If you are a homeowner then you understand why home renovation is important. First and foremost it adds value to your property. The simple act of replacing an outdated garage door for instance will recover over 98% of the costs incurred. Other renovations can give you an even higher return according to the Cost vs. Value Report. Furthermore, renovations make your home more comfortable, energy-efficient, modern (if new technologies are adapted), and perhaps even bigger. Best of all, it offers a sense of satisfaction at having created a space that is secure and relaxing.
Best Home Renovations for Resale
Where modern home renovations are concerned, the money you invest will not always be recovered at the time of sale. It is a given that people want the best possible value for the time & money they invest in home renovations. So when it comes to selling, the highest possible price can be demanded. The crucial point then is to know which home renovations to put your money in.
Just because you spend a ton of money in remodeling your home, it does not necessarily mean that it will add value to the house.
If you need to replace electrical wiring or plumbing, chances are that you won’t see much of a return. This is because the person purchasing the house expects these to be in top condition.
If you want to add value to your property, then it is vital that the focus is on things that will appeal to the buyer. It is also important that you do not go overboard with your home improvements. Having the most expensive property in a low-cost neighborhood can make selling it difficult.
So what are some potential home improvements that will add value to your property?
Making a living space brighter always adds appeal.
You can achieve this in a number of ways. Before embarking on a renovation project, consider what your budget and the structure of the building will allow. Repaint using a white or very light shade of paint, use strategically placed lighting, make an existing window larger, or tear down a wall so space is more open and bright. Combining an open kitchen with dining and living spaces ideally suits today’s modern lifestyle.
Having a home office is a need of the day.
The number of people who work from home is growing by the year. Even if we take the Covid situation out of the equation, companies are now more conscious of the carbon footprint they leave behind and also want to cut down on costs. So converting an unused space into a dedicated workspace can add value to your home and provide some tax relief. Make certain that there is plenty of space for filing cabinets, a workspace, additional data ports, and phone lines. This will make the space more usable as an office.
First impressions are always lasting and the first thing a potential buyer sees is the outside of your house.
Chances are that if the outside is shabby and rundown, the interest of the potential customer dwindles. Bankrate.com states that a positive first impression can add as much as 10% to your home value. When renovating your house, do not underestimate the value of fixing the shutters, paving a driveway, or having a manicured front yard.
Home Renovation Costs
When considering renovating your house, one of the very first questions that come to mind is how much does a typical home renovation costs. Well, that really depends on how much renovation you want to be done. You can begin with something as basic as a paint job and go all the way to razing the whole house and rebuilding it!
When trying to come up with the cost of renovating a home, one of the major contributing factors is the area in which you live. Other factors include the condition of the property, age, square feet being renovated, and most obviously the quality of items being replaced. Starting with the most mundane jobs like paint, moving to floor, appliances, and fixtures, the price range varies tremendously depending on the quality.
The first step when considering home renovation ideas is to decide your needs versus wants. Make a priority list of everything that must be done because it is worn out or broken and prioritize the list.
Next, employ free resources like HomeAdvisor and get estimates for plumbers, engineers, and handymen in your region. Typically labor costs make up around 30 to 35% of the project cost. Also, do some online window shopping and estimate the cost of things needed, like fixtures, flooring, knobs, paint, nails, etc. Factor in for things like not being able to use the kitchen and having to order in, or perhaps even having to spend some nights in a motel.
Lastly, do not forget that you will have to pay to dispose of the waste materials removed from the house. The more detailed your plan is, the better the chances of staying true to your budget.
Finally, keep in mind that despite the best-laid plans, staying within budget is still going to be a major challenge. Hence, have money set aside for unforeseen expenses.
How Much Should I Spend on a Home Renovation?
New homeowners generally have no idea of the cost of renovations or costs necessary for the maintenance of a house. It is generally recommended that you follow the 1% rule. This rule recommends that you set aside 1% of the market value of your house. Currently, the average value of a house in the U.S is slightly over $ 300,000. This means you should set aside around $3,000 annually for renovations and maintenance. This rule provides a very basic estimate.
If your house is old with ancient materials and finishing, or the climate in your location is harsh then this amount will not be sufficient. It will be more appropriate to set aside 2 to 3% of the value of your home.
There are a few other factors are worth considering when trying to calculate the average cost of renovations.
For example, if you plan to live in your home for over five years, then the approach should be to invest in what is affordable and go for upgrades you desire. In this case, you may want to limit what you invest. On the other hand, if you intend to sell, then the focus should be on getting a maximum return back. This means you may be willing to spend a little extra because you will get a good return on your money.
Another factor affecting the average cost of renovations per square foot is the location of your house. The renovation of a house in New York City will cost nearly twice as much as a comparable renovation in say Denver.
What Home Renovations are Tax Deductible?
Before you can claim any tax refund, make sure you understand the difference between home improvement and home repair. Generally speaking, there are very few exceptions where you can get some kind of a tax break with home repairs. There is a better chance of getting a tax break with home improvements.
IRS defines home improvement as something that will add value to your home, extend its life or adapt it to new use. Improvements that increase energy efficiency like solar-generated water heaters, or double/triple panel windows will allow you to claim some tax credit.
The home repair will only simply reinstate the original value or condition of the house, which is usually not tax-deductible. Any renovations made to enhance the resale value of the property can be claimed, but such deductions will have to be spread over time. Examples of such renovations would be adding a security system, landscaping or adding a swimming pool.
The cost of home renovations based on medical requirements can too be deducted from taxes to some degree. Not only that, but you may also claim any expenses related to maintaining and operating these facilities. Handguards, ramps for the wheelchair, widening of doors or hall, installation of wheelchair elevator, etc.
It is a good idea to consult with your tax professional before undertaking any major repairs. Once you know what renovations will earn you a tax credit, you can keep a detailed track of the expenses incurred. This will make it very easy to verify claims at tax time.
Undertaking a home renovation can be a big challenge. Knowledge of how much to spend on home renovations, which renovations will add value, and if the tax credit is possible can help make the final decisions easier. The key to successful home renovations lies in planning and budgeting. The more information you have before starting your project, the better you can deal with any issues that may arise.
