With the real estate market still on the rebound, many homeowners are turning to renovations and remodels on their current homes, rather than purchasing new ones. Their reasons for doing so vary, with some thinking of it as a financial investment; a way to increase the value of their home to boost the potential for a sale, while others think of it as a way to enjoy the property they now own. When considering a remodel, homeowners need to ask themselves what their motivation is behind it, in order to make the soundest decision.
An Investment in the Future
Regardless of whether you plan on to stay in the house forever, or you intend to sell the house relatively soon, it’s important to regard any remodel you make on your home as an investment. This is important on two levels, personal and financial.
Personal Investment
Your comfort and the way that you interact with your home is an important component to consider. As one contractor notes, his clients often remodel their homes because they want to create the perfect environment for them; homeowners are not often under the delusion that they are going to be able to purchase a house that is constructed exactly to meet their needs. By remodeling, they can increase their comfort and enjoyment in the home. If this renovation is taking place more than five years from the time a homeowners wants to sell the home, thoughts should be directed toward the current homeowners, and not toward a potential buyer.
Financial Investment
Financial investments go hand in hand with any type of remodel. The key is to determine if what you are doing is a repair or a renovation.
Repairs are what you do to keep your home in its current condition. They do not add value to your home, but they do maintain its current value.
Renovations are what you undertake to increase the value of your home. Depending upon what it is you are renovating, the latest Remodeling Cost vs. Value report for 2013 found two things of note:
- Nationally, most renovations are increasing in value, meaning the amount recouped at resale has gone up in nearly every area
- On average, most homeowners manage to recoup approximately 63.3% of the cost of the renovation at time of resale, with the cost of a new entry door recouping the most at 85.6% and the cost of home office remodel recouping the least at 43.6%.
Other contractors like to point out that most buyers will pay more for a recently remodeled home, than a home that is older in style. This fact is supported in part by a survey undertaken by The National Wood Flooring Association (NWFA). In a survey of Realtors, it was found that most Realtors (90%) feel that a home with new hardwood flooring sold faster, sold for higher amounts, and were easier to sell than comparable homes without new flooring.
When to Make a Lifestyle Decision
More than 50% of homeowners on average remain in their homes for approximately 10 years, while 25% of homeowners remain in their homes for 20. This means that a large percentage of the population should be looking at a remodel as a personal investment that enhances their lifestyle, rather than one that will capitalize on resale.
Enhancing your lifestyle through a renovation means looking at the items that will complement how you live. A kitchen remodel that includes a large stove, built-in cutting boards, and a bar sink, for example if you enjoy cooking and entertaining, is something that will complement your lifestyle. Selecting generic cabinets and counters that are popular at the moment simply because you may sell the house within five years, is not as good an investment in the same case.
Five Year Plan
Many contractors, Realtors, and designers agree that the timing for making your renovation a lifestyle or financial investment hinges around the five year mark. This means that at the time you are considering your renovation, you need to look ahead five years: If you are planning on staying in the house the entire time and beyond, the renovation should be lifestyle, moving during this time makes it financial.
What You Need to Know Before Taking on a Remodel
A remodel can be a major commitment, as well as a major investment. Before you take on a remodel, make sure you understand the following:
- Whether the remodel is something you are undertaking to sell the home, or something you are undertaking for personal reasons
- The length of time a remodel will take from the time it is begun until the time it is complete
- The length of time ordering materials may take – most remodels cannot get underway until all materials have arrived on the job site. This can add up to 12 additional weeks to the process
- The fact that some areas of your home may be off limits for weeks or months during the process – being without a working kitchen for up to 8 weeks during a major kitchen remodel for example
- The cost of the final job, including materials and labor – this can vary widely and change depending upon problems encountered
- What kind of inspections, permits, and regulations your state or town may require – zoning laws may restrict some types of remodels, while codes may restrict or prevent the use of some materials or fixtures
- The background of your contractor or builder – get references and ask for examples of previous work to check competency
- What the return on investment is in your area – some remodels pay out more in one area versus another
Make Decisions Carefully
A remodel is a major investment in the future – regardless of whether you intend to remain in your home or not. Approach any potential remodel carefully, with a great deal of research and planning going into what it is you intend to do. With the right approach, your remodel will be sure to fulfill all expectations.
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