5 Home Improvement Projects With the Highest Return on Investment – Motley Fool

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If you're selling a home, you might worry whether you've over-improved your property. In other words, have you upgraded too much to recoup the cost?

If listing your home is in the foreseeable future, it's essential to know which improvements are most likely to pay off when you sell. Here are five home improvement projects known for holding their value.

Let's face it; the first thing we notice when we drive up to a house is its exterior. If the house looks like it was last painted during the Korean War, the lawn is overgrown, and the mailbox appears to have been run over by a moose, it's nearly impossible to see it as a potentially beautiful home.

According to HGTV, exterior improvements recover 90% to 100% of what you pay for them. That makes fresh paint, vinyl siding, an updated front entry, new deck, patio, porch addition, and landscaping safe home upgrades.

If you don't plan to sell for a few years, consider a charming addition like a fountain, lily pond, or stone-paved walkway. That way, you'll have time to enjoy it before putting the house on the market.

Seller tip: Safe and attractive stairs and railings make buyers feel secure and show you're a homeowner who focuses on upkeep.

Living space retains a fair share of value. For example, a family room addition offers an average return at resale of 83%. A basement remodel will recapture a little over 90%, and an attic bedroom conversion provides an average return of nearly 94%.

Seller tip: If you plan to convert an attic, consider adding a bath. Buyers will feel as though they're walking into a suite.

You know all those shows you've seen on television where they've totally gutted and rebuilt a kitchen and bath? If you want a healthy return on investment, you need to forget about those shows. The best return -- and we're talking 98.5% to 102% -- is on minor kitchen and bath remodels. A minor remodel is primarily cosmetic and doesn't rearrange your floor plan. In other words, you're not tearing out a tub so you can install a shower across the room or removing a wall in your kitchen and relocating cabinets. It's about reimagining how each space can look through cosmetic enhancements. For example:

Seller tip: Avoid upgrades that make your home the most expensive in the area. Most homebuyers would rather buy the least expensive home in a fantastic neighborhood than the most expensive property in a so-so neighborhood.

There's nothing particularly exciting about having replacement windows installed, but boy, can they pay for themselves. In some cities, the average homeowner recoups more than they spent on the windows. In others, you'll get close. Here's why: Living in a home with energy-efficient windows can cut down on your utility costs year-round. Even if you recover the average return at resale of 89.6%, you've practically paid for the windows.

Seller tip: Think of windows as an investment. They'll help you keep money in your bank account whether you sell or not.

If you have space and can add a new bathroom, you'll likely recapture around 86.4% of the cost when you sell. If you live in the home long enough to enjoy the extra bath yourself, that's a win/win.

Seller tip: The value is in having another bathroom. Only pay for upgrades like a rainforest shower, heated floors, or a towel-warming rack if you're buying them for your pleasure. Unless you live in a luxury home, you're unlikely to recoup the cost of luxury upgrades.

Ideally, the upgrades you make to your home will both give you enjoyment and make your home stand out from the crowd when it's time to sell. If you're not sure how to finance your home improvements, you have several options. Consider a cash-out refinance, where you refinance your existing mortgage, borrow more than your remaining balance, and get the difference in cash. A cash-out refinance is a good option if you have solid equity in your home plus a strong credit score. Borrowing against your home via a home equity loan or HELOC could also work, and that way, you don't need to apply for a brand-new mortgage.

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5 Home Improvement Projects With the Highest Return on Investment - Motley Fool