Does a Renovation Make Financial Sense?
Home renovations are no small endeavor – no matter what they try to tell you on the home improvement networks. There are some situations, though, in which home renovations make financial sense and others in which they do not. Knowing the difference can save you a lot of personal and financial pain. These are a few questions you should ask before diving in that will help you make a wise decision.
How Will You Finance the Renovations?
If you have cash savings to fund the renovation or choose to go with a with a traditional, low interest loan it is a far different story than if you’re going to finance the work with credit cards or borrow from retirement funds. In order to determine how financially worthwhile the project is, you must be able to accurately predict (or at least closely estimate) the final costs of the project.
Interest rates on credit cards and cards from home improvement stores add up quickly and can easily become the expense the keeps on giving long after the renovation is complete.
If you’re thinking long term, think home improvement savings plan. This will allow you to set money aside each month to go towards things like improving your home cosmetically or taking care of emergencies that arise with heaters, air conditioners, roofs, or appliances along the way.
Who Will be Doing the Labor?
This is a multi-faceted question. If you’re planning to do the labor yourself, you can save a great deal of money on the renovation project – if the laws in your municipality allow for you to do the work yourself. Throughout California, for instance, there are a few things you can do on your own, but for the heavy lifting, you may need a licensed contractor to complete, or at the very least oversee, the work.
The other side of the coin to consider is that if you’re not confident of your abilities and press on trying to do it yourself, make sure you have room in the budget to correct mistakes you may make or replace items that may get broken in the process.
Some renovations typically provide a better ROI (return on investment) than others. Dollar for dollar, kitchen and bathroom renovations generally do well as do adding rooms or family rooms to the home.
Maximize the potential of your investments by choosing fiscally responsible updates. Rather than going for granite countertops, for instance and tearing down walls, consider a fresh coat of paint and quartz or other hard-surface countertops instead. Bigger bang. Lower costs.
If you plan carefully, and choose wisely, you can make renovations work well for you. Always look for renovation projects that raise the value of your home – especially if you’re planning to sell the home in the not so distant future.