A senior research fellow at Harvard University, Kermit Baker, explains when remodeling could be a wise choice for homeowners, despite the slump in real estate. Here in Birmingham, AL. we've been fortunate enough to escape most of the real estate carnage. So, if you like your neighborhood, school district, location and plan to “stay put” for at least five years, home improvement is a smart choice. Let’s look at the reasons why.
1. Funding your project is fairly inexpensive:
Two factors must be considered before you begin. Your financial situation should be fairly solid. It’s true that taking funds out of savings with interest rates so low (less than 1%) will not result in lost income, but be careful that you don’t dig into your safety fund. In addition, the facts that home equity lines of credit have low rates of interest. This will work to your advantage.
2. Contractors will give discounts:
Business has been and still is “off” for building contractors. According to Bernard Markstein, economist with the National Association of Home Builders, most are ready and willing to give a generous discount – perhaps as much as 20% below prices during the real estate boom.
3. Cost of building materials:
There’s been an amazing drop in the cost of building materials in the last few years. In particular, a big price reduction has been seen in plywood (23%), lumber for framing (35%) and drywall ((29%). This can really make a difference in total cost.
4. Savings on energy costs:
If your project includes replacing windows, installing appliances and adding or upgrading insulation, you will see a significant savings to your energy bills. Of course, the savings won’t recoup your full investment, but it will give you a bonus, as well as a modern, convenient kitchen.
5. Remodeling costs less than buying another house:
One might say it’s cheaper and less trouble to just buy another house that is already remodeled. Even though you can probably find another house with the features you want, could you easily sell the one you own? Consider the cost of moving and all the touch-ups you would need to do in a new house. John Ranco, past president of the Greater Boston Association of Realtors says, “Commissions and fees to sell a $400,000 home could be as much as $25,000. You could get a lot of remodeling done for that amount of money.”
6. Smart project choices:
Wise selection of renovation projects can reward you with a payback. Remodeling projects that bring your house up to par with the other houses in the area will be an advantage at the time of sale. If you make improvements like updating a 5-10 year old kitchen just to make it more high-end, you won’t recoup much of the cost. Remodeling a 40 year old bathroom or kitchen will pay off at the time of sale.
7. You can enjoy the fruits of your labor:
Think to the future. When it’s time to sell and you didn’t do any remodeling earlier, you will need to do some projects before putting your house up for sale. This always adds stress and money output to an already stressful situation. Also when you are ready to sell, contractor and material costs may be higher. If the remodeling is done before you’re ready to sell, you and your family can enjoy the benefits of a more functional and beautiful home.
As long as you are confident that you will be in your house at least five more years and are financially stable, remodeling now is a good move. Labor and materials are at a reasonable price, the cost of borrowing is down. Renovating is usually less expensive than upgrading to a more deluxe house. You will undoubtedly get a return on your project, and at the same time you will get enjoyment from your remodeling projects.
1. Funding your project is fairly inexpensive:
Two factors must be considered before you begin. Your financial situation should be fairly solid. It’s true that taking funds out of savings with interest rates so low (less than 1%) will not result in lost income, but be careful that you don’t dig into your safety fund. In addition, the facts that home equity lines of credit have low rates of interest. This will work to your advantage.
2. Contractors will give discounts:
Business has been and still is “off” for building contractors. According to Bernard Markstein, economist with the National Association of Home Builders, most are ready and willing to give a generous discount – perhaps as much as 20% below prices during the real estate boom.
3. Cost of building materials:
There’s been an amazing drop in the cost of building materials in the last few years. In particular, a big price reduction has been seen in plywood (23%), lumber for framing (35%) and drywall ((29%). This can really make a difference in total cost.
4. Savings on energy costs:
If your project includes replacing windows, installing appliances and adding or upgrading insulation, you will see a significant savings to your energy bills. Of course, the savings won’t recoup your full investment, but it will give you a bonus, as well as a modern, convenient kitchen.
5. Remodeling costs less than buying another house:
One might say it’s cheaper and less trouble to just buy another house that is already remodeled. Even though you can probably find another house with the features you want, could you easily sell the one you own? Consider the cost of moving and all the touch-ups you would need to do in a new house. John Ranco, past president of the Greater Boston Association of Realtors says, “Commissions and fees to sell a $400,000 home could be as much as $25,000. You could get a lot of remodeling done for that amount of money.”
6. Smart project choices:
Wise selection of renovation projects can reward you with a payback. Remodeling projects that bring your house up to par with the other houses in the area will be an advantage at the time of sale. If you make improvements like updating a 5-10 year old kitchen just to make it more high-end, you won’t recoup much of the cost. Remodeling a 40 year old bathroom or kitchen will pay off at the time of sale.
7. You can enjoy the fruits of your labor:
Think to the future. When it’s time to sell and you didn’t do any remodeling earlier, you will need to do some projects before putting your house up for sale. This always adds stress and money output to an already stressful situation. Also when you are ready to sell, contractor and material costs may be higher. If the remodeling is done before you’re ready to sell, you and your family can enjoy the benefits of a more functional and beautiful home.
As long as you are confident that you will be in your house at least five more years and are financially stable, remodeling now is a good move. Labor and materials are at a reasonable price, the cost of borrowing is down. Renovating is usually less expensive than upgrading to a more deluxe house. You will undoubtedly get a return on your project, and at the same time you will get enjoyment from your remodeling projects.
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