Value Added
Home Improvements That Really Pay Off
By Donna Rosato

(MONEY Magazine) – When you put money into renovating your home, you do it for you and your family, right? You select the tiles you like best for the bathroom, your favorite style cabinets for the kitchen, the patio stones that say "home" to you. Renovations can be expensive, after all (Americans spent a record $138 billion on home improvements last year, according to Harvard's Joint Center for Housing Studies), and this is the place you wake up every morning and return to every night. It's an extension of you. And yet...

And yet. You can't discount the fact that where you sleep and cook and watch your baby take her first steps is also your biggest financial asset. As you make improvements, you ought to have one eye on the future, when your house might become someone else's biggest asset. Some renovation projects pay off more than others--studies of home sales show that adding one small bathroom, for instance, increases appraisal values more than redoing a basement or building a new bedroom.

We spoke with appraisers, architects, builders and real estate agents around the country and discovered the projects that give you the best return on the dollar: updating your kitchen, renovating your bathroom and making outdoor space more usable. On the following pages, you'll find three recent projects--a deck in Washington, D.C., a kitchen in Minneapolis and a master bathroom in Armonk, N.Y.--that strike us and our expert sources as wisely planned and executed. Each offers ideas with broad appeal that you can implement, whatever your budget. Spending as little as $2,000 on a kitchen or bathroom can boost a home's sale price by $3,800 to $4,800, reports Since little things can add up resale-wise, we also got advice on four smaller projects that can pay off. You'll find them on page 116. And if you're a potential big spender wondering about the value of kitchen brand names like Bosch and Sub-Zero, see our take on high-end appliances on page 112.

Which projects will actually help you command a higher price, of course, depends on where you live, what the other homes in your neighborhood are like and where local property values are heading. If your house sits on a modest street and you add a gold-plated gate over your driveway, you won't recoup that cost. But wise owners can recover on average 80% of renovation expenses in the form of higher home-sale prices, according to annual surveys in Remodeling magazine, which are the industry standard. (In general, the newer the improvement is, the more of your investment money you'll get back.) As for that 20% margin, stop and consider that the enjoyment you get from the improvements trumps that loss and then some. That's a decent deal in our book.