GETTING THE MOST FROM YOUR RENOVATION DOLLARS
For most of us, the family home is likely to be the largest single investment we will make. While the purchase of a home is driven primarily by the need to provide shelter for your family, all homeowners anticipate that the value of their home will increase over time.
The extent of this increase depends very much on market factors such as location and overall economic conditions. In recent years we’ve seen tremendous volatility in some parts of the country and this has led to a price distortion in these markets, but over the course of twenty or more years of ownership, the expectation is that a home’s value will continue to appreciate.
As the last wave of the Baby Boomer generation prepares for retirement, many plan to downsize and use the proceeds of the sale of their principal residence to purchase a smaller home. Remaining funds can then be added to retirement portfolios or used to pay off other debts.
For those planning to make this transition within a few years, it can be highly tempting to complete expensive renovations in the hopes of boosting the home’s selling price. While this can be an effective strategy, it is critical to proceed with caution! When it comes to makeover projects, some renovations are definitely better than others; here are just a few things to keep in mind to help ensure you get the best return for your renovation investment.
Bathrooms and Kitchens
Bathrooms and kitchens are frequent upgrade targets and it is generally accepted that money spent updating these rooms gives you the best opportunity to maximize your investment. In many cases, you can make a significant impact with relatively inexpensive upgrades to fixtures and lighting but anything beyond that will require a greater investment.
When upgrading a bathroom, for instance, costs will quickly escalate if installing upgraded amenities such as soaker tubs and whirlpool baths. The same holds true for kitchen renovations and once you start replacing appliances and upgrading counters and cabinets, costs will mount at an alarming rate.
Basements are also very common renovation projects and a basement that adds more living space to the home is a strong selling feature. Converting an unfinished basement into a comfortable space is an expensive proposition but a well-designed, modern basement will give your home a tremendous advantage once it hits the market.
Families with growing children will definitely appreciate the extra space, and basements that can be easily converted into a legal apartment with a separate entrance provide the potential for the new owner to earn extra rental income. Not all buyers are interested in renting out their basement, of course, but as the number of intergenerational families continues to rise, the ability to provide a self-contained apartment for aging parents makes this a very attractive feature for many buyers.
Renovations to Avoid
Just as some renovation projects can help boost the value of your home, others may actually have a negative impact on the future selling price. At the top of this list is the installation of a pool, and while lounging on the deck of your own pool is something you may enjoy, not everyone shares this feeling.
Families with small children, for example, often shun homes with pools over safety concerns. For others, the work and expense of maintaining a pool is not something they wish to take on further limiting demand for your home.
It is also common to see smaller homes that have had attached garages converted to an expanded living room or extra bedroom. Again, converting the garage may have served the owners well at the time, but the loss of garage space may be seen as undesirable by many potential buyers.
Align Your Priorities
Finally, while these things may not add to your home’s “curb appeal”, it’s important that major items are in good repair. Things like the condition of the roof, as well as the age of your cooling and heating systems, are all areas that new buyers will closely examine. If after conducting an inspection it is discovered that these critical systems costing thousands of dollars to replace are in poor repair, prospective buyers may insist on a lower purchase price, or may even pull their offer altogether.
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