Deciding Whether to Remodel

Spend Your Remodeling Dollars Wisely

No doubt about it, remodeling is expensive. A bathroom remodel can quickly reach $10,000—and that’s about where the most basic of kitchen remodels start. In short, remodeling is an investment and you want to make sure you get the best return on your dollars.

Check Comparables

The first step is to figure out what the market will bear. Get an appraisal of your house as it is and then dig up the sale price of houses in your immediate area that already have the improvements you’re thinking of making. If you can complete the project without closing the gap between the current value of your home and its future value, the project is worth thinking about. However, if your house is already at top price for your area, then it’s highly doubtful you’ll get back any of the money you invest in a remodel.

Remodeling vs. Moving

Next evaluate the cost of remodeling versus the cost of moving. Figure out the cost of a new mortgage versus a cash-out refinance or an equity loan, taking into account both interest rates and fees. What are the costs of moving versus the costs of living through a remodel (increased take-out and hotel stays, for example). And, of course, figure out the average cost of a house with the new features you desire in a neighborhood comparable to the one you’re in. Increasingly, people are finding it’s cheaper to remodel what they have than to buy or build something comparable.

Consider Resale

While it’s seldom a good idea to undertake a major remodel as part of a sprucing-up-to-sell program, it is a good idea to keep the tastes and needs of future owners in mind when you do remodel. Remodeling magazine does an annual report evaluating the return on investment for a variety of home improvements. They crunch the numbers to determine region by region what projects will return what percent of your remodeling investment if you were to sell within a year of remodeling. You’ll find their full report online at www.remodeling.hw.net .

Finally, don’t forget to consider intangibles such as neighbors and schools. If you absolutely love your house and your neighborhood, you need to take that into consideration. Resale isn’t everything. Even if there’s little chance of recouping your investment when you sell, it’s OK to spend the money for that new deck or home office as long as you understand that you are investing not in the house, but in your quality of life.