On a similar note...
On a similar note...
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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.
This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from Aug. 18-20, 2020, among 1,414 U.S. homeowners ages 18 and older, among whom 883 have done home improvement projects since March 1, 2020. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Anna Palagi at [email protected]