Remodeling is a great way to improve your home and raise its market value. However, without clearly thinking the process through, you can spend a lot of money and still end up with a space that doesn’t work. Americans spend $340 billion annually on remodeling, according to the National Association of Realtors (NAR).
Main Reasons People Renovate
The NAR survey discovered that only 35-percent of homeowners prefer to move rather than remodel. Most people say they are willing to renovate an existing home to meet their needs or preferences, and here are the main reasons they choose to do so:
- Improved functionality
- Preparing the house for sale
- Upgrading an outdated design
- Adding space to accommodate a growing family
Should You Stay or Should You Go?
According to the National Association of Homebuilders, Americans are remodeling enthusiastically, with the last three quarters of 2017 showing a continuing upward trend. The Census also reports that 40 percent of renovations are major upgrades or additions, costing over $25,000 each.
With that much money at stake, how do you decide whether to spend the money or move?
The first thing to consider is whether renovating the property would make you want to stay. Can you update the design to make your home match personal preferences or make it more comfortable for your family? Does it make logistic sense to add additional space to your home on the current property?
If you can’t answer yes to these questions, then a renovation isn’t likely to keep you in the home long-term, so you need to consider whether a remodel is necessary to sell the home. What do you have to fix in the space for the home to be competitive on the market and net you the best possible return on your investment?
For example, if you want a home that’s more technological, you might be able to renovate your existing space. Remote entry, real-time security system alerts and even wireless control of HVAC systems are all options that can be installed in existing structures, so you don’t have to ditch a space you love to buy a new home that’s already equipped with Smart Home features. On the other hand, if you need two more bedrooms or lifestyle changes mean you prefer a range to a bilevel, you might be better off looking into buying something else.
It’s important to understand the answers to these questions, because they drive what you change about your space. If you plan to stay in the space, you can renovate whatever means the most to you; if you plan to sell the home, you need to remodel the areas that add the greatest value on the market.
Remodeling When You Plan to Stay
You can take a long-term approach to renovations if you plan to stay, considering more extensive renovations that increase your enjoyment of your home.
You’re statistically likely to be happy with the results — 75 percent of owners in the NAR survey said they were happy with renos. You do still want to invest in the rooms that yield the best return. If a particular area of your home requires repairs, that trumps style or preference needs. Barring that, here’s where you should focus your budget.
Modernizing your kitchen with new flooring, upgraded cabinetry, appliances and countertops costs $35,000 to $65,000 for major upgrades and rebuilds. However, it’s a room you spend a lot of time in, and opening up the space or improving functionality can have a big impact on quality of life. You also get between 57 and 62 percent of that back in resale value.
Top reasons for renovating your bathroom include upgrading worn finishes and flooring, replacing plumbing and fixtures and installing fancier bath and shower facilities. When you replace toilets and sinks, you potentially increase the cleanliness of a much-used space and have the added benefit of creating a healthier home.
The National Association of the Remodeling Industry estimates the average bathroom renovation at $30,000, while REALTORS® said the average cost recovered comes in at $15,000. That’s a 50 percent return on investment if you sell your home after a bathroom remodel. This is a definitive win in one of the most critiqued rooms in your home.
Refinishing Your Basement for Bedrooms or Living Area
If your family is growing and space is an issue, consider a basement remodel. It’s pricey and has an average cost of $40,000. However, you get about a 63 percent return on your investment. You might also create a separate entrance once children leave home and convert it to a rental space for increased return.
Spaces to Remodel if You Go
If you opt to move instead of remodeling your existing home, you might still need some renovations in the space. Many professionals recommend refinishing hardwood floors before listing a home, and it’s always a good idea to put fresh paint on the walls. You’ll also want to fix anything major that could keep potential buyers from making an offer.
If you’re already thinking about remodeling, it’s probably because you aren’t happy living in the existing space. Make it happen if you can, or consider making minor upgrades and selling the home. Partnering with a reputable appraiser costs a few hundred dollars but gives you a neutral assessment of what needs immediate attention before you list the property.
Kris Lamey is a real estate agent and investor in South Florida who specializes in purchases of distressed property for resale.