Planning a Profitable Home Improvement Project
I know what you're thinking: A profitable home improvement project??!?! Stay with me for a minute. Home improvement and renovation projects can be expensive, intimidating, and complicated- but if you PLAN them the right way, you can feel confident that they will pay off in the end!
This 6-step planning guide walks you through my framework for planning every home improvement project I have ever attempted. This guide applies to DIY projects and major contracted renovations the same. If you walk through the steps (in order!) you can feel much more confident that you will be satisfied with the results of your project, as well as assured that you have invested money in your home in the best way possible. Today we will cover the first 3 steps, and follow up with the final 3 next time!
Step 1: Determine Your Home Value
Before starting a new home improvement or renovation project, let's chat about your home value (and why that matters at all!). When you improve or change your home, you have the potential to increase (or heaven forbid, decrease!) the marketable value of the property. A new kitchen, improved curb appeal, or updated wall and floor coverings can all increase the amount of money you can ask for your home when you are ready to move. They also impact the appraised value of your home, in the case that you're not moving but are more interested in re-financing a mortgage for a more affordable monthly payment.
The work you put in to your home can directly affect the equity you have in your home (how much the home is worth vs. how much you owe on your home loan).
You can use a simple tool like Zillow.com to get a rough estimate of the value of your home, as well as the potential added value of different home improvement projects in your local area. Look up your address on Zillow.com, and find the "Price this home" link near the estimated home value. By following the prompts, you can view similar recently sold homes in your area, as well as adjust the homes that are being used to estimate the value of your property.
You can also use a Realtor to help you determine the market value of your home, and gain insight into how different projects will impact your value. Before I start any big home improvement project, I check with my Realtor-friend, Laura. (Hi, Laura!!!) She sold us our current home, counseled me through our major renovation, and she will list this home to sell when we're ready to move in the future. We have a great relationship, and I trust her insight and advice! (Go find a Realtor-friend. You won't regret it!)
2. Determine your project budget
Next, let's ensure that the budget you are planning for your project is in line with your projected home value once the project is complete. In other words, be sure you don't invest more in a project that it is worth to you!
Zillow.com also provides estimates for the value you can add to your home by completing various projects. While these are not perfect dollar amounts, they are a good place to start if you have never calculated how much value a project can add to your home.
As a rule, I try to keep the cost of renovation projects as FAR beneath my desired home value as possible! I see this as a way to make our home ownership journey as profitable as possible. If I can add $10,000 of value to my home and the project only costs me $8,000- I go to sleep knowing that I've earned the future-me $2,000! My house is a real estate investment, and I hope to see a profit when it is time to move. (And in the meantime, I get to enjoy living in my updated space!) Win-Win!
For your project, set a max budget based on the added value you hope to gain as a result of your work, rather than looking at the financing you have available at the time. This will keep your budget on track and help ensure your project is strategic and profitable in the end.
Check out my Pinterest board all about ways to Add Value to Your Home!
Step 3: Inspiration
Yay, now for the fun part! I know it is tempting to start here, and you probably already have lists of boards and bookmarks of gorgeous home spaces that inspire you. (I know, I have those lists, too!) But I strongly encourage you to start with steps 1 and 2 before you commit to a specific project. At least once you should determine your home value and get a clear understanding of how different home improvement projects will impact the value and marketability of your home.
There are so many places to get inspiration and step-by-step guides for every flavor of home improvement project you can imagine. As you may have guessed, Pinterest is my favorite, as I am a visual AND a verbal learner- and I like to be able to read posts and sort through images at the same time. I also like that Pinterest helps me find articles that are very popular with other homeowners, as I like knowing that the advice I read is vetted before I pin it!
One last chunk of advice here: try to keep your design plans in line with the style and the "feel" of your home, as well as with popular trends in your area. Remember: the ultimate goal is to improve BOTH the life you live in your house now, AND increase the value of your house for your future sale or refinance. (Unless you have loads of cash to waste, or you plan to live in your house FOREVER- then do what you want!.... but neither of those situations describe my personal home ownership philosophy!)