Financial Wisdom: Home Remodeling

construction

Are you considering a remodeling of your home? If so, why? The reason — that answer is central to whether a remodeling your home is financially wise. Here are some other considerations to determine if a home remodeling project is a good financial decision for you.

Why are you remodeling?

If you are planning to stay in your current home for at least 3 years, sprucing up your home and making structural changes may be wise. However, if you are getting ready to sell your home, it may be a financial mistake. In reality, few major remodeling projects will get you a 100% return on your investment unless your home is under current value for your neighborhood. Shop around and look at the other houses in your neighborhood that are for sale. If your home is outdated, and your real estate agent believes it will adversely affect your selling price, it may be advantageous to put in some money and elbow grease into the home prior to sale.

Kitchens and baths sell homes. Granite countertops and hardwood floors are highly sought after by home buyers. However, these are two of the most expensive upgrades you can add to your home. Be sure to select neutral colors to appeal to the widest audience. Don’t over-improve your home; typically you don’t want to be the most expensive home in the neighborhood. Remember, sometimes just paint, cleaned carpet, and decluttering can increase home value. This can be done for a fraction of the cost as a full upgrade of surfaces in your home.

What is the value of your home today?

As mentioned above, for the best resale in the future, you typically don’t want to be the most expensive home in the neighborhood. Before you embark on a rehab or remodeling project of your home (regardless of whether you are staying or selling), meet with a real estate appraiser to learn the value of your home, and the potential value of your home after the remodeling is complete. Do not overbuild or over-improve for your neighborhood unless you are planning to be in your home for a minimum of 10 years. If you want to add on to your home or make it more suited to your family, understand that it may be a financial risk, depending on the value of other homes in your area.

Purchasing a fixer-upper?

There is nothing like a little bit of elbow grease to turn an ugly duckling into a swan. However, it is important to get the right professionals in to do particular work – plumbing, electrical, structural issues must be handled by licensed professionals. A contractor will pull the necessary building permits and make sure that the home meets local building codes. The importance of this cannot be overstated! If unpermitted work is completed, you will have problems selling your home in the future. Start with the structural elements and safety concerns of the home first and then move to dressing it up.

Construction Loans

Taking out a construction loan may be a good option for remodeling your home. They can be obtained for new homes, existing homes, and even when you want to buy a fixer upper. Check with your personal accountant for recommendations on how to best pay for your remodeling project.

Also, remember if you need to remodel your home for accessibility features including ramps, widened doorways, and wheelchair user accessible bathrooms, some local and federal grants may be available. If you are a Veteran, be sure to contact your VA benefits advisor to determine what funds are available to you.

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