Did you know that most of the dollars spent on renovations are never recouped? That’s right, even though spending on renovations grew 10% in 2012, reports Harvard’s Joint Study on Housing, many won’t see all that money returned. Oddly enough, some of the smallest renovation projects earn the highest amount of return. On average, replacing your property door recoups 85% of the cost of the door and installation, according to a 2013 Remodeling Cost Vs. Value National Report by Hanley Wood.
There’s more to think about than dollars and cents however. So, before you decide to renovate your property, consider all of these important factors.
Return on Investment
Think about how much of the cost of your renovation will be returned in terms of resale or rental value. Not all renters are looking for a newly renovated kitchen, for instance. On the other hand, a poorly decorated or outdated kitchen is probably going to turn most renters off. Ugly and old cabinets, or chipped and cheap counters are a big turn off. You don’t have to remodel the entire kitchen. Consider doing minor repairs and fix just badly needed issues. According to 2013 national averages, a minor kitchen remodel returned more than 75% in value, while a major remodel returned only 59%.
Hidden Costs of Renovation
There’s always additional costs in every remodeling project, even smaller ones. After calculating in all the possible expenses of your remodeling project always add an additional 10-20% depending on the estimate of the project. This provides a much more accurate picture of the true cost of renovation.
Don’t forget to include costs for new tools you may need to buy, gas to drive to pick things up, and additional parts, attachments, batteries and other things you’ll need. A painting project for instance, also requires a tarp, painter’s tape, and plenty of rollers, brushes and paint can openers.
Find the Right Man for the Job
Finding the right contractor is key to the success of any renovation project where you are not doing the work yourself. Perform a diligent, in-depth contractor search before you even start searching for financing. Always check references, reviews, and compare price quotes from as many contractors as possible.
Compare apples to apples as well. Many roofing contractors will not include flashing installation or vents, some will use 10-year shingles instead of 20-year, and others use cheaper materials to lower the price.
Play the Market Wisely
Many investors will buy an old home and add lots of updates, only to find the price does not improve at all. If the home is in a undesirable area, or all the other homes in the area are run down, installing granite countertops is not going to boost the value much at all.
Banks still rely on property appraisals to find a value for the home. These appraisals are based on the sale prices of similar homes in the area. Condos are valued based on similar units recently sold in the same building. If these sale values are low, even with new countertops, your buyer will not be approved to finance the home and you won’t close the deal.