Renovating one’s home has always been a popular American pastime. If you need a bit of convincing, just check out the television programming lineup on the popular network HGTV.
But renovating is more than a hobby as it often results in:
- The creation of an updated home that better serves its occupants
- An increase in the value of one’s home and property.
And while renovations often create happier places for families to call home, particular renovations are smarter choices than others.
Why Renovating Is a Smart Move
In addition to creating a more enjoyable and functional space for each family member, renovating also increases a property’s value. From a financial perspective, this is quite helpful because it may help:
- Increase the home’s value-creating a loan-to-value ratio that allows a homeowner to cancel PMI (Private Mortgage Insurance) years earlier than scheduled.
- Allow for a homeowner to tap the appreciated value (newly acquired equity) to pay for a child’s college education or other important family obligations.
And a renovated, updated, and well-kept property performs quite competitively for the attention of homebuyers, especially in a hot, competitive real estate market. Renovations are a smart investment in that the current homeowner gets to enjoy the fruits of their labor/efforts, and future owners will find the updates and modernization appealing.
It is imperative to recognize that renovating requires carefully planned project outlines, sufficient financing, and a well-thought-out budget. Ultimately, homeowners need to plan to avoid the untenable position of being in the middle of a renovation when they realize a costly error is ready to cause:
- Unplanned costs.
- The need to secure additional emergency financing.
As such, let’s review five renovation tips that will help as you plan your next renovation like a pro.
- Make a Realistic Budget
Although one would like to believe that anyone attempting to begin a renovation project (on any scale) will know the importance of setting a realistic budget, the reality is, not everyone understands just how vital this renovation step is. The key word here is ‘realistic.’
And unfortunately, the plethora of home renovation shows on TV can often mislead unsuspecting renovation novices about costs and expenses, which vary tremendously based on the timing and the location of the renovation.
The budgetary phase of renovation planning is the starting point where homeowner must reconcile their available funds with a prioritized list of wants and needs – think of it as a baseline budget of those funds that can be used to complete a renovation project. This is generally when homeowners hit the firm realization that their budget does not support the costs required to complete a dream home renovation project.
Remember, when you have set forth a realistic budget, it is important that you stick to the budget and avoid impulsive buying decisions, make rushed decisions, or other common home improvement errors.
The reality is renovation expenses have a way of creeping up beyond one’s budget if they are not tracked carefully and in real-time. This is why a homeowner needs to follow all these helpful tips when renovating.
- Select the Right Contractor for You
Selecting the right contractor for the renovation project is equally important to any other design decisions that need to be made in the process. In fact, choosing the right contractor will likely keep the renovation project running smoothly, whereas the wrong contractor will create frustration and confusion.
When you have neared the completion of your budget, be certain to ask your contractor to review the budget’s numbers to determine if your budget is realistic. A contractor should also be considered a wealth of information that homeowners can rely on as they set plans to begin their renovation project.
The contractor one chooses should understand the homeowner’s vision and be amenable to work with. And while recommendations are important, homeowners should also require a full background check on their chosen contractor that includes the following:
- The contractor’s license.
- The certificate of insurance.
- The contactor’s lien history and bond number, etc.
Most homeowners have heard tales about contractors disappearing into the night or poor-quality work that will not be repaired. As such, the best method to choose a good contractor is to do one’s research. Check out what the Better Business Bureau or the local Chamber of Commerce has to say about the contractor’s history as a professional operating in that area, as well as their Yelp and other online reviews.
When you have identified the top contractor candidates, the next step is to ask for a quote that breaks down the expenses as follows:
- Cost for supplies.
- Costs for labor.
- An estimate as to the completion schedule and finishing date.
And don’t be shy and afraid to request references from previous clients from the last three to five years. Any legitimate contractor will be willing to provide testimonials regarding their work.
- Expect Unexpected Expenses
Anyone who has ever planned to do something knows that – on paper – everything looks terrific. That is until the contractor opens up a wall to find something unexpected – like a hidden beam, electrical work that needs upgrading, or undetected termite damage.
This is because home renovations are not done in a vacuum. One of the ways to prepare for unforeseen expenses is to knowingly pad your renovation budget. Many renovation gurus suggest that a minimum of a 10% buffer be built into the budget; however, some even suggest a buffer of up to 25% over current expense expectations!
- Protect Valuables Against Dirt & Dust
Living through a renovation is likely to be the most challenging part of the process due to the dirt & dust remodeling kicks up, and the personal invasion it causes. The truth is that even the most thorough and meticulous contractors will be unable to prevent dust and dirt from flying about the house.
So, if a homeowner plans on living through a renovation, it is noted that they will have to proactively work to contain the renovation mess to the areas being renovated. This would include:
- Removing anything valuable that is on display or hanging on the walls in most of the home to avoid having to micro-clean these items.
- Sealing off closets properly to protect linens, clothing, or food products.
However, it is critical to be realistic regarding the process of living through a renovation. And, if you believe that it may honestly be too much to handle, you are advised to find somewhere else to live during the renovation, at least during the most critically dirty construction times:
- Take a vacation.
- Rent a furnished place for a short time.
- Spend some time with family or friends.
- Obtain Home Renovation Permits
One of the most common errors a homeowner may make when planning a renovation is that they will not need a obtain a building permit. A building permit is a written authorization that is issued by the local zoning governance board that allows a construction project to move forward legally. Building permits are generally required for most major renovations. Building permits seek to ensure that the work is done in compliance with building codes, and the work is done safely.
While cosmetic repairs are usually completed without seeking permission from the local building department, if a renovation knocks down walls, requires electrical outlets have to be moved, or needs a plumber, it is likely that this renovation will require the application of a building permit.
An experienced contractor will have a full understanding of the local regulations and laws impacting zoning and building permit requirements, which is another prudent reason to select the right contractor.
Choosing to renovate without the required building permits will likely have short- and long-term consequences. If caught by the authorities, the renovation project may have to be delayed (until the appropriate paperwork is obtained), and the homeowner may be required to pay fines for their choice to renovate without the required paperwork.
And, if you think you may have made it through a renovation without the necessary permits, this ‘non-permitted’ work will likely be noticed when selling the home in the future. The consequences may include:
- Finding it challenging to sell the property because of the work that was done illegally.
- Having to walk through the permitting process after the fact, which usually entails additional costs and time, to be able to sell the home.
- Finding it difficult to obtain a mortgage due to this unresolved issue.
How Much Should You Invest When Renovating?
Prior to jumping into a renovation project, it is important to gain an understanding as to which renovations have been shown, historically to yield the highest return, the best bang for your buck. Remember, however, that renovation costs vary significantly by the region of the country.
Remodeling Magazine issued the 2020 Cost vs. Value Report, where it compared renovation projects from 101 markets across the country to determine which project best retains its investment when resold. Here are a few examples to consider.
A Minor Kitchen Renovation
A modern kitchen is a smart way to improve a home’s functionality for the current family or a future family. Kitchen renovations tend to also add value to a property. As noted by Remodeling Magazine, a homeowner might choose to reface cabinets, add stone countertops, and replace appliances with energy-efficient models in a small kitchen renovation. According to the report, a minor kitchen upgrade would cost and return the following:
- The average cost (101 Markets) was $23,452
- The average resale value was $18,206
- The cost that homeowners recouped was 77.6%.
Replacing Siding (Vinyl)
Any experienced real estate professional will tell that old, worn-out siding often makes a great house look dilapidated. The cost for replacing 1,250 square feet with new vinyl siding with all 4/4 and 5/4 trim (a fractional measurement).
- The average cost (101 Markets) was $14,359.
- The average resale value was $10,731.
- The cost that homeowners recouped was 74.7%.
Replacing Windows (Vinyl)
The windows used in this renovation were low-E (an energy-saving feature) simulated-divided-light vinyl windows.
- The average cost (101 Markets) was $17,641.
- The average resale Value was $12,761.
- The cost That homeowners recouped was 72.3%.
Homeowners considering a home renovation must recognize that most home improvement projects hit unexpected snafus and potholes as a regular course of business. Even the most finicky homeowners must be prepared for those moments when things may not go as planned.
As unexpected issues arise, keep things in proper perspective. Approach these moments with a spirit of resolution than to point the finger and offer blame. And, don’t forget when you are feeling stressed to keep your eye on the final prize because, when the construction and dust are gone, you can sit back and enjoy the upgrades your new home has to offer.