7 Home Renovations That Could Help or Hurt Your Home’s Value (Depending on Where You Live)
According to data from the Joint Center for Housing Studies of Harvard University (JCHS) Leading Indicator of Remodeling Activity (LIRA), American homeowners spent $463 billion on renovations in the year’s first quarter. It’s also worth mentioning that, per Houzz data, over half (51%) of those who renovated their homes in 2023 spent $25,000 or more on the project. While particular home renovations can increase a home’s potential selling price, some upgrades can decrease its value depending on the location.
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This is why we will break down home renovations that could either increase or decrease your home’s value and share advice on what to consider before beginning a specific home-related project.
Home Renovations That Could Either Increase or Decrease the Resale Value
What are home renovations that could help or hurt your home’s value depending on where you live?
Adding a Swimming Pool
“In states like Florida or Arizona, where outdoor living is a way of life, adding a pool can significantly enhance a home’s value and attract more buyers,” said Alex Shekhtman, an experienced mortgage broker and founder of LBC Mortgage. “But in colder regions where pools can only be used a few months of the year, that same addition might not only fail to add value but could also be seen as a costly burden for future buyers.”
According to HomeAdvisor data, the national average price for building a pool is $41,606, so you’ll want to run the numbers before making this investment. While this may be an investment worth considering in some locations, not all potential homebuyers would be interested in a swimming pool in colder climates where it wouldn’t be used much.
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Secured Outdoor Spaces
“Adding a patio, an outdoor kitchen, or a deck will often increase your home’s appeal because potential buyers are picturing themselves spending time outside year-round,” Shekhtman said. “In warm climates, the outdoor space is almost as important as the indoor space.”
Unfortunately, it’s worth pointing out that his same logic wouldn’t apply in a location with harsh winters as there may not be much use for an outdoor space for the majority of the year.
Adding Energy Efficient Products
“In colder climates, buyers are more interested in features that help with energy efficiency — new windows, improved insulation, and upgraded heating systems are valued because they directly affect comfort and energy bills during harsh winters,” Shekhtman said.
These same energy-efficient products and renovations wouldn’t hold the same value in a warmer climate where the focus would be on enhancing the outdoor space instead of ensuring the house stays warmer.
Turning Your Garage Into a Home Gym
Shekhtman noted that it can be tempting to convert your garage into a home gym, but if you’re considering selling soon, these highly personalized changes can work against you. According to HomeAdvisor, if you wanted to remodel your garage into a home gym, you could spend anywhere from $5,730 to $24,140, excluding the equipment.
Extreme Customization
Shekhtman stated that people often overlook the balance between personalization and resale value. If you plan to stay in your home for a long time, you have more freedom to customize things to your taste, but spending money on upgrades that excite you may not increase the resale value.
Shekhtman added, “Future buyers may not share your vision, and what you see as a unique selling point could be viewed as a potential renovation project by them. It’s critical to keep the next buyer in mind if resale is on your horizon.”
Extravagant Luxuries
According to Shekhtman, buyers in luxury markets are willing to pay a premium for things like chef’s kitchens, spa-like bathrooms or high-tech home systems. However, in a more affordable market, those same upgrades can be overkill, and you might not see a strong return on investment. You may even struggle to find a buyer for your home when you list.
Shekhtman advised that in more affordable markets, you’re better off focusing on basics like fresh paint, updated fixtures or a modernized bathroom, which can go much further in terms of adding value.
Building an Accessory Dwelling Unit (ADU) on Your Property
“Unlike renovations that may add value only in specific regions (like swimming pools in warmer climates), ADUs offer consistent benefits regardless of location,” said Sean Phillips, an architect and the founder of Otto ADU. “Essentially, these are self-contained tiny homes that you can add to your property — like converting your garage into an accessory suite or building a standalone unit in your backyard.”
Based on data from Angi, you can expect to pay an average price of $180,000 if you want to install an ADU on your property, which is a significant amount of capital to allocate to a home upgrade.
Phillips added, “The universal need for additional, flexible living space makes an ADU a wise investment in any housing market.”
While there are more scenarios where an ADU will help your home’s value, you have to consider that not all homebuyers may share the passion for this additional unit. Also, it’s worth pointing out that not all states allow ADUs or short-term rentals, so you could face potential issues if you don’t have the proper permits. A potential homebuyer could also see this added property as a burden if they don’t want additional space to maintain.
How To Tell If a Home Renovation Is a Good Idea
“It’s all about context — understanding what works in your area is crucial,” Shekhtman said.
Before deciding on a renovation, he also noted that you should ask yourself if it adds value based on where you live. You may want to start by looking into similar listings to see what types of features are attractive to homebuyers so that you don’t spend a significant amount of money on a home renovation project that could hurt you in the future.
Shekhtman concluded, “Ultimately, the smartest renovations are those that align with both your local market’s expectations and the long-term trends in your area.”
The goal should be to strike a balance between upgrading wisely to add value to your property and avoiding the temptation to over-customize in areas that won’t yield a high return.
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This article originally appeared on GOBankingRates.com: 7 Home Renovations That Could Help or Hurt Your Home’s Value (Depending on Where You Live)
