Go big or go home. The fact that your back yard is small and basically sounds unusable for recreation, a backyard patio/living space would be a good use which will make the home more marketable.
We had kind of a crappy back yard. And then we put in a paver patio. Did a fountain with led lighting – awesome. But the best part is we did a fire pit. Don’t mess around with the portable ones. Don’t mess around with the wood ones. We did a natural gas fire pit. Hooked to the house line. It is the greatest thing since sliced bread. You have all kinds of design options – can do a traditional round pit, rectangles, squares, etc. You can top it with ceramic logs, lava rock, or fire pit glass for different looks. Easy to turn on, easy to turn off. No propane tanks to haul around and replace. Cost us about $800 to have the gas line run and few bucks for the burner and valve. Got some nice furniture to go around it. It get’s more use than just about any space in the house.