8 Ways to Increase Your Home Value

Every homeowner wants to see their home value increase. If you plan to move, home price appreciation gives you the chance to sell at a nice profit. If you stay, higher home values give you more equity, which you can utilize to fund home improvements through a home equity loan or cash-out refinance.

How to increase home value

Property values increase over time based on the housing market, comparative sales in the area, and your home’s condition. If you want to try increasing your home value at a faster rate than relying on the market alone, there are ways to take a more proactive approach.

Bear in mind that while these strategies can potentially increase your home’s value, they may not offer a positive return on your investment, depending on the project and your local market.

1. Increase your square footage

Increasing your home’s square footage may increase its value, but it depends on where you add space and how useful it is.

Here are some of the more valuable options:

• Accessory dwelling unit (ADU): Think of an ADU as a small second house on your property. At a minimum, it should have electricity, plumbing, a kitchenette, a bathroom, and a place to sleep. A space like this can be used as a guest house, extra living space for a multigenerational household, an office, or an income property.
• Finished basement: Finishing your basement can double your home’s usable square footage. It can offer a place for guests to stay, children to play, adults to work, or friends to hang out.
• Finished attic: Finishing your attic can have similar benefits to finishing your basement. However, you may not gain as much usable space due to ductwork and ceiling height limitations. Also, keeping this space comfortably cool may be a challenge in the summer.
• Bedroom addition: Adding a master suite or increasing the number of bedrooms to be in line with what homebuyers want in your area can increase your home’s value.
• Bathroom addition: If your bathrooms are small or few — especially if you only have a single bathroom — an addition may be worth the expense. 

One major downside to more square footage is increased utility and maintenance costs. If you live in a neighborhood that has more starter homes, these hefty costs could make your home less appealing to potential buyers.

2. Add curb appeal

Your home’s exterior is your first chance to delight prospective buyers. Perhaps that’s why projects that increase curb appeal often have the greatest return on investment.

Some curb appeal projects with a typically high return on investment include adding stone veneer, replacing the front door, replacing the garage door, replacing siding, and replacing windows.

3. Enhance your kitchen

Even people who don’t cook enjoy an attractive kitchen, especially in homes with open floor plans. When guests come over, they often congregate in the kitchen, so even if you’re only serving pizza and beer, you’ll want it to look nice.

A complete kitchen remodel typically does not increase your home’s value by nearly as much as you spend on it.

If your main reason for enhancing your kitchen is to help your home sell, talk to an experienced local agent about the features that are most desirable to buyers so you can spend your dollars effectively.

4. Update your bathrooms

As with a kitchen upgrade, you’ll spend more on a significant remodel than you’ll get back in resale value, but even smaller updates can make a difference.

Replacing plumbing fixtures, lighting, towel bars, and other hardware are only part of a bathroom update. Repair wall cracks, regrout tile, and replace old caulking around the tub and cabinets to give your bathroom a clean, fresh look.

5. Make your home energy efficient

An energy-efficient home can be a great idea, and it will surely appeal to buyers because you’ve already spent the big bucks. They reap nothing but benefits from lower energy costs and a more comfortable home.

But in terms of getting a return on your investment, as well as reducing your environmental impact, you need to calculate the trade-offs carefully. The remodeling process can create substantial waste unless you properly recycle or rehome old items. The most environmentally friendly option may be to use and maintain what you have until it wears out.

There are also tax credits available for certain energy-efficient projects that can reimburse you up to $3,200 per year. Projects such as replacing a heat pump, switching to efficient windows, or conducting a home energy audit may be eligible if they meet requirements laid out by the IRS.

6. Add bedrooms

Building codes and local customs determine what room needs to legally be considered a bedroom. In addition to a closet, a bedroom might need to be a certain size, have a door and window, be above ground, and have walls or a ceiling of a certain height. However, if you have a bonus room or office, adding a closet and converting it to a bedroom can increase the value of your home.

It’s important to note that creating a bedroom can also increase your property tax. For example, say you convert an attic that’s not currently included in your home’s square footage for your tax assessment into a bedroom. The bedroom would be included in future tax assessments, and as a result, your property tax is likely to increase based on the new square footage.

7. Have your home inspected

A home inspection from a licensed inspector will alert you to maintenance issues you need to address to protect your home’s value. Maintaining the overall health of your home may not directly increase its value, but it can prevent your property from losing value. Here are some of the problems a professional inspection will reveal:

• Roof damage
• Faulty electrical system
• Plumbing leaks
• Wood-boring pest infestation
• Foundation and chimney damage
• Failing or obsolete equipment, such as a hot water heater

Addressing maintenance issues doesn’t directly increase the value of your home because home valuations generally assume structures, systems, and equipment are in good repair. However, these fixes keep deferred maintenance from reducing your home’s value down the road, and repairs and replacements can make your home compare more favorably to similar homes.

Consider updating parts of your home to be low-maintenance. Reducing the amount of maintenance required can save you time and money. It can also make your home more appealing for future buyers. 

8. Paint the interior

Nothing freshens up a home as quickly or inexpensively as new paint. Whether you do it yourself or hire a pro will depend on the condition of your walls and trim — and your skill level.

The more dings and uneven textures your walls, trim, and ceilings have, the more you need a professional painter to achieve a quality result. You might also want to call an expert if you have cracks, papered walls, old paint that might be lead-based, and drastically different colors than you’ve chosen for the new paint.

Crisp whites and soft neutrals like gray and beige — or the currently popular “greige,” which combines the two — are your best bets to get the most value out of a paint job.

Figuring out your home value

Knowing how much your home is worth can help you make important financial decisions such as whether to refinance, apply for a home equity loan, sell, or spend money on upgrades. Here’s how to figure out your home’s market value:

Through an online home value estimator

Home value estimators — also known as automated valuation models or AVMs — from real estate websites can give you an idea of how much your home is worth:

• Zillow uses a combination of public and user-submitted data to calculate an estimate of your home’s value.
• Redfin uses data from the Multiple Listing Service, an agent database of properties for sale, to estimate how much homes are worth.
• Trulia uses public and agent-reported data to create an estimate of a home’s value.

These sources have limitations, however. They’re only as good as the data they are based on, and sometimes that data is inaccurate or incomplete.

Areas with few homes or unique homes also make it hard to generate a value for one home based on others in a similar location. Sometimes, a home’s ownership rarely changes in an area, and there aren’t comparable sales to generate estimates.

Through a home appraisal

A home appraisal is a formal, professional opinion of how much your home is worth. Lenders often rely on home appraisals when you apply for a mortgage and they need to establish your home’s value.

Since a home appraisal costs several hundred dollars, you won’t want to order one until you start working with a lender. Your lender can tell you if your credit score and debt-to-income ratio are high enough that it makes sense to move forward.

How much do homes increase in value per year?

If you’ve been watching the real estate market over the last 10 years, you may have an unrealistic idea about how much home values normally increase. Nationwide, home values increased by about 4% percent per year from 1996 through 2024. 

Price increases can spike in areas that are experiencing housing shortages, driving up prices for both rental properties and owner-occupied homes.

Historically low mortgage rates have also fueled demand for homeownership. Low interest rates temper the impact of higher home prices a bit, and vice versa, for anyone using a mortgage to buy a home.

Further, real estate values are highly localized. It doesn’t matter what’s happening with home prices nationwide; it matters what’s happening in the neighborhoods where you are trying to buy or sell.

How to pay for improvements that increase home value

You have multiple options for financing home improvements. Here are loans to consider if you need additional funds:

• Cash-out refinance: This is a better option if you can get a lower interest rate. Try to find the best refinance rates.
• Personal loan: You might take out a personal loan if you need cash fast, but be aware that the interest rate on unsecured loans is often higher than it is on loans that have collateral, such as a mortgage. 
• Home equity loan: Consider this option if you need a lump sum but don’t want to refinance. Learn more about home equity loans.
• Home equity line of credit (HELOC): Instead of borrowing a lump sum, you can use this option to pay for a series of projects over time. Learn more about HELOCs.
• Credit card: A credit card could benefit you if it offers a 0% introductory APR. 

Cash-out refinance

With a cash-out refinance, you take out a new mortgage that’s larger than your existing one. The new loan pays off that mortgage, and the excess — minus the loan’s closing costs — goes into your bank account to use however you want.

Home equity loan

A home equity loan allows you to borrow a lump sum based on the difference between what your home is worth and what you owe. You can usually borrow up to 80% of your equity, sometimes more depending on the lender and your willingness to pay private mortgage insurance.

If your house is worth $300,000 and you owe $200,000 on your mortgage, your home’s equity is $100,000, or about 33%.

HELOC

A HELOC gives you a line of credit to draw upon as needed. If you’re doing a series of home improvement projects over a longer time, a HELOC may save you money compared to a home equity loan.

The initial interest rate is often lower than a home equity loan rate but higher than a first mortgage rate. The rate is variable, so it may go up in the future.

Personal loan

A personal loan is an unsecured loan that you can use however you want. The amount you can borrow is based on your ability to repay the loan, and your interest rate is based on your credit score.

If you see a loan advertised as a home improvement loan, it’s probably just a personal loan.

Credit card

Similar to a personal loan, you can use a credit card to buy almost anything. Your credit line will be based primarily on your income, and your interest rate will be based on your credit score.

Daria Uhlig contributed to the reporting for this article.