From an investment point of view, money is wasted when improvements are made that will not add to the resale of your home when you decide to sell. Here is a partial list of the items that add to resale value somewhat commensurate with their cost:
Adding a third bedroom to a two bedroom home is usually a good investment. Enlarging from a four to a five bedroom house may actually diminish its resale value because there is a larger number of potential buyers for a four bedroom. Bedroom additions must be accomplished in a manner that does not disrupt the existing floor plan. Don't, as an example, add a bedroom that can only be entered by passing through another bedroom.
An extra full or half bath almost always adds greater value than its initial cost. Like bedrooms, however, the location of this improvement will determine its actual value to a potential buyer. A new bath in the basement will bring very little or no extra dollars upon resale. A new bath off the master bedroom could have a major positive effect upon the selling price.
Improvements in the kitchen usually pay off. New appliances, flooring, counter tops and cupboards are worthwhile. A great kitchen can be the deciding factor in choosing your home over that of a competitor.
Deciding to buy or sell or improve your home are big decisions with big consequences. Remember to use the services of a Realtor when making big decisions regarding real estate. They know the market.