Are You Overspending on Your Home Renovations? - If you're like most other homeowners, anytime you spend money on your home, you worry if it will cost too much – and if the renovations and repairs are actually worth the investment! Knowing which renovations are needed, and how much you should spend on them, can be the difference between increasing and diminishing your home's resale value.
So, how do you know if you're overspending on your home renovations?
Experts say that's always a tricky question to answer, but they have some tips that might help in your decision-making process.
First, you have to decide if you're making the renovations in hopes of reselling the home, or if you'd like to make some changes that will help you better enjoy the home yourself. If the changes are for your likes, wants, needs, etc., you have a little bit more flexibility – but keep in mind, you never know what the future holds. Even if you’re not planning on selling the home now, you may have to do so down the road. Designers say that you can customize the home, but that you shouldn't make any changes that could hurt the resale value later.
If you're renovating because you intend to sell the home right away, there are a few rules of thumb that can help you make sure you aren't overspending:
First, never make renovations that cost more than 20% of the home's total value. Realtors say if you spend more than one-fifth of what the home is worth, it's unlikely that you'll ever see a full return on your investment.
Also, you don't want to make so many renovations that it becomes the most expensive home in your neighborhood. Homes on either end of the price spectrum (meaning the highest and lowest-priced properties within a community) typically have a lower resale value. Buyers’ agents know this, and often tell their clients to avoid purchasing these homes. In other words, it's much harder to sell a home that’s worth $400,000 in a community where the rest of the homes are worth $200,000-$250,000.
If you're not just making changes to the existing structure – but are actually adding onto the home – there is also a way that you can tell if you're spending too much on renovations. Builders say you need to calculate the cost per square footage. To do it, simply take the total cost for the project and divide it by the square footage that you are adding on during the expansion. Then, compare that number to the cost per square footage of homes for sale in your area. If your number is higher, you're paying too much!
Of course, all of these guidelines are simply suggestions, and there are always exceptions to any rule. The best advice we can give you is to always ask yourself if a renovation is going to increase the home's value in the long run.
For example, if every home in your neighborhood has a back deck, but yours does not, it's something you should consider. Walk-in closets and extra storage space are always at the top of buyers’ wish lists, so those additions never hurt either.
Other rules aside, the biggest piece of advice is to always make the necessary renovations before making cosmetic ones. So if your roof is in need of repairs, you need to take care of them before you change the color of paint in your kitchen.
By following these suggestions, guidelines, and tips, you should be able to remodel your home without having to worry if you're paying too much for it!
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