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The HGTV show ‘Love It or Leave It’ features a family who is ready to do something about their living situation, but they haven’t decided what they want to do yet. The show has a designer/renovator who works on upgrading their current home and a realtor who looks for a new home for the family. The showrunners keep the count fairly even of families who choose to stay in the renovated home and families who choose to move to a new home. However, statistics show that 55% of American homeowners would rather renovate their current home than purchase a new one. They would rather keep the home where they have built equity.

What is Home Equity?

Home equity is the difference between the amount you owe on a mortgage and what a home is worth. It is essentially what you OWN in a home. The amount of equity in a house can grow over time as you make payments and the property value increases. 

More technically, home equity is the property’s current market value minus any liens, such as a mortgage, that are attached to a property. You can do a number of things, in addition to making payments, which will increase the amount you OWN. Making improvements/renovations is something that will increase the market value of your property.

The trick is, choosing the most valuable home renovations. In other words, which renovations will build home equity while making your home more beautiful and comfortable to live in? Obviously, anything you update or freshen up in a home will be beneficial, but some updates can actually increase the value of your home. Here is a list of 10 Equity Boosters you will want to consider when planning a home renovation.

 

  1. Curb Appeal
  2. Smart Home Upgrades
  3. Energy-Efficient / Eco-Friendly Upgrades
  4. Add Outdoor Living Spaces
  5. Kitchen Remodel
  6. Bathroom Remodel
  7. New Siding
  8. Finishing Out Additional Spaces
  9. Flooring Upgrades
  10. Painting And Wall Finishes
build home equity, most valuable home renovations

How to Increase Home Value

Whether you are preparing your home for sale or just making it more comfortable, the renovations you choose should build home equity at the same time. Adding value to your home is money well spent, bearing in mind that some of the most valuable home renovations are not visible changes. Looking at #1 on the list: curb appeal is a change which is highly visible and extremely beneficial in terms of market value.

build home equity, most valuable home renovations

#1. Curb Appeal

Curb appeal is the first thing a buyer sees as they drive up, but it is also what a homeowner sees every day when they arrive home. It can be the difference between a potential buyer driving past a run-down house or stopping to look at a well-cared-for house. It can also make a difference between a homeowner arriving home to feel beauty and peace or frustration and added work needed. Curb appeal could include a new front door, a new garage door, neat and updated landscaping, sound roofing, new windows and more.

build home equity, most valuable home renovations

#2 Smart Home Upgrades

Once upon a time features like automated lighting and temperature control, security systems, door cameras and smart locks were only in science fiction movies. Now they are commonplace and will likely be expected in the near future. When researching the system you want to use, be sure you choose one which is transferable to a new homeowner, when and if you sell your home.

Related Post: 5 Practical Steps for Success with Fix and Flips

build home equity, most valuable home renovations

#3 Energy-Efficient / Eco-Friendly Upgrades

This is one of the ‘invisible’ improvements which are a smart investment for the homeowner who wants to know how to increase home values. Everyone is looking for lower energy bills. Consider adding insulation, and upgrading your HVAC with a renewable sourced, eco-friendly and energy-efficient system. Your home will be more comfortable, and will also appeal to environmentally conscious buyers.

build home equity, most valuable home renovations

#4 Add Outdoor Living Spaces

Expand your home’s habitable living spaces by adding a deck, patio or outdoor kitchen. With the rise in ‘work from home’ jobs, adding extra living/working spaces will significantly build home equity. Outdoor upgrades are a great balance of functionality and beauty, making space for entertaining and relaxing, as well as alternative working spaces.

build home equity, most valuable home renovations

#5 Kitchen Remodel

A modern, updated kitchen can be a deal breaker for prospective home buyers. A mid-range remodel is recommended because it yields a higher ROI (96%) than a major remodel with upscale materials (38%). If you want to know how to increase home values, approach your renovations strategically. Focus on updates that appeal to a broad range of potential buyers. This includes replacing outdated cabinetry and countertops, adding new light fixtures and hardware, and installing modern appliances—essentially making cosmetic changes without altering the infrastructure.

Related Post: How to Use Home Equity to Build Wealth

build home equity, most valuable home renovations

#6 Bathroom Remodel

About 25% of realtors recommend a bathroom upgrade before putting a home on the market. This is one of the most valuable home renovations, but like the kitchen remodel, a mid-range redo yields a higher ROI—74% for midrange and 45% for a major redo (changing the layout and using luxe materials). Consider updating your shower and bathtub, installing new tile, light fixtures, and hardware. These mid-range changes can make a big impact on the overall look and feel of your bathroom.

build home equity, most valuable home renovations

#7 Change Out Siding

Siding is also part of curb appeal, but changing out the siding also affects the energy efficiency and the protective layers of the home’s facade, which need to be replaced periodically. Replacing vinyl siding with manufactured stone veneer will elevate the elegance of your exterior and give your home a totally new look plus yielding 153% ROI. Other options are fiber-cement siding and new, updated vinyl siding. 

build home equity, most valuable home renovations

#8 Finishing Out Additional Spaces

If you have an unfinished basement, attic room, unused storage building, etc., consider finishing it out to increase the value of your home. Adding significant living space to your home will always make it more functional and appealing. Also, the extra space can function as an additional revenue stream! Renting out your basement/extra space is a great way to generate cash flow. The extra income can go toward your mortgage or savings for an investment property.

Related Post: How to Use Debt to Build Wealth in Real Estate

build home equity, most valuable home renovations

#9 Flooring Upgrades

Nothing is more discouraging than walking into a pleasant room that has dingy, dirty carpet. Consider replacing old and worn-out carpets with hardwood, tile, or laminate flooring. Not only will these materials add a classy look to your home, but they are durable and low maintenance. Decor styles change frequently, but wood floors are always trending and although it is generally the more expensive of options, it yields 118% ROI while sanding and refinishing hardwood floors yields 147% ROI. Consider carefully when deciding. 

build home equity, most valuable home renovations

#10 Painting and Wall Finishes

Now the question is: how to increase home value for the lowest cost? Easily, painting freshens and cleans up a house for the least amount of money (especially if you do the painting yourself). A fresh coat of paint, whether inside or outside can be a total game-changer. There are also some very interesting new techniques for wall textures that you can look into. Micro-cement is a special type of concrete that can be used for covering tile in bathrooms, on kitchen counters, floors, walls and much more. Researching can be fun!

When you are thinking about renovations, whether for an imminent sale or for your own comfort and enjoyment, consider your budget to ensure you invest in renovations that will bring a significant return on your investment. We recommend getting a professional home appraisal to determine the current value of your home. It is helpful to have a baseline value to gauge exactly how much value you are adding to your home through your chosen renovations. Do your research, find out what buyers are looking for and make reno decisions that will boost the equity in your home. You will be glad you did.

 

For More Information:

Real Estate Workshop-October

Real Estate Masterclass

Strategic Real Estate Investing

 

This post was originally published on February 15, 2023 and has since been updated to serve you with more comprehensive content.

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