Remodel or Move
Most homeowners will sooner or later give serious thought to remodeling.
Recently, a homeowner contemplated doing a costly renovation to a small,
two-bedroom home. The major expense was the kitchen, which was only
marginally functional. For more space, walls had to be knocked out. The
engineering that was required to do this ran the cost of the kitchen up to
$100,000. Does it make sense to make such costly renovations if you don't
increase the square footage of the house in the process?
Before you can make a decision, you need to know the approximate current
value of your home. The easiest way to get this information is to call your
real estate agent and ask for a current market evaluation of your property.
One quick phone call to your agent may be all it takes to decide whether or
not to proceed with your plans.
A general rule-of-thumb for remodeling is to make sure that you don't
over-improve your home for the neighborhood. If the renovation tab in the
above example were to escalate to $300,000, you could risk over-improving
for the neighborhood. It's not a good idea, from an investment standpoint,
to improve your home to the point that it's best house on the block. Market
price is held back somewhat by the lower-priced homes on the block.
Your real estate agent can help you to determine if you will be
over-improving for the neighborhood. Ask for comparable sales information
for listings in the neighborhood that you foresee will be similar to your
home after it's remodeled. If the comparables sold for less than the amount
of the current value of your home plus the cost of the renovation, you may
be spending too much on the remodel.
Home Seller Tip: Keep in mind that you usually don't recoup 100
percent on a major renovation if you sell immediately after the work is
done. Just as it's risky to buy a home if you plan on moving again soon,
it's also better to postpone a major remodel if you're personal life or
financial situation is uncertain.
The disruption of remodeling can be murderous on relationships. If the
construction will take the kitchen and baths out of commission, consider
moving to an interim rental for the duration. The cost of maintaining two
homes should be factored into your budget.
Before embarking on a big remodeling
project, find out what kind of home you can buy for the same investment.
You may find that for the same amount you plan to invest in remodeling, you
can buy a larger, more comfortable home that will provide more appreciation
potential in the long run.
For instance, let's say you own a two-bedroom home that's worth $600,000. If
you invest $100,000 in a kitchen remodel, you'll still only have a
two-bedroom house. If you can find a suitable three-bedroom replacement home
for $700,000, you might be better off selling your home and buying the
larger one.
Copyright 2004-2006 Dian Hymer. Distributed by Inman News.
If you are looking for a home remodeling contractor in New Jersey,
then please call Ron (856.981.7569) or Joe ( 267-471-1998) today or
complete our online
estimate form.
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