How to Make Your Remodeling Projects Pay Off
A few years ago, you could usually be guaranteed to get most of their money back for home improvement projects you undertook. However, due to tight economic conditions, this has changed. According to a study from Remodeling magazine, the average return on such projects dropped from 87% in 2005 to 64% in 2009. We have six tips that will help you get more money back on your remodeling investments.
Tip #1 – Repairs get higher returns than enhancements
You’ll get the most money on repairs and other maintenance that is necessary, as opposed to cosmetic. While buyers might appreciate a newly remodeled bathroom, they won't tolerate a bathtub that doesn’t train. Buyers generally won’t even look at property with maintenance issues, no matter how minor, according to real estate appraiser Jim Amorin of Austin, Texas.
Trying to keep problems a secret will also hurt you. If buyers discover problems during inspection, they commonly ask sellers not only to pay for the repair, but to also shell out additional money to compensate the buyer for the inconvenience of having work done. And they’re allowed to do this by law too! So the $10,000 you saved by putting off a repair could cost you $20,000 for the buyer’s anguish, adds Amorin. That’s $10,000 you could have saved by repairing initially! So if you have a repair that needs to be done, do it now.
Tip #2 - Remodeling saves you money, as opposed to adding on
A few years ago, McMansions were the hot item. Nowadays, B\buyers want smaller, more affordable homes. Having a big, formal living room in addition an everyday family room is less desirable than having one multi-use common space. It will be more beneficial to reconfigure your floor plan or utilize unused basement or attic space for your remodeling needs.
For example, you may be looking to build a new bathroom. Converting floor space you have can cost between $3,000 and $6,000 while building an addition can run between $25,000 and $50,000. So by remodeling your existing space, you can save between $22,000 and $44,000 at resale, and your home will be that much more attractive to buyers!
Tip #3 - “Going Green” can save you on green
Firstly, eco-friendly improvements can save you money. By adding energy-efficient features to your home, such as EnergyStar appliances and extra wall insulation, you won’t need to use your air-conditioner or heater as much, and your electric bills will decrease dramatically.
You can also add the federal tax credit of up to $1,500 that lasts through 2010 on some EnergyStar products, which will save you additional money. In addition, many buyers are first-time homeowners in their twenties and thirties, and they’ve been raised to be environmentally conscious, so a green home can be that much more attractive to them.
The best way to go green is in your regular remodeling decisions: For example, if you’re replacing your windows, buying energy-efficient windows can save you $450 upon the purchase (after tax credits), as well as $150 or more in annual heating costs. The latter can also apply to your buyers, who will be pleased how they’ll save that much more mney.
Tip #4 – Redoing your technical infrastructure is more economical than the latest fad
Some homeowners think that having expensive home electronics will add to the aesthetic appeal of their homes. The problem there is that with technology, people want the newest and the coolest. If you purchase a $10,000 home theater today, it’s on its way to becoming obsolete the moment you take it out of the packaging. Something better will always come along. Buyers seek any excuse to haggle and low-ball, and they won’t be impressed with your out-of-date system.
Expanding on your Tech infrastructure is a much wiser option. If, during a home project, you have the opportunity to install a cable or Ethernet port, do it. It generally costs about $80 a room to set up, and it's a low-cost way to provide universal access to any new technology that comes onto the market, which will ultimately appeal to buyers who are coming with their new, cool gadgets.
Tip #5 – When it comes to design, go with traffic
New design fads can be tempting. You may be tempted to redo your bathroom in an art-deco style. If this is the trend in your neighborhood, by all means do it. However, if everybody else has gone with the Victorian-era bathroom from the 1800s, steer clear. “Unconventional features” add money to your home, and they don’t appeal to the widest range of people. "You really have to keep your house's amenities in line with the neighborhood now," according to Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies.
The same principle applies to colors. Use cool colors, such as grays and blues. Like unconventional fixtures, loud colors (red, yellow) don’t appeal to the widest range of buyers. Most people are comfortable with tradition. Stick with it.
Tip #6 – Five years is the best length of time for a return
If you plan to stay at your residence for less than five years, don't invest in a huge remodeling project. You have a greater chance of losing the money you spend while the housing market fluctuates.
But if you do plan to stay for the long-term, now is the time to start a new project. Thanks to the economy, contractors are charging much lower rates for the same work than they did a few years.
Get them while they need the work, and make it clear that you’re interviewing multiple contractors so they'll be motivated to give you the best rate (and put in the most effort) possible. It’s the golden rule of investing: Buy low. And when you’re ready to sell, you can sell high.