SECOND HOMES
Get away to a place on the water, a country retreat or a spot in the heart of the city.
Many homeowners are surprised to learn that the equity in their home comprises a larger portion of their net wealth than the holdings in their stock market or retirement funds.
Although few of us purchase a home strictly for its investment value, in practical terms it represents an asset that can pay high returns when it comes time to either refinance the mortgage or sell your home outright. Of course, a home that is well maintained and offers up-to-date systems and amenities will have a higher value than a comparable home that is poorly maintained or lacking the conveniences and extra living space that today’s buyers want. Remodeling, then, becomes the key to protecting and enhancing the investment value of your home, not to mention its many other benefits.
“What improvements will add the most value to my home?” To answer that question, it is important to understand that remodeling — and your home for that matter — is different from other investments that are primarily financial in nature. What’s unique about housing is that the “investor” or owner receives the immediate benefit of being able to occupy and enjoy their investment
The longer you intend to stay in your home and will enjoy the new family room or whatever improvement you make, the more weight this factor contributes to your overall return on investment.
The other part of your investment return is the increase in resale value that the remodel adds to your home. Despite the limitations of the appraisal process in allotting what you might consider fair value for all the improvements that you proudly made to your home, there are certain rules that you should consider to increase the dollars you get back from your remodeling investment:
Maintaining your home in good repair is the most critical of all investments that you can make to your home.
The quality of the work you have done on your home is another factor that can’t be ignored. Shoddy workmanship, low-grade materials and inferior products will wipe out any value the remodeling might have added to your home.
Remodel for yourself and your own family, not the next owner. It is a gamble to predict what the likes and dislikes of the next owner might be. Keep in mind, however, the more your tastes stray from the norm of most of your neighbors, the less likely you are to get maximum return from your improvements. Stay with styles, colors and features that have broad appeal.
Kitchen and bath remodels are the two most popular remodeling projects year in and year out, no matter where you live. Minor kitchen remodels tend to recoup more of their costs than major kitchen remodels. Bathroom remodels also vary on how much they add to resale value, depending on the extent of the makeover.
Extra space in the right place offers a high rate of return since existing homes tend to lack the roominess of new homes. New family rooms, larger master bedroom suites and eat-in kitchens are all examples of spaces that most buyers value highly.
Although it is difficult to put an exact price on the resale value of a particular remodeling project, for most of us the real value of remodeling is the comfort and pleasure it adds to the years spent living in a home.