Home renovation projects can be an exciting and rewarding way to improve your living space and increase the value of your property. In the past year, I have completed a full gut rehab renovation in a high-cost area full of old housing stock. Throughout the process, I've done a ton of research and learned a lot over the process.
In general, the cost of renovations can quickly escalate, making it important to carefully consider your options and balance the return on investment with your mental and financial well-being.
I strongly encourage you to follow these 8 tips before getting started:
1. Turn-Key vs. Renovation
Before making renovation, you'll need to decide whether to buy a turn-key property or a property that needs renovation. There are pros and cons to both approaches. A turn-key property may have a higher purchase price, but it may save you money in the long run by not having to deal with the stress and costs of a renovation.
On the other hand, a property that needs renovation may have a lower purchase price and may offer greater potential for return on investment, but will require more time, effort, and money to bring it up to your standards.
In my case, as a result of the extreme housing shortage in my area, I chose the renovation path over the fierce competition for turn-key homes (which frequently required outrageous overbids). I was also able to fully customize the space to meet my needs: I tear down most walls, redid all the floor plan, created a loft style living room and transformed the unfinished attic to a master suite with a balcony and amazing skyline view.
2. Assess Your Needs and Goals
Once you decided to do renovation, the first step is to assess your needs and goals.
What are you trying to achieve with the renovation? Are you looking to increase the value of your property, improve your living space, or both?
Knowing what you want to achieve can help you make informed decisions about the type of renovation to undertake and the budget you'll need.
3. Determine Your Budget
Once you've assessed your needs and goals, it's time to determine your budget. In a high-cost area, you may need to be more realistic about what you can afford. Consider the scope of the renovation, the materials you want to use, and the cost of labor. It's important to set a budget that you're comfortable with, so you don't overextend yourself financially.
4. Choose the Type of Renovation
There are several types of renovation projects, from basic remodeling to full gut rehabs. Each has its own advantages and disadvantages, and the type of renovation you choose will depend on your needs and budget. For example, a basic remodeling project may be more affordable but may not achieve the level of improvement you're looking for.
A full gut rehab, tearing down to the studs and only keeping the main structure, on the other hand, may be more expensive but can provide a complete transformation of your living space.
5. Evaluate different Financing Options
There are several financing options for home improvement, including:
Home Equity Line of Credit (HELOC): This is a revolving line of credit that uses your home as collateral. It usually has a variable interest rate and a set draw period.
Home Equity Loan: This is a fixed-rate loan that uses your home as collateral. You receive the money upfront and make fixed payments over a set term.
Personal Loan: This is an unsecured loan that can be used for any purpose, including home improvement. The interest rate is usually higher than a home equity loan or HELOC, and the loan amount is smaller.
Cash-Out Refinance: This is a new mortgage that replaces your existing one and allows you to borrow more than you currently owe. The excess cash can be used for home improvements.
It's important to carefully consider the pros and cons of each option and choose the one that best fits your financial situation and goals. It's also a good idea to consult with a financial advisor or mortgage professional to help you make an informed decision.
6. Balance ROI with Mental and Financial Well-being
While return on investment (ROI) is an important factor to consider, it's not the only one. It's important to balance the potential ROI with your mental and financial well-being.
For example, if a full gut rehab will provide a high ROI but will be too stressful and financially draining, it may not be worth it. On the other hand, a more affordable remodeling project that improves your living space and reduces stress may be a better option
7. Work with Experienced Professionals
Finally, it's important to work with experienced professionals when undertaking a home renovation project. A qualified general contractor can provide you with a detailed estimate and help you manage the renovation process from start to finish.
Be sure to get multiple quotes from different contractors, check their references, and verify that they are properly licensed and insured. This will help ensure that you are getting a fair price and that your renovation project is completed to your satisfaction. You can also ask different contractors to visit the site during construction, and get feedback from different perspectives.
8. Do Your Own Research
There are many great websites, blogs, and podcasts available for home renovation and investment. Here are a few of my recommendations:
Houzz.com: Provides a wealth of information and inspiration on home design and renovation, with a focus on photos and user-generated content.
BiggerPockets: A real estate investing forum with a focus on rental properties and house flipping. It also has a podcast that features interviews with real estate investors and experts on a variety of topics related to investing.
Remodelista.com: Offers a curated collection of design inspiration and resources for home renovation and improvement.
ThisOldHouse.com: A trusted source for home renovation and improvement information, including how-to guides and videos.
Young House Love: A blog by a couple who chronicles their home renovation projects and shares design tips and inspiration.
The Chaise Lounge: A podcast focused on the business of interior design, featuring interviews with successful designers and industry leader
In conclusion, home renovation projects, especially in a high-cost area require careful planning and consideration. I hope you learn something from my tips, and complete a renovation project that enhances your living space, improving your mental and financial well-being.