Avoiding Costly Renovation Mistakes

With stay at home orders in place and businesses closed, many of us are spending more time at home in 2020. Our homes have suddenly needed to be much more multifunctional. Our homes are now also our work, school, gym, etc. With all these changes happening and increased time spent at home, the need for home renovations has increased. According to recent polls, more than 3 in 5 American homeowners have begun home renovation projects since March of this year. 

When renovating your home, you want your money and time to be well spent. Successful renovations come from careful planning and financial strategizing. Whatever your home improvement project may be, you want it to be beneficial in the long run.  If you are amongst those looking to take on new home renovation projects there are several things that need consideration.  

Return On Investment

If a home improvement project makes you happy it may be worth doing. However, if you plan to sell your home soon, your money will be best spent in projects that have higher returns for your money. Renovations can be very expensive but many will not actually increase the value of your home. 

Choosing your project carefully can help ensure you get a return on your investment. According to Remodeling Magazine’s 2020 Cost vs. Value Report, installing manufactured stone veneer is likely to have the largest return on investment. You can expect to recoup an average of 95.6% of your investment on this update. Plus manufactured stone veneer could add some serious curb appeal to your home and help it sell faster. On the other hand,  adding a master suite is a highly expensive renovation with only an average return of 51.6%. Some renovations are more appealing to buyers than others based on the local market and neighborhood. Before beginning renovation you may consider calling your realtor and asking about which renovations are most appealing in your neighborhood. 

Creating a Budget

Whether you hire a contractor or do the work yourself you need to create a budget and stick to it. Look at what others have spent on similar projects to get an idea of how much you need to spend. Before you begin a renovation project you need to know how much you can spend on your project.  Be sure to add up all costs of the project and add at least 10-20% for incidentals. This can help insure that you don't go over your limit and run out of cash in the middle of a project. However, changing one small thing mid project can seriously increase costs. For example, getting the slightly upgraded tile compared to what you budgeted for can really add to costs. On the other hand, buying the cheapest materials may reduce the quality and value of your home renovation. Be sure to weigh your options in quality versus price. Making the right choices for quality and price can boost the aesthetics of your home and increase its value. 

Choose Your Funding

Since March 1, 2020, 61% of homeowners have taken on home renovation projects. A large portion of these were paid for using cash on hand, money saved specifically for the project, or stimulus checks. However, large projects often need to be financed. Should you need to finance your renovation be sure to explore your options carefully. Credit cards, a cash-out refinance, a personal loan, and a home equity line of credit are just some of your options. Each option has varying costs and risks. However you choose to finance your home renovation be sure the project isn't going to cause you unnecessary financial hardship. 

Hire the Right Contractors

When hiring a contractor get multiple estimates. Check references and credentials of any contractor you receive estimates from. Your contractor needs to be properly licensed to perform the necessary work on your home. You can check the contractors ratings with the Better Business Bureau. If any complaints or grievances have been filed against them they are likely to show up there. Additionally, A good contractor will offer a warranty and guarantee the work they do on your home. Once you've chosen the best contractor for you make sure you get a signed agreement or contract for the work they are to perform. 

Home Renovation Permits

It’s always recommended that you hire a licensed and bonded contractor for any home renovation. However, should you decide to do the work yourself be sure to obtain necessary permits. You can obtain necessary permits by contacting your local municipality. If you hire a contractor verify that they have obtained the proper permits as well.  Permits will protect both you and your home. Should you fail to obtain proper permitting your renovation may not meet local building codes. This could affect your ability to sell the home in the future. 

Final Thoughts

Your home and the equity you have in it are an investment. You want the renovations you make to your home to increase the value of your home rather than take away from it. To learn more about the equity in your home contact Peoples Choice Mortgage today!