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Renovation Reservations

MoneyWise

Christian talk radio with Rob West

September 23, 2022

If you’ve been putting off a home renovation project due to the sky high cost of building materials, there’s some good news. Prices have actually gone down a bit for one major building material. The bad news it continues to rise for many others. We’ll talk about that and some renovation projects you might want to think twice about today on MoneyWise. Overall cost of building materials continues to rise. It was up half a percent in July, the latest month that figures are available. But the price of lumber actually fell nearly two and a half percent, helping to at least moderate a bit the cost of home construction and renovation projects. The bottom line is, if you can wait, even as much as another year before taking on a major remodeling project, you could save some money. New home construction is down nearly 19-percent from a year ago, and that should help bring down the cost of building materials in the coming months. Now, about those remodeling projects. While it’s true that most of them will increase the value of your home, that’s only one part of the equation. You also have to factor how much they cost. And despite what you might hear on some of those cable flip this or fail that TV shows, many improvement projects won’t increase your home value anywhere near what you’ll pay for them. You’ll recoup some of the investment, but not all. NET LOSS HOME IMPROVEMENTS 1. An in-ground swimming pool. Installing a pool could cost you $50, 000 or more. Add to it the ongoing extra costs of maintenance and insurance. So pools are pricey, but according to the National Association of Realtors, you’ll get back only 43% of what you spent 2. New carpeting throughout the house. You’d think that would be a plus, but it could actually lower your home’s value. Many buyers don’t like carpet, and if they do, what are the odds they’ll like the color you chose? A much better alternative is more expensive wood flooring. Installing a hardwood floor could get you back the entire investment plus 7%, so it’s in the winner category. 3. An elaborate renovation of the master bedroom. Knocking out a wall to increase its size and putting in upscale features like french doors and gas fireplaces will get a ho hum from prospective buyers. The average return is just 50-percent. So instead, consider a fresh coat of paint and maybe upgrading a few fixtures to give the room an updated look. 4. A major kitchen renovation. A large-scale renovation could cost you a heart-stopping $100, 000. The survey showed that a kitchen renovation returns just over 50-percent of its cost. And after a certain point, the more you spend, the smaller the percentage you get back. Obviously, if you’re selling your house, you don’t want to have run down appliances and beat up cabinets, so you’ll want to update those, but keeping the overall cost down to just $20, 000 could recoup up to 80-percent of your investment. But even then, you don’t get all of your money back. 5. Adding on a sunroom. It's a great place to hang out in nice weather, letting sunlight in and keeping the bugs out, but with an average cost of $30, 000, it’s also a losing proposition as far as an investment. On average, you’ll get back less than 50-percent. Now, I should mention that return on investment isn’t the only consideration for doing a home improvement project. If you’re trying to sell your house but a 1950s kitchen or bathroom stands out like a sore thumb, you may have to do some updating just to sell the place. In that case, don’t worry. You’re likely to recoup your cost and more with appreciation. Something else you always have to consider is whether the project you're considering fits into your budget. Obviously, it’s best to save the money first and pay cash. But when that’s not possible, folks often take equity out of the home to pay for renovation. If you refinance your home and take cash out to renovate, don’t extend the term of the loan. If you take out what used to be called a second mortgage, make sure you go with a home equity loan and not a home equity line of credit (HELOC) because they usually have variable interest rates. Well, that’s a lot to digest, but I hope it helps you with your next home improvement project. On today’s program, Rob also answers listener questions: ● How can you figure out how to handle finances after the passing of a spouse who handled household finances ● Should you repair your current car or buy a new one? ● Does it make sense to cash in insurance policies to pay off debt? ● What can you expect from the market in the immediate future?

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