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| © Getty Images | Make sure you're heading into home improvement projects the right way. |
Many of us are spending more time at home in 2020, which could mean having
more time to take on home improvement projects. But home renovations aren’t
just a way to fill time; you want the results to be worth the hard work. The
key to any successful project lies in careful planning — including financial
strategizing — long before the power tools come out.
Roughly 3 in 5 American homeowners (61%) have taken on home improvement
projects since March 1, 2020, spending $6,438, on average, according to an
August 18-20 NerdWallet survey conducted online by The Harris Poll among 1,414
homeowners.
Whether you’re outfitting your home with a new office or classroom, or taking
on long-intended improvements such as painting or installing new flooring,
here are five tips to help you make sure you’re heading into the right
project, the right way.
1. Consider return on investment
Any project may be worth your time if doing it makes you happy, but if you
plan to sell your home soon, make sure you focus on projects that give a good
return on your money. Many renovations cost thousands of dollars but won’t
increase the value of your home by the same amount.
For example, it costs about $50,000 to add a new bathroom, but homeowners
typically recoup only about 54% of the cost in increased home value, according
to Remodeling Magazine’s 2020 Cost vs. Value Report. A minor kitchen remodel,
on the other hand, returns about 78% of its cost, so that type of project
might make more sense.
Consider calling local real estate agents to ask them about the return you
might receive from a home renovation project. Some local markets or
neighborhoods may reward certain upgrades more than others.
2. Create a budget
You don’t want to run out of cash in the middle of a home remodeling project.
But unless you’re careful, your project may get more expensive while it’s
underway. That nicer tile may add only $7 per square foot, but if your kitchen
has 100 square feet of floor space, watch out! To avoid running short on cash,
add up your expenses before you start the project. Then add 10% or 20% to the
total to allow for cost overruns.
To get an idea of how much you’ll have to spend on a specific project, look at
what others have spent on comparable projects using a project estimate
calculator or perusing sites like HomeAdvisor or Remodeling Magazine.
3. Choose the right funding option
Since March 1, 34% of homeowners who undertook home improvement projects used
cash on hand to fund those projects, 25% used money they had saved for those
projects specifically and 14% used money from their economic stimulus check,
according to the NerdWallet survey. As long as these projects aren’t being
funded to the detriment of more important expenses, using available cash or
savings can be a good way to keep from paying interest on your home
improvement project.
If you have to finance your project, explore your funding options carefully.
Among them are a home equity line of credit, a personal loan, a cash-out
refinance or even credit cards. But they come at varying costs depending on
the interest rate and how long it will take you to pay off the loan. A home
improvement financing calculator can help you weigh these costs and make a
savvy decision.
4. Research contractors
If you’ve decided to hire a professional, get written estimates from different
contractors. As those estimates roll in, check their references and ask about
their credentials. At a minimum, make sure each contractor is properly
licensed to do the work on your home. You can also ask about their membership
in trade associations. Many reputable contractors belong to professional trade
groups such as the National Association of the Remodeling Industry or the
National Association of Home Builders.
A good contractor will guarantee the work and offer a warranty. You can check
Better Business Bureau ratings to see if others have had complaints about
companies you’re evaluating. If there have been complaints, check to see how
they were resolved.
When you select a contractor, make sure you get your agreement in writing.
5. Secure home renovation permits
Permits help protect your home and your safety. Without the necessary
approvals to perform work on your property, there’s a chance the renovation
won’t meet local building codes. It could even affect your ability to sell
your home in the future. Contact your municipality for details about what
permits you must have for your renovation project. And follow up to make sure
your contractor has permits in hand before beginning the work.
6. Understand price/quality trade-offs
You’re probably planning to pay hundreds or thousands of dollars on a
remodeling project. It’s understandable to look for ways to save money, but
don’t automatically cut corners by using the cheapest materials.
Talk to your contractor about the trade-offs between quality and price for
your project. You’ll probably be better off selecting the best-quality
products that fit your budget. Otherwise, you could be stuck with having to
make costly repairs after a few months because you skimped on quality.
A home remodeling project can give a big boost to your home’s aesthetics and
market value — if you avoid costly mistakes. By setting a budget, researching
contractors and making sure your improvements use quality materials, you can
help avoid expensive pitfalls and enjoy your home’s new design.
See more at
NerdWallet
