Have all these home improvement shows got you thinking about renovating your kitchen or removing some walls and expanding your living room? You’re not alone. In fact, homeowners will spend an estimated $368 billion on home improvements and repairs in 2021, up 9 percent from 2020.1 Their motivation is typically twofold: to make life better by improving living spaces and to protect the value of their homes.
In addition, as home prices rise in most areas, homeowners are often more willing – and able – to move through the equity in their homes. The right kind of renovation can help your home increase in value. But remember, even a moderate remodeling project can be both expensive and time-consuming.
Before you start researching contractors and picking paint colors, make sure you’re making the most of your time and money, and that your project will increase the value of your home – not just your stress level. Here are some considerations to take into account.
1. To decorate or not to decorate?
First, check out comparable homes in your area. If you put it up for sale, will your home suffer in comparison? How many bathrooms and bedrooms do they have on average? Do most have gourmet kitchens and finished basements? If you decide you want – or need – to keep up with the competition, then do a little research to see how likely you are to be able to recoup the cost of your proposed renovations when you sell your home. (The following slides can help.) How important is it to you if you don’t end up recovering those costs?
Don’t price yourself out of the market.
When you are considering a proposed renovation, keep in mind that if the home increases in value too much, it may make the home more difficult to sell.
Installing that gourmet kitchen could make your home the most expensive on your block if you want to recoup your costs at the time of sale. When you put your home on the market, even expensive renovations don’t always cover the cost. For example, according to Remodeling Magazine’s 2021 Cost vs. Value report, you’re likely to recoup only 57% of what you spend on a major kitchen remodel.2
Be open to the possibility of moving to a new home as an alternative.
If, after pricing your renovation options, you find that the costs and inconvenience outweigh the benefits, you may want to consider looking for a home that already has the conveniences you want.
2. Decide to proceed? Now, how will you pay for the renovation?
With any renovation project, it’s easy to get caught up in the fun decisions – choosing fixtures, appliances, colors and finishes. But before you get too carried away, make sure you’re in good financial shape.
Don’t start without a budget.
A ballpark figure is not enough – it’s important to determine how much you’re willing to spend. There is a very common phenomenon called “scope sprawl” where you add some of this and some of that, and before you know it your budget is gone. Knowing (and sticking to) your numbers will help you determine early on what you can afford – and help prevent disappointment and financial stress later.
Research financing options.
If you’re not using the cash you’re saving to pay for renovations, you’ll need to borrow money. A home equity line of credit may be an attractive option, allowing you to pay for expenses as they arise. If you have enough equity in your home and your current mortgage rate is higher than the rate on your new mortgage, you may also want to consider cashing out and refinancing. If you don’t want to borrow against your home, check out traditional bank loan or credit card promotions, including limited-time, 0% APR financing or rewards programs that offer cash back.
3. What’s the best way to spend your money?
Which is a better use of home improvement dollars – updating a usable but somewhat outdated kitchen or replacing a house full of old, drafty windows? When you finally sell, potential buyers may love the new kitchen, but they may be hesitant about the obvious structural issues.
Don’t underestimate the value of quality structural upgrades.
Redoing the siding may not be as sexy as adding a master bedroom suite, but it could be very attractive when it comes time to sell. According to Remodeling’s 2021 Cost vs. Value report, new siding can recoup 69% of the initial cost (on average). Not only will it give your home a new look, it will also create a warmer, more energy-efficient home.
Be sure to look for small projects that add immediate value.
Consider replacing your front door with a higher quality version. First impressions count, and when friends and neighbors and potential buyers walk into your home, the door is the first thing they notice. Spending your renovation budget elsewhere instead? Put a fresh coat of paint on the door and purchase a new welcome mat.
Think about what you might need in the future.
Do you plan to stay in your home as you get older? Then you may not want your proposed renovation to include additional stairs or doorways or halls that may not be easy to navigate using a wheelchair or walker. Think showers with seats and non-slip coatings, or kitchen cabinets with pull-out and pull-down shelves.
4. Do it yourself or hire a professional?
Sometimes, you can save money by tackling a renovation project (or part of it, such as painting or plastering) yourself. With thousands of how-to videos online, it’s easier than ever to become a do-it-yourself (DIY) expert. But know your limits. Projects that must be completed twice are the most expensive of all.
Don’t take on more projects than you can handle.
It may seem like a good idea to tackle expensive tasks yourself to save money. But some jobs, such as rewiring or resurfacing a bathroom, are best left to professionals. Taking on projects you’re not qualified for can be dangerous and ultimately more costly (when you have to hire a contractor or handyman to fix the results).
Do your homework before hiring a professional.
Recommendations from friends and relatives may work, but don’t stop there when hiring an electrician, plumber, or contractor. Nationally known websites offer local customer reviews, which can be a valuable resource. Get multiple quotes for any major project. Be sure to get a face-to-face consultation and cost estimate before you hire anyone, and check to make sure the professional is licensed and insured before you sign a contract.
Remodeling your home is a big project, even if someone else is doing all the work. But creating the home you really want can be very satisfying-especially if you pay a price that makes you feel as comfortable as you are in your home.
Estimate the value of your home.
