Top improvements that increase home value based on market data

August 29, 2019 — Written by Jeffery Marino & Joe Gomez

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 we took a scientific approach. Our data science team created the home improvement calculator. With this tool, you can use our data on thousands of recent home sales across twenty major cities to estimate which home improvements add the most value.

Try the calculator. It’s one of the only tools based on actual home sale data.

Our home improvement calculator is powered by the proprietary data model Opendoor uses to make competitive, all-cash offers on homes. If we don’t have data for your city yet, there are plenty of useful insights you can apply more generally.

Read on or click the links below to jump ahead:

Understanding the data behind home improvements

When we look at our data, we can see that the value of making a home improvement varies significantly by two dimensions: home value and location.

Adding value depends on your current home value

In general, remodeling a lower-priced home has a bigger percentage increase on the home’s value than remodeling a higher-priced home. Remodeling a kitchen is a great example.

Based on our data, if you remodel a kitchen in Denver and your home value is less than $500,000, you’d see an average increase of about 6%. The same project for a more expensive home would have an average increase of about half, 3%.

Why the difference? It could be because the value of a home’s features follows the same principles of supply and demand. If fewer homes at lower price points have upgraded features, then larger remodeling projects like adding wood floors or updating a kitchen or bathroom make the home stand out.

add wood floors

However, expensive homes have remodeling potential, too. Across many cities our data show that projects like adding a bedroom, adding living space, or adding a pool have a relatively higher increase on more expensive homes than other projects, but of course, it depends on the market.

Explore the chart below to see how home improvement values can change at different home price tiers:

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Home improvement value is all about location

Let’s look at finishing a basement as an example. This project adds a lot more to your resale value in Portland than in any other market. This is a unique quirk in the Portland market where there happens to be strong demand for extra basement space, much more than say Dallas or Atlanta.

The map below shows how the value added by a home improvement project varies based on the location.

There are obvious regional trends like adding a pool in Phoenix, Tampa, and Las Vegas versus Minneapolis, but check out adding a full bathroom in the Southeast, and maybe think carefully before remodeling your kitchen in those markets.

See how Opendoor calculates your home value to make a competitive, all-cash offer

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. We studied 11 projects and ranked them by the average value increase across the cities where we buy 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. By referencing Opendoor’s home improvement data, you agree to cite Opendoor as the source and link back to this page.

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 price (as we explained above). We recommend using our home improvement calculator to get a more precise view of the data since you’ll be able to select your city and home value range.

If you’re interested in some of the more general trends, we’ll dive into the top 5 projects below. Jump ahead to learn more about a project that interests you:

Top 5 projects to increase your home value

Compare the costs of selling to Opendoor versus a traditional home sale

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 poolAverage Resale Value % IncreaseAverage $ Resale Increase
1. Tampa, FL10.4%$31,100
2. San Antonio, TX9.7%$19,450
3. Houston, TX9.4%$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. We define finishing a basement 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 basementAverage Resale Value % IncreaseAverage $ Resale Increase
1. Portland, OR10.6%$42,250
2. Nashville, TN8.7%$26,100
3. Raleigh, NC7.3%$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%!

finish a basement

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.

We define this project 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 bedroomAverage Resale Value % IncreaseAverage $ Resale Increase
1. Los Angeles, CA8.4%$50,100
2. Orlando, FL7.5%$22,350
3. Jacksonville, FL7.2%$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 we 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.

add a bedroom and add value to home

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 bathroomAverage Resale Value % IncreaseAverage $ Resale Increase
1. Atlanta, GA8.4%$25,450
2. Sacramento, CA7.8%$23,450
3. Minneapolis, MN7.7%$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.

add bathroom to increase home value

Should I add more interior living space to my home?

Adding living space can add 5.3% on average to the median home value, according to Opendoor’s home improvement data. That’s a dollar increase of about $16,628. We define this project as the addition of 150 square feet of above-ground living space.

Top 3 cities to add interior living spaceAverage Resale Value % IncreaseAverage $ Resale Increase
1. Sacramento, CA6.4%$19,450
2. Tucson, AZ6.3%$12,550
3. Tampa, FL5.9%$17,700

In most of the markets we studied, adding a bedroom creates more value on average than expanding the living area. But in some metros, such as Austin, Denver, and Tucson, a larger living room or an additional family room actually creates more value than a bedroom.

In Sacramento—our top city for adding living space—expanding the interior creates about the same amount of resale value as adding a bedroom, regardless of the current home value. While it’s true that, in general, bedrooms demand a higher home sale price, adding more usable space in the home can be a wise investment, especially for big families.

adding living space can increase your home value

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 you 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. We hope our home improvement calculator can help you do both.

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.

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