Home Renovations Can Make Money

If you’d like to sell your home, undertaking some much-needed renovations can improve the value of your property. Your realtor is a great source of advice about what type of renovations really make a difference in the selling price of your home. While some types of renovations are essential before putting your home on the market, others may be viewed merely as “fluff” that may look nice, but aren’t crucial for the overall integrity of your property.

Is it possible to add value to your home through renovations? Answering this question depends on the home and the renovation project, but for the most part, yes it is possible. Stores like Home Depot and other home renovation retailers see billions of dollars each year spent on updating homes. This is a clear indicator of the frequency of home renovations, but lets take a look at some figures before judging the success of a renovation project. As a smart homeowner it is best to plan first; look at how much you want to spend and realistically how much value the project will add to the house.

A typical bathroom remodel costs somewhere around $11,000. Sure this may be a bit pricey for some, but consider that on average that same typical bathroom remodel added just over $11,000 worth of value to the home. After a quick calculation in your head it is easy to see that a homeowner can recoup over 100% of their costs. Projects that take place in other rooms throughout the house show somewhat similar results.

Research printed in the National Association of Realtors and Remodeling magazine shows that most homeowners can rationally expect to recover their home renovation costs if they plan carefully. For example a middle of the road remodel of one’s kitchen costs $43,000 on average and can add value of about $40,000. This is a better than 90% recovery of funds.

A common renovation for older homes is replacing old windows with newer, more efficient windows. In a mid-sized home this would cost about $9,500 and add somewhere around $8,600 of value to a home. In comparison renovating a master bedroom on average would cost $76,000 and recover about 85% of that money. If you are looking for an addition, a family room would cost around $55,000 and return about $45,000, or 83% of the value.

Home offices are a wonderful renovation that returns an average of 73% recoup of your initial renovation costs. Compared to bathroom renovations recoups, you’ll need to consider the best room in your home to renovate and will bring the most selling power to your home. What renovations should you sink your money into that will help you sell your home?

While home renovations can significantly add to the selling price of your home, the best renovations are those you do because you love your home and want to present it in the best light possible, to a buyer that will love the home just the way you did.

DIY Home Renovation Tips

Home renovation often increases property value. This is one of the most common reasons for renovations, in addition to updating a home and making it more suited to your personal tastes. When it comes to renovations, some homeowners opt to utilise the services of professional contractors. Renovation projects can be very costly, especially where you enlist the services of a professional builder, interior designer or other specialist. This is why some people prefer DIY (do it yourself) renovations, which can be more cost effective, especially where you have the skills to do some of the tasks. So if you are thinking of DIY home renovations, here is a list of renovation tips that may help you renovate your home.

Plan

Having a plan for each step of your renovation allows you to renovate in a more cost effective manner, giving you the ability to budget accordingly before you start the project; an outline of the project will help during the renovations.

Appropriating funds from your budget is extremely important. Kitchens and bathrooms are huge selling points in a house, which means you should spend the bulk of your time and resources renovating those rooms. Often a new coat of paint or new carpet can change the entire look of your bedroom and living rooms, and both are relatively inexpensive ways to improve a place.

If you are looking to increase the property value, talk to a realtor before you start your renovations. Your realtor can provide you with insight as to which renovations are worth the money and which ones will not turn a profit. Additionally, your realtor can provide you with current real estate trends so you can see what aspects of a house are selling points with buyers and which ones are not.

Improve instead of renovate

Before you start the project, think about what you want and decide whether or not you have to replace things or simply reface them. For example, if you are renovating your kitchen, ask yourself if you need all new cabinets or if painting or staining your current cabinets will provide your kitchen with the update you are looking for. In addition, you can remove the doors of your current cabinets and attach new ones for far less than the price of installing a complete cabinet system.

Cost

One of the biggest costs in renovating your house comes from materials. By purchasing and transporting materials on your own you can save hundreds of dollars. A contractor or other third party will charge you delivery fees among other hidden fees to pick up and deliver materials to your home. In addition, doing this yourself gives you the option of shopping around, comparing costs and finding items on sale or clearance.

The best way to reduce cost is to go to places and source second hand building material. If you can’t access used materials, then head to thrift stores or larger outdoor stores that sell cheaper items.

Design

Creating a design for your renovation is perhaps the most important aspect in the remodelling process. Use resources of the internet to get an idea of how you want to design things and speak to professionals to get expert advice and tips on how best to approach the renovation and how to work with the space that you have.

Extra help

Some renovations will inevitable require the use of a contractor. If you are not accustomed to working with plumbing or cabinetry, it is wise to invest in a contractor to handle those aspects of the renovation for you. The low cost of doing it yourself is gone, but not knowing what you are doing can cost you a significant amount of extra money in the long run! If you must go the route of hiring a contractor, you can still get things done cheaply by doing smaller tasks yourself. For example, if you hire a contractor to handle your new kitchen, you can paint the kitchen yourself, which will save you several hundred dollars.

Consider these tips!

Before you start your renovation project, consider these DIY home renovation tips. Each will save you time and money on your renovation. Adhering to them will help you increase the property value of your home and maximise your profits by allowing you to see a return on the money you spent remodelling, should you decide to sell your home.

Home Renovations a Place to Start

Whether you are considering a home renovation because you want to sell your home or because you want to update it, you may be wondering where to find home renovation ideas. You probably already have a picture in your head of what you might want your new look to be, but is it a total picture?

Most people who decide to renovate their homes only think of a few things they want to do, and then they are stuck. You might know that you want new cabinets and countertops for your kitchen renovations, but you have no idea what kind of cabinets you want, and what about flooring, walls, appliances, etc.? You will need to have a total picture of the home renovation ideas you want before you can move on, or even come up with a budget for it.

The first thing you will want to do is forget about your budget – just during the idea phase. You might be surprised to know that most home renovations can be done for far less than you think. Get your ideas first and then you can try to work your ideas into your budget. You can do this by shopping around for the best prices. Also, the more work you can do yourself, the more money you can save.

What will you be renovating, the kitchen, bathroom, exterior, or the whole house? Write it all down on a legal pad – one page for each part of the house you will be renovating. Now, go out and buy some home interior decorating magazines and search online for ideas that best fit what you have already got in mind. Cut out your favorites, or print them, even if it is just a little something that you especially liked. If you found a photo of bathroom renovations and you really liked a particular style of showerhead, cut it out.

Place your cut-outs and printed ideas with the page of your legal pad that you started. Use envelopes or paperclips for this so you don’t lose anything. This process of gathering home renovating ideas can take quite a while until you have found the combinations of ideas that you can work with.

Once you have gathered and chosen your home renovation ideas, it is time to decide on a budget. Set a budget for your kitchen renovations, your bathroom renovations, your living room renovations, and so on. Once you start renovating your home, start with the part of the home with the lowest budget. This is likely to be the living room or bedrooms as they will likely only require paint, trim and flooring.

Assuming you are starting with the bedroom renovations first, shop around for the materials that you need and find the best prices. You are very likely to come in under budget for the project. You can then move the money from that budget that you didn’t spend on to the next lowest budget.

If you can continue to come in under budget on the smaller projects, you will have quite a nice budget for the larger, more expensive projects that you are likely to also have the biggest home renovation ideas for.

Home Renovation Mortgages – A Growing Component of Canadian Mortgages

Home renovation mortgages – smaller and more easily financed than the larger mortgages used to finance new home construction for what have been disparagingly dubbed ‘McMansions’ – are likely to be a growing component of the Canadian mortgages market as the baby boom generation enters into retirement. Canadians may be increasingly investing in home renovations and upgrades rather than building new, ‘greenfield’ homes – or so statistics for 2007 released by the Canadian Mortgage and Housing Corporation, Canada’s federal mortgage insurer, seem to indicate. And this, before Canadian homeowners witnessed secondhand the implosion of the U.S. housing market.

According to the CMHC’s Renovation and Home Purchase Report released in May of 2008, homeowners in Canada’s ten major urban centres spent over $19.7 billion on home renovations in 2007 – and that is only in Canada’s largest urban centres, not the smaller cities, suburbs, towns and villages scattered coast to coast. According to the CMHC’s estimates, “1.5 million households in ten of Canada’s major centres indicated they had completed some form of renovation in 2007.” To break those numbers down further, that represents 37 percent of all homeowner households in these major centres, with 31% of such households undertaking renovations that cost in excess of $1,000 Cdn.

Statistics across Canada’s five major regional centres – Vancouver, Calgary, Toronto, Montreal and Halifax – shows that the average amount spent on home renovations in 2007 was $13,200 Cdn, slightly above the $12,800 average for all ten major regional centres. That’s not McMansion money, but neither is it chump change or a mere trifling amount.

So why do Canadians invest so heavily in home renovations? “The main reason given by households for renovating in 2007,” according to the CMHC, “was to update, add value or to prepare to sell – 59 per cent. (While) 27 per cent of respondents stated that the main reason for renovating was that their home needed repairs.”

Accordingly, the top three reasons cited by the CMHC for renovations completed in 2007 were:

o Remodeling rooms – 31 per cent

o Painting or wallpapering – 27 per cent

o Hard surface flooring and wall-to-wall carpeting – 26 per cent.

These numbers, while interesting, fall somewhat short of getting to the incentives that spurred almost 2 out of 5 Canadian homeowners (to the extent that statistics for Canada’s major centers are fairly representative of homeowners across the country) to undertake major home repairs – repairs that averaged close to $13,00 Cdn. a pop.
A somewhat broader grouping of these home renovation statistics, however, may be helpful for teasing out the incentives for this level of renovations spending.

Statistics Canada, the federal government agency that assisted CMHC in compiling the numbers for the 2008 Renovation and Home Purchase Report, breaks home renovations down into two contrasting sub-groupings: alterations and improvements versus maintenance and repair. Maintenance and repairs, as the term suggests, consists of any work undertaken “to keep a property in good working condition or maintain its appearance,” while alterations and improvements are work dome “to increase the enjoyment, value or useful life of the property.”

Amongst those surveyed homeowners who did some form of renovations in 2007, according to the CMHC’s numbers, “three quarters did some form of alteration and improvement to their home, while 42 percent did maintenance and repairs.” (At first blush, the numbers don’t add to one hundred, but stats show that 18% of renovating households did maintenance and repair as well as alteration and improvement renovations.)

The predominance of households undertaking home renovations to enhance “the enjoyment, value or useful life” of their homes indicates the importance of the investment these Canadians have made in their homes. Given that 2007 was a peak boom year in terms of increased home values, its not surprising that Canadians pushed so much money back into what for many, if not most, is their biggest single investment. Look for continued growth in this area of spending as housing and real estate markets settle into more sustainable levels of growth than we have seen in the past decade.

With Canadian housing and real estate markets coming off their largest post-World War II boom, and with baby boomers increasingly feathering their nests (so to speak) for retirement, we can most likely expect the spread of McMansions to slow somewhat, while more and more Canadians tap into home renovation mortgages to enhance the enjoyment, value and usefulness of the home .

How to Finance Your Home Renovations – Whether to Dip Into Savings Or Secure a Home Equity Loan

The reasons for undertaking home renovations are varied. Many homeowners want to modernize or update the look of their homes for their own comfort and enjoyment. Some, rightly, view their home as an investment and want to increase the resale value of their home should they decide to sell. In today’s environmentally-conscious times, many homeowners are now undertaking home renovations to increase the energy efficiency of a house. Their investment in home renovations converts into a smaller “carbon-footprint” and long-term savings in energy consumption and costs.

Whatever the reason, homeowners planning home renovations should consider both their costs and their financing options before beginning their project.

Options for Financing Home Renovations

As with any investment, the financing option you choose depends on the size of the project and your current financial situation. Financing options can range from dipping into your pocket or savings and paying cash for smaller projects such as painting and wallpapering, to tapping into a line of credit, taking out a line of credit or even refinancing a mortgage for larger renovations that can range from bathroom do-overs to adding additions to existing homes.

Here are some of the more common options for financing home renovations, both large and small:

Financing Minor Home Renovations

Self-Financing – This option makes sense for smaller projects. It is also a feasible option for do-it-yourselfers on a pay-as-you-go (or pay-as-you-build) plan.

Credit Cards – Charging large expenses to a credit card is an option, but not necessarily a good one. With their higher interest rates, credit cards have limited value in home renovation projects, and can be damaging to your financial health if there are unexpected cost overruns. (A do-it-yourself installation of a tub surround in your bathroom can turn expensive if your plumbing skills are not as honed as you would have liked them to be and you notice water dripping through your living room ceiling!)

Loans and Lines of Credit – These are popular options that offer interest rates substantially lower than those charged for credit cards, but often higher than those of home equity loans. One disadvantage of personal loans is that once they are repaid you need to reapply to obtain more funding. Lines of credit are ongoing, up to the credit limit, so there is no need to reapply if you need more funds. (A line of credit with room on it above and beyond the cost or the renovation will come in handy on a plumbing job gone bad – see above.)

Financing Major Home Renovations

Home Equity Loans – These loans allow you to leverage the equity in your home. They are often used to fund major renovations because they offer the needed capital at a much lower interest rate than credit cards or other types of loans. Typically a home equity loan, which can be structured as a line of credit secured against your home’s existing equity, is limited to 80% of your home’s value, but a mortgage broker can often work for you to secure loans of up to 95% of your home’s value. With home equity loans, there may be some setup costs, but like lines of credit, there is room to allow for cost overruns and unexpected expenses.

Mortgage Refinancing – If you are planning major renovations, like adding an addition or in-law suite, it may pay to refinance your mortgage. With this option you can spread the payments out over a longer period and enjoy mortgage rates that are normally much lower than those of credit cards, lines of credit or personal loans. As with home equity loans, there may be some initial fees to refinance.

New Purchases – If you are buying a new home that has already been built or is a resale, and know that you want to make improvements it will probably make sense to include anticipated renovation costs in your mortgage. A mortgage broker can help you shop around for the most favorable rate. If you are having your home built a mortgage broker can work with you to find a construction loan that fits your anticipated building schedule. You don’t want to be borrowing and paying interest on the entire project up front. A construction loan that allows you to draw down the cash that is need for each phase of your home’s construction as it is needed will have significant cost savings over the time it takes to build your dream home

Other Tips for Financing Home Renovations

Unfortunately, cost overruns are common with home renovations. When budgeting for your home renovation, be sure to leave a contingency fund for overruns or other unforeseen expenses. And as the project proceeds, you may discover that you want to add new items to the renovation, so having a little extra cash on hand is a good idea.

Consult the Experts When Financing Home Renovations

Always plan ahead and try to be accurate about the costs of your home renovations. If you are making major changes, a mortgage broker can help you decide on which home equity options are best for you.

Home Renovation – Increase Your Profit Using Value Engineering

The concept of value engineering in renovation has never been more essential than it is today. At the start of 2009 we can still hear all sort of commotion about slow economy and troubles in the real estate market. All this should awaken renovators who are planning to increase the value of their homes, that a small miss-calculation or an over-renovation could easily destroy their profit or worse result in a complete loss.

Let me be clear, slow economy and slow real estate market does not mean that you can not remodel your home to increase its value. What it means is that you need to know what to renovate and how much to renovate in order to turn a good profit. At first sight this may seem simple; however, there is more involved than a simple question from your local renovator. To fully maximize your profit you need to understand value engineering in regard to home renovation.

Simply put value engineering in respect to home renovation is the process by which you analyze to determine what renovations will bring in the most profit for your home. Here we are going to quickly discuss the steps that must be taken to determine how to maximize your profit.

1) The first step in this process is to determine the market value of your home as well as market value of renovated homes similar to your home in your area. This is done to find out whether there is any room to profit. If the price for your un-renovated home is close to the price of a renovated similar home nearby, renovation could be a waste of time and money.

Remember, the key words are “similar homes” and “in your area”. There is no point comparing your home that is built on a 20 x 100 parcel of land to a home built on a 5 acre land as you are not able to stretch the size of your land. Also the comparables that you choose must be near your home, preferably on the same street or just few homes down the road from your home. You can obtain market value of these renovated homes from your local real estate office or from a qualified appraiser.

2) The second step is to determine how much value each renovation adds to your home. This information can be obtained from your local real estate office or a qualified appraiser. Real estate salespersons and appraisers for most part use a process called CMA (comparable market analysis) to determine your home value. In short the appraiser looks at similar properties sold recently near your home.

Using his/her extensive database, the appraiser is able to adjust the price based on the condition of various areas of your home as well as any new additions. For example the database indicates that an additional second bathroom in your area increases home value by $8000, updated kitchen increase value by $6000, Second garage does not impact the value and etc. This is how your local real estate salesperson is able to price out your home.

3) The third step is to determine the cost for each renovation. Make sure to get price estimate from at least three qualified contractors

4) The final step is to analyze your findings in step 2 and step 3 to determine what renovation(s) will yield the most profit.

How to Start a Home Renovation Business

A home renovation business remains fairly profitable irrespective of the state of the economy. During an economic downturn, owners undertake improvements to increase the home value. On the other hand, during an economic upswing, homeowners opt to renovate their homes instead of buying new high-priced ones.

Individuals desiring to start a home improvement business need not necessarily be experts or qualified home building professionals. The actual renovation work can be outsourced to other professionals and skilled laborers. Nonetheless, home renovation owners need to possess the skills necessary to supervise the work. What to do:

• Forming the business – A person wanting to commence a renovation business needs to decide on the form and structure of the company. The business owner can hire a lawyer to prepare a draft of the company’s articles of ownership or visit a legal site online and draft the articles. These have to be filed with the state office where the business is formed.

• Getting the license – The licensing laws are different for each state. However, a general applicable law is to procure a general contractor license or a license as a home renovator/remodeler. For exact details, contact your state’s local business department that provides all the relevant information and the applicable fees.

• Procuring the insurance – A licensed insurance broker can provide all the relevant and applicable insurance laws for a property renovation business. Generally, insurance coverage for any liabilities arising during the renovation is required. Additionally, the home renovation business owner may be required to have a bond to operate.

• Liaison with sub-contractors – Renovating a home requires professionals with numerous technical skills. To offer a complete home renovation package, owners need the services of technicians, such as plumbers, electricians, HVAC consultants, masons and carpenters. Checking the local telephone directory to find suitable contractors to sub-contract the work can be an option. Additionally, the business owner can contact the state’s professional licensing division to procure information on the registered service providers within the area.

• Acquiring the equipment – A property improvement business requires a substantial investment in various equipment such as saws, routers, ladders, levers, extension cords and many others. Procuring these supplies or contracting an equipment provider is crucial for the timely completion of the work.

• Materials procurement and scheduling – The business owner should open a credit line with material suppliers to ensure a continuous and timely supply of building materials. Another important aspect is to schedule deliveries from various sub-contractors onsite as required. Material delivery can affect the renovation time frame.

Once you have done the necessary leg work to set-up a home renovation business, marketing the business is the next important part. Contacting local home inspectors, architects, insurance providers and lenders can assist owners to gain projects. Advertising in various media like print, radio or online is also beneficial.