your buck, consider updating one or two of the most important rooms, such as the bathroom or kitchen.
If you choose to do a major renovation, you’ll need to decide how you’re going to pay for it. Putting such large projects on a credit card isn’t a good idea unless you’re certain you can pay off the balance quickly.
A personal loan may be a better way to help you finance your project. You pay them back in monthly installments and they usually have better interest rates and more flexible repayment options than credit cards.
You might also consider a cash-out refinance, which takes a portion of equity and replaces your mortgage with a larger one worth more than the value of your home. Your lender then gives you a check for the difference.
If you have a $300,000 mortgage on your home and you’ve paid off half of the principal, then you have at least $150,000 available in equity. Opting for a cash-out refinance to cover $20,000 worth of repairs would net you $20,000 in cash and adjust your outstanding mortgage balance to $170,000.
Interest rates are typically lower on a cash-out refinance than on a traditional home equity line of credit or home loan. Even better, if interest rates were higher when you took out your original mortgage, you could secure a much lower rate.
Rocket Mortgage® can help you figure out which loan options will best fit your project and timeline.
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Once your budget is set and you know how much time you want to commit, it’s time to choose your project. In truth, steps 2 and 3 are probably happening in tandem. You can’t plan your budget without first choosing a project or narrowing down different projects at different price points.
Here are some high-return home improvement projects that you might want to consider:
Upgrade Your Interior Paint
If you need a low-cost way to modernize, upgrade and increase home value, look no further than a fresh paint job. Paint is a major draw for buyers, and peeling or outdated interior paint can be a turn-off.
Take a walk through your home and decide which rooms need a fresh coat of paint. Or, if you’ve always wanted to change the color of a room, now is your chance to explore what color palettes are trending and work some magic.
If you only have a few hundred dollars in your budget, focus on painting the kitchen and bathrooms, as these rooms are the most likely to have seen the most wear and tear over time. Having a clean, attractive kitchen and bathroom will go a long way toward impressing potential buyers.
Painting by yourself could take a few days, depending on the square footage you’ll be painting and how much help you have. Expect to spend $20 – $50 per gallon of paint. You can hire a painter to do the work for you for a national average of $917 per room. Expect a return of 1% – 2% for your efforts.
Touch Up Your Landscaping
The exterior of your home is the first thing buyers see. It’s worth the cost and effort to spruce up your curb appeal. Mow the lawn, trim the shrubbery, rake the leaves and touch up the paint on your fence.
Consider planting brightly colored flowers. Low-maintenance flower beds can help your yard look great and catch a buyer’s eye from the road. Pay attention to how your house fits into the neighborhood. If the surrounding homes have gone the extra mile on their landscaping by trimming trees and laying fresh sod, you may want to do so as well.
Doing your own landscaping takes time and effort, but is a more affordable way to improve your home’s value. Expect to spend several hundred dollars on tools, plants, mulch and more. The worse maintained your yard is, the more time and money you’ll have to spend making it look good. If you hire a professional landscaper, you can spend anywhere from a few hundred dollars to tens of thousands of dollars.
Depending on the extent of your landscaping, you may see an increase of 1% – 10% in value.
Modernize Your Bathroom
When deciding on a home, buyers rate bathrooms as some of the most important rooms in the house. Bathrooms are also among the most cost effective to upgrade. Here are some ideas:
- Remove dated wallpaper and replace it with a modern, neutral coat of paint.
- Swap out hardware on drawers, cabinets and closets.
- Replace dated light fixtures and fluorescent lighting with LED fixtures and bulbs.
- Upgrade faucets and showerheads to WaterSense fixtures.
If you’re doing your bathroom upgrades yourself, plan for at least a few days of work. You don’t need to budget for a full remodel to modernize your bathroom. For every $1 spent on bathroom renovations, you can expect to make back $1.71 in home value.
Keep It In The Kitchen
If you want to focus your repairs on just one room, you can’t go wrong with the kitchen. Like the bathroom, a modern, updated kitchen ranks high on millennial home buyers' priority lists.
If you plan to stay in your home for at least a few more years, you’ll have time for some significant kitchen improvements. According to Consumer Reports, spending as little as $5,000 on your kitchen can bring up to 7% back in returns when you sell.
Not sure where to get started? Here are a few areas you can focus on to make your kitchen that much more attractive for buyers:
- Replace old and broken appliances with new, Energy Star-certified models.
- Apply a fresh, neutral coat of paint to the walls and update the backsplash.
- Consider repainting your cabinets and replacing the hardware.
- Install granite countertops, which may cost a bit more than Formica but will appeal to buyers.
Unlike other home improvement projects, you might not want to remodel your kitchen yourself. The average cost for a professional kitchen remodel is $12,961, and renovations can take anywhere from a week to a month to complete. If your budget is lean, consider small upgrades like painting or replacing hardware yourself.
Most people think of their utility bills as something they can’t change. However, new advancements in energy-efficient home additions can lower costs and be a big draw for buyers.
One of the best ways to decrease your home’s environmental impact is with energy-efficient windows, such as Energy Star-certified windows. These can lower your home’s energy costs by up to 12%.
Replacing all the windows in a three-bedroom home can average between $3,000 and $10,000. Unless you plan to live in the home for another decade, you may want to choose a few key windows. Consider upgrading your attic insulation, especially if you’re not going to replace every window.
Need a low-cost way to cut your utility bills? Switch to LED bulbs throughout your home. LED bulbs cast better light than fluorescent bulbs and use much less energy. Plus, they’re available for as little as $5 each and some models can last up to 25 years.
Don’t forget to keep up with your home’s HVAC, plumbing and electrical system maintenance to ensure that your home isn’t wasting energy.
If you’re up for a larger project, installing solar panels on the roof can go a long way toward increasing home value. They’re a highly visible way to inform homebuyers that your property is energy efficient.
Not only do solar panels cut back on electrical bills, but there’s the possibility of selling surplus energy back to the electric company. Installing solar panels is an involved project, , so it’s not advisable unless you’re planning on increasing home value over the long term.
Energy improvements can cost anywhere from $100 to more than $40,000 depending on how green you decide to go. Your improvements can also take as little as an afternoon or require months of work. Go with what best fits your budget and resale goals.
Step 4: Make A Plan
After you choose how you want to upgrade your home, create a plan of attack. First, decide if you need to hire a contractor to get the job done, go the DIY route or do a combination of both.
This decision depends on your skill level, time and the size of the job. For example, you could handle painting a room or two by yourself, but pulling up carpet to install hardwood may be over your head.
If you need to hire a contractor, ask around for recommendations. If you have a real estate agent, they may be able to recommend professionals as well. Shop around for contractors in your area and collect a few estimates before making your decision. Ask potential contractors for samples of their previous work and request plenty of references.
Set a schedule and deadline for your home improvements. Block out hours or days from your calendar and devote them to your projects. This will help keep you on task and on schedule before you list.
Get Financing To Increase Your Home’s Value
There are plenty of ways to improve the value of your home, but you need to set a plan and budget before you take on a project. Decide how much you want to spend and base your project investment on how long you plan to stay in your home. If you want a major return on your money over time, consider renovating your kitchen or installing energy-efficient windows.
No matter what you decide to do, create a safe and scheduled plan before starting your improvements. Choose how you’ll finance your project. Personal loans and cash-out refinances are two options.
Rocket Mortgage® can help you determine which loan option works for you.
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