Home improvement can be a great way to boost the value of your home, and it can also increase the comfort level of living in it. But be careful not to overdo it and spend more than you can afford to recoup when you sell.
Home improvements can range from minor cosmetic changes to major additions and renovations. Remodeling projects can include adding or removing walls, refinishing floors or putting in new cabinets and countertops. Most remodeling projects are done with an eye toward increasing a home’s resale value. But some improvements may not add the expected resale value because they’re overly personal or don’t fit in with the neighborhood’s style and values.
If you’re considering a home improvement, talk to a real estate agent about what renovations are most likely to pay off. But don’t make a decision solely based on the potential return on investment (ROI).
According to the NerdWallet survey, about 3 in 5 homeowners who did home improvement projects in 2020 did so because they wanted to increase their living space. Other reasons cited included:
Another popular reason to renovate is to add bedrooms or bathrooms, particularly if you have children. Adding a master suite, for example, could be a great way to increase your home’s value and appeal to prospective buyers.
Other popular home improvement projects include turning an attic into a bedroom or finishing the basement. While these projects will probably pay off when you sell, keep in mind that they’re expensive, time-consuming and disruptive. Unless you’re moving to a larger home, it may not be worth the cost and disruption.
One of the most important factors to consider is how much you’ll enjoy your project. You’ll never get 100% of your money back when you sell, but if you choose projects you’ll love, you can at least enjoy them for years to come.
Choosing the right contractor is crucial. You should always check a contractor’s license and references before hiring them. If you’re not sure how to select a good contractor, ask friends and neighbors for recommendations. Then, compare quotes from several contractors. It’s also important to establish a payment schedule and, as much as possible, to withhold final payments until the work is completed and all required inspections and certificates of occupancy are obtained.
The most common financing sources for a home improvement project are cash from savings and loans from family, friends or financial institutions. More expensive projects are often paid for with home equity loans, cash-out refinances or contractor arranged financing. Credit cards are also sometimes used to fund home improvement projects. However, paying for a project with debt is not recommended — it’s too risky and can end up costing you more in the long run. NerdWallet’s home improvement tips can help you avoid getting into debt to finance your project.