Top improvements that increase home value based on market data
Not all home improvements are created equally, so how do you choose between remodeling your kitchen or adding wood floors? How much would adding a bedroom or bathroom actually increase your home value?
There’s a lot of opinions on the topic so here is a scientific approach. Opendoor’s Data science team created the home improvement calculator. With this tool, you can data on thousands of recent home sales across twenty major cities to estimate which home improvements add the most value.
Top home improvements that add the most value
These are the top renovation, remodeling, and home improvement projects that increase home values based on Opendoor’s data on thousands of recent home sales. 11 projects were studied and ranked by the average value increase across the cities where Opendoor buys and sell homes. We assume the median home price in each market.
Home Improvement Project | Average Resale Value % | Increase Average $ Resale Increase
1. Add a pool ~ 7.3% ~ $22,000
2. Finish a Basement ~ 6.6% ~ $22,000
3. Add up to a 3rd Bedroom ~ 6.2% ~ $20,000
4. Add a Full Bathroom ~ 5.7% ~ $18,000
5. Add Living Space ~ 5.3% ~ $17,000
6. Full Kitchen Remodel ~ 4.8% ~ $15,000
7. Convert Existing Sq. Ft. to a 2nd or 3rd Bedroom ~ 4.3% ~ $14,000
8. Full Bathroom Remodel ~ 3.7% ~ $11,000
9. Install Hardwood Flooring ~ 3.4% ~ $10,000
10. Add a Half Bathroom ~ 2.9% ~ $9,000
11. Add an Attached Garage ~ 2.2% ~ $7,000
Data represents the average increase in resale value for median-priced homes across all 20 markets currently served by Opendoor. Home price data via the National Association of Realtors (NAR). Opendoor data updated August 2019. *Source Opendoor data
It’s easy to start thinking… “Woah, adding a bedroom could increase my home value 6%, I’m going to add six bedrooms!” Unfortunately, many projects have diminishing returns, meaning the more you add doesn’t mean the more value you gain. The above chart shows the value of doing one remodeling project to the median home in each of our markets.
Ultimately, the amount of value a project adds to your home will depend on the home’s location and current value.
Considering a home improvement project?
We’ll dive into pricing trends for the top 5 home improvements that can increase your home value below.
Add a pool
Finish a basement
Add a bedroom
Add a full bathroom
Add a living space
Will adding a pool increase my home value?
Adding an in-ground swimming pool can add 7.3% to the median home value, according to Opendoor data across 20 cities. This is an estimated dollar increase of about $21,700 at resale.
Top 3 cities to add a pool | Average Resale Value % Increase| Average $ Resale Increase
1. Tampa, FL 10.4% $31,100
2. San Antonio, TX 9.7% $19,450
3. Houston, TX 9.4% $18,750
Adding a pool is a great example of how the value of a project varies based on price and location.
In Southern markets such as Tampa, Jacksonville, and Austin, the higher the home value, the more value a pool can add. The opposite is true in the West Coast markets of Los Angeles and the Inland Empire where adding a pool results in slightly less value as the home price increases.
One reason for the trend could be the high cost of living in West Coast markets. The added expense of maintaining a pool could make homes less desirable to budget-strapped buyers.
How much will finishing a basement increase my home value?
Finishing a basement can increase the median home value by 6.6% based on our data across 20 cities. That’s an estimated dollar increase of $21,786 at resale. In this blog post, finishing a basement is defined as 700 square feet of basement space with added insulation, drywall, lighting, and an emergency escape window or door.
Top 3 cities to finish a basement | Average Resale Value % Increase | Average $ Resale Increase
1. Portland, OR 10.6% $42,250
2. Nashville, TN 8.7% $26,100
3. Raleigh, NC 7.3% $22,000
When rented out to vacationers or a long-term tenant, a finished basement can also generate income, making it a very attractive amenity for buyers. However, we found its value to be highly location-specific.
For example, Portland has many historical Victorian and craftsman homes, which may be why the coveted basement hang-out has such a large increase there. In fact, it has one of the largest increases among lower-priced homes we observed in our data, adding north of 15%!
Should I add a bedroom to my home?
Based on our data, we found that, all other things being equal, your home value has the highest increase when adding a second or third bedroom. The data also shows that adding up to a 3rd bedroom can have an average increase of 6.2% for the median home. That’s an estimated dollar increase of about $19,813.
In this post this project is defined as adding a 2nd or 3rd bedroom that increases the above-ground living space of your home by at least 150 square feet. Typically bedrooms must have a closet, window, and door.
Top 3 cities to add a bedroom | Average Resale Value % Increase | Average $ Resale Increase
1. Los Angeles, CA 8.4% $50,100
2. Orlando, FL 7.5% $22,350
3. Jacksonville, FL 7.2% $14,450
With an average price increase of more than $50,000, adding up to a third bedroom to a median-priced home in Los Angeles results in the highest value gain of all the remodeling projects studied.
It’s not just that square footage comes at a premium since adding living space generates more value in Tucson and Sacramento than in L.A. It’s more likely that adding a bedroom is particularly valuable in denser metros. For example, Los Angeles has one of the highest number of persons per household in the country.
Should I add another bathroom to my home?
According to Opendoor’s data, adding a full bathroom can increase the median home value by 5.7% on average, which is a dollar increase of about $17,638. We define adding a full bathroom as converting existing space to include a shower, sink, and toilet. We assume no change to total square feet.
Top 3 cities to add a bathroom | Average Resale Value % Increase | Average $ Resale Increase
1. Atlanta, GA 8.4% $25,450
2. Sacramento, CA 7.8% $23,450
3. Minneapolis, MN 7.7% $23,000
Between adding an additional full bath, putting in a half bath for guests, or just dressing up an existing space, it comes as no surprise that adding a full bathroom creates the most resale value on average.
What might surprise you is that remodeling an existing bathroom creates nearly as much value as converting one from scratch in many metros.
The difference in the resale value added between a full bath conversion and a full bath remodel in Minneapolis, for example, is a few thousand dollars. In Atlanta, however, adding an entirely new full bathroom can have a higher increase than adding a pool or a bedroom.
How to choose home improvements with the best ROI
It’s important to remember that “adding value” is not the same as return on investment (ROI). Understanding how much a project could potentially add to your home’s resale value is the first step in determining whether or not the investment will pay off. The second step is understanding the cost.
In Phoenix a kitchen remodel can add $23,000, but the median cost of renovating a kitchen is about $15,000, according to the most recent American Housing Survey. Local costs will vary, but in the context of ROI, this means the net return on remodeling a kitchen in Phoenix would be estimated at just over $8,000.
How to calculate the ROI for a kitchen remodel
Home value before remodel $200,000
Home value after remodel $223,000 (+$23,000)
Cost of remodeling a kitchen-$15,000
Return on Investment (ROI) $8,000 (+53%)
Estimating the value-added before taking on a project makes it easier to negotiate with contractors and to understand whether or not it pays to invest your time and money.
Even if the ROI of a project is negative—as it might be for more expensive homes—you’ll also want to consider how much you’ll enjoy the upgrade yourself and how soon you plan to sell, whether that’s weeks or years away.
While some homeowners want to maximize ROI, others may prefer to increase the quality of life in their home.
Takeaways
Your location and current home value are important factors to consider when deciding which project will create the most resale value.
While remodeling tends to create more value among less expensive properties, some projects—like adding a pool in Austin or an attached garage in Tampa—actually produce more value for higher-priced homes.
Don’t forget that the value added is not the same as ROI. Subtract the cost of a project from the expected home value increase to gauge whether or not it will result in a net gain.
*Source - Opendoor study August 2019
