Home Improvements That Pay You Back

Remodeling and renovations can make a big difference in how fast you sell your house and the return on your investment according to USAA's research.

After years of a tumultuous housing market and a reluctance to spend on home improvement projects, it seems homeowners are now itching to make some changes. The American Express Spending and Saving Tracker reports 70% of homeowners are planning a home-improvement project and expect to spend an average of $3,500.

"Enthusiasm is on the rise," says Dean Herriges, president of the National Association for the Remodeling Industry. "There's definitely some pent-up demand from recent years, but now people are becoming accustomed to the new norms in the economy, and they want to take care of their homes."

Renovations and remodeling can add to your enjoyment of your home, but the best projects are the ones that also pay back your costs if you decide to sell. So before you add a bedroom or finish out your basement, consider the price tag and what it might add to the value of the house.

Kitchens

Typically, kitchens cost the most of all rooms to remodel, but they also are among the home improvements that pay you back the most, according to the Remodeling magazine report.

If resale is your top priority, go for broad appeal.

• When replacing or adding cabinets, use lighter woods and avoid contemporary designs.
• Ask local real estate agents what sells best.
• Stick with features and finishes common to your neighborhood and to the style and age of the house. For instance, don't put granite countertops in a starter home.
• Change out cracked and stained countertops but not necessarily with pricey granite. Less expensive options include ceramic tile and concrete.
• Select up-to-date appliances. If you're on a budget, visit retailers that sell secondhand appliances and those almost as good as new.

Cover Your Renovations 

According to Harvard's Leading Indicator of Remodeling Activity, spending on home renovations is expected to trend upward this year.

If you're among those making improvements to your home, you also may need to upgrade your insurance coverage.

Also make sure your homeowners insurance covers the cost to completely rebuild your home should disaster strike. The cost to rebuild your home may differ significantly from its purchase price or resale value.

Bathrooms

Bathroom improvements can range from subtle updates to grand makeovers. However much you spend, upgrading the bath tends to garner rewards at resale.

"It's very important to keep bathrooms looking good," says Herriges. "Even some small, less expensive things like new sinks, countertops or flooring can give you an immediate return on investment."

A few more quick fixes include:

• Painting cabinet doors and updating hardware.
• Adding stylish new faucets.
• Reglazing worn tub and tiles.
• Replacing older fluorescent lighting fixtures.

Master Suite

A spacious master suite with a sitting nook, a changing area and a closet with built-in organizers can make buyers swoon.

But making the space bigger isn't always better, explains Herriges. "Projects within the existing footprint of the home — renovations, not additions — tend to be better at paying for themselves," he says.

The master bath is a real selling point. Without spending much, plush towels, candles and new cabinet pulls can update the master bath and make it more inviting.

Outdoor Living Areas

If right for your climate, outdoor decks and kitchen areas make great investments.

"Power-washing and restaining a weathered wood deck doesn't cost much and can make a big difference," says Herriges. "As for new decks, those made from synthetic materials require less maintenance and hold up well."

Attics and Basements

The attic might transform into an extra bedroom, an office or a playroom. And finished basements often make great recreation rooms or hobby areas.

But Herriges cautions buyers not to get too specialized if they're planning to sell the house anytime soon. For example, converting the basement to a football-themed man cave might be your dream, but it could have limited appeal among potential buyers.

Choose Upgrades Wisely

Some updates just don't add much in the way of resale value. In the Remodeling report, sunroom additions and home office remodels are near the bottom of the list. That's not to say they're always bad ideas — just make sure you'll have time to enjoy them before selling the home.

The Remodeling report also recommends that homeowners compare their houses to others in the same neighborhood. Projects with potential for high payback include adding a deck to the only house in the neighborhood without one, or a second bathroom in an area where every other home already has two.

Conditions in the local housing market also play a role. "Don't count on making your money back if you make expensive renovations in an area that has a glut of houses for sale," cautions Herriges.

You can help your chances of a financially worthwhile renovation by talking to experienced real estate agents in your area. USAA members can use the Home Improvement Network to find a trustworthy local contractor.