New year, new changes to your home? With our market’s continued inventory shortage, renovating has become an attractive option for homeowners. Taking on a home renovation can provide a change of scenery, and when the time comes to sell, increase the value of your home.
The question is, will you get back what you put in?
According to Remodeling Magazines 2021 Cost vs. Value Report Trends, the return may be lower than you’d expect. With costs on the rise in the past year, the national report shows an overall average return of 60% when comparing the increase in home value with the cost of renovation, down 3.7% from 2020.
The rates of return by project can vary by source, so doing some up front research and comparisons can provide you with a baseline for a given project. Aside from looking at the averages, here are a 5 key considerations to take into account when deciding on your next big project.
Your Local Market
Making a sound decision on both your renovation and the budget for it starts with understanding your surroundings. It’s important to know the current ceiling for home prices in your neighborhood and make sure that your home has adequate room to appreciate based on the changes you’d like to make.
For example, let’s say you spent $400,000 on your home. If recent comps suggest the top end for your neighborhood is around $425,000, spending $75,000 on a luxurious renovation is more than likely going to result in a loss.
Timing matters here too. If the plan is to stay put, you’re more likely to recoup your costs as your home appreciates over time. That said, there are no guarantees and plans can change, so a conservative approach that aligns your budget with local home values will serve you best. If you need help with pulling comps in your neighborhood, we’re here to help you!
The Required Expertise
Not all contractors and home professionals are created equal, and neither are we! When it comes to who will actually be working on your home, you have to feel comfortable that the outcome will align with your expectations.
DIY-ing your home renovation can save you money, but it can also cost you money when it comes time to sell if the work is not done correctly. Furthermore, if the project flops, your costs can increase quickly if the work has to be done twice.
Local Tastes and Trends
When planning a renovation, consider what’s popular in home design, especially here locally. Browsing homes in your area online can be a great way to see what updates, materials, and finishes are popular. As you’re conducting your research, keep an eye on the big-ticket items that would cost the most to change.
For example, carpet in the main living area may be your preference, but if the wide majority of homes in your area feature engineered hardwood floors, your decision could end up costing you in the long run. If you’re in need of some design inspiration, check out our Design Trends Guide as a starting point!
Unexpected Expenses
When renovating, it’s all to common to encounter costs you didn’t anticipate. Things like structural challenges, water damage, mold, etc. can quickly put you over budget and turn your renovation experience upside down.
As you create your budget, plan in 10-15% for the unexpected to ensure that an unplanned expense doesn’t derail the project or put you in a tough financial position.
Future Expenses
This one is especially important for first-time and new homeowners. In a recent survey from Bankrate, 21% of millennial homeowners and 16% of all homeowners expressed regret over the maintenance costs associated with owning a home.
Things are bound to degrade and break in any home. Utility costs can vary greatly by season. Taxes increase along with the value of your home. These are costs that you should plan and prepare for, and if your renovation is going to leave you short on savings, it may be in your best interest to make more gradual changes or adjust your renovation budget accordingly.
If you need a hand examining home values in your neighborhood or recommendations for home professionals, we’re here to help. Simply fill out the form below or give us a call at 972-608-0777.
