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The Home Renovation Decision
Anyone who has lived through months of dusty floors, washed dinner dishes in the bathtub, and stayed with friends when the water in the house is off for two days knows major remodeling is an extraordinary pain. But letting go of what you have and trading up to a new home is not an easy decision.
Ask yourself what factors are most important to you:
- Do you love your neighborhood?
- Are you near services and schools?
- What is your commute time?
- Is there room to renovate - considering lot size, etc.?
- Have you built up enough equity in your current home to justify spending on a remodel?
You've heard the old adage "location, location, location." If you already live in a desirable neighborhood, but the house vexes you because it has one bathroom, or a kitchen that was last updated in 1960, remodeling may be the answer.
Timing and the Market
Does it make sense to invest in a major renovation in your market? A renovation that will pay off in Toronto, may not pay off in Beaverton. If you spend $85,000 on a kitchen renovation, you may recoup more than what you spent in Oakville, but not in Keswick where housing prices are a much lower percentage of the cost of the remodel.
Renovation Decision Points
Do your research:
Appraise House and Neighborhood
Paying for a current appraisal is money well spent in the remodeling process. If your home is already valued high relative to the market, you will not recoup the cost of an expensive remodel. Research comparables using My Estimator to value your home among the others in the neighborhood - remodeled or not - to get a better picture of your possible financial gain. It is easy to spend over $10,000 on a bathroom upgrade without architectural changes, but will it pay off?
Remodeling Returns
Check out the RENOVA home improvement valuation guide for an idea of typical remodeling project costs and possible payoffs. Some projects will return 75 percent of your costs while others may return as much as 103 percent, but some financial experts caution that these numbers are only valid if you turn around and sell your home within a year of completing the remodel. The longer you wait to sell, the more the renovation value decreases.
Paying for It
Do you have the equity in your home to open a home equity line of credit, or apply for a home equity loan to pay for the remodel? If you have less than 20 percent equity in your current home, wait to remodel.
If you do have the equity, what will the renovation entail? If it is a large project - such as big structural changes and losing the use of your kitchen or your one bathroom, you may want to consider moving out during the hammering and drilling.
Trading Up and Out
Depending on your area, trading up to a new house with all the features you are looking for is often cheaper than remodeling. The trading up trade-offs are that you may need to move a distance from your current home and incur the time and costs of buying and selling again.
August 23, 2007 in Home Maintenance Matters | Permalink
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