Boosting Your Home’s Value: Top Renovations That Pay Off

Purchasing your home is one of the biggest investments you’ll ever make. Whether you’re planning to sell in the future or simply want to make your home the envy of the neighborhood, increasing its value can be both rewarding and fun. By focusing on renovations that offer a high return on investment (ROI), you can ensure that your efforts pay off in the long run.

Ready to dive into the world of home improvements? Grab your toolbelt (or your contractor’s phone number), because we’re about to explore the upgrades that give you the most bang for your buck—and how to finance them.

What Is ROI?

Return on Investment (ROI) evaluates the efficiency of an investment. In real estate, ROI measures the profitability of a property investment by comparing the net profit to the initial cost. The formula to calculate ROI is:

ROI = (Net Profit / Total Cost of Investment) x 100

For example, if you spent $20,000 on a kitchen remodel and it increased your home’s value by $30,000, your net profit would be $10,000 ($30,000 - $20,000). So, the ROI would be:

ROI = ($10,000 / $20,000) x 100 = 50%

How Property Value Works

Property value is determined by various factors, including location, size, condition, and market trends. Appraisers assess these factors along with recent sales of comparable properties to estimate a home's market value. Improvements and renovations can significantly impact this value, making it crucial to choose projects with high ROI.

Top Home Improvements to Raise Property Value

Let’s start with the heavy hitters—projects that not only transform your space but also add serious value to your property. According to a 2023 Cost vs. Value Report and the National Association of Realtors, these home improvements top the charts:

1. Garage Door Replacement: Believe it or not, one of the best ways to increase your home’s value is by replacing your garage door. According to the 2023 Cost vs. Value Report, a new garage door can recoup an impressive 102.7% of its cost. This upgrade not only enhances curb appeal but also improves security and functionality. It’s a win-win!
2. Kitchen Remodel: The kitchen is often considered the heart of the home, and a well-executed remodel can significantly boost your property’s value. Homeowners can expect to recoup around 67% of their investment on a midrange kitchen remodel, and up to 80% for a minor kitchen remodel. Focus on updating countertops, cabinets, and appliances to create a modern and functional space that buyers will love. In fact, even a fresh coat of paint can make a massive difference.
3. Bathroom Renovation: A stylish and updated bathroom can make a big difference in your home’s appeal. Renovating a bathroom typically recoups about 71% of the cost. Consider adding new fixtures, fresh tiles, and improved lighting to create a spa-like atmosphere that will attract potential buyers, or just make your mornings a little more luxurious.
4. New Wood Flooring: Refinishing or installing new wood flooring is another high-ROI project. The National Association of Realtors found that refinishing hardwood floors can recover 147% of the cost, while new wood flooring can recoup 118%. Wood floors add a touch of elegance and are highly desirable among buyers.
5. Energy-Efficient Upgrades: Incorporating energy-efficient features like new windows (70-80%), insulation (100%), and solar panels can not only save you money on utility bills but also increase your home’s value. These upgrades are increasingly popular as buyers look for homes that are both eco-friendly and cost-effective.
6. Exterior Improvements: First impressions matter, and exterior improvements can significantly boost your home's curb appeal. Projects like new roofing (100%), updated siding (89%), and fresh paint (55%) can recoup a substantial portion of their costs. The 2023 Cost vs. Value Report highlights that exterior projects often yield higher returns compared to interior remodels.
7. Home Office Addition: With the rise of remote work, having a dedicated home office has become a major selling point. Converting an existing space or adding a new one can attract buyers who need a functional workspace. This trend is expected to continue growing, making it a smart investment for the future.
8. Outdoor Living Spaces: Creating outdoor living spaces like decks, patios, and landscaped gardens can enhance your home's appeal and provide additional areas for relaxation and entertainment. These spaces are especially attractive to buyers looking for a home that offers both indoor and outdoor living options.

How to Fund Your Dream Projects

Home improvements don’t just happen—they take planning, budgeting, and, of course, funding. That’s where a Home Equity Line of Credit (HELOC) from MidWestOne Bank comes in handy.

A HELOC lets you tap into your home’s equity (the difference between what your home is worth and what you owe on it) to finance renovations. Here’s why it’s a fantastic option:

• Low Rates: Compared to credit cards or personal loans, HELOCs often have lower interest rates.
• Flexible Borrowing: Borrow what you need when you need it—perfect for multi-phase projects.
• Tax Benefits: Interest on a HELOC may be tax-deductible if used for qualified home improvements (consult your tax advisor).

Learn more about MidWestOne Bank’s HELOC options here.

4 Tips for Maximizing Your ROI

Home improvements don’t have to be all business. Here are some fun ways to make your projects both exciting and value-boosting:

1. Think Bold, But Not Too Bold: A pop of color on your front door? Yes! A leopard-print kitchen? Maybe not. Balance trendy updates with timeless designs to appeal to future buyers.
2. Sweat Equity Pays Off: Tackle small projects yourself, like painting walls or updating hardware. You’ll save money and get bragging rights for your handiwork.
3. Go Green (Literally): Landscaping isn’t just for curb appeal—it's also therapeutic! Planting trees or creating a garden can increase value and give you a green thumb to show off.
4. Make It Smart: Adding smart home features, like a thermostat or security system, is a modern touch that appeals to tech-savvy buyers. Plus, it’s just plain cool.

Improve Your Home’s Value Today

Investing in the right home improvements can significantly boost your property's value and make it more attractive to potential buyers. From garage door replacements to kitchen remodels, these projects offer some of the highest returns on investment. Understanding ROI and property value can help you make informed decisions and maximize your home's potential. And with financing options like a HELOC from MidWestOne Bank, you can turn your renovation dreams into reality.