Profile picture for raj_home2011

Home remodeling

Guys

I'm a first time buyer. Are there any considerations one must make before doing a large renovation in a new house? I'm buying a home in the 750k range and needs about 80k worth of work to add a bathroom, remodel the tiny kitchen and finish the basement

I will definitely stay in this home for 5-6 years but beyond that may look to move to the west coast

With a kitchen, basement & additional bathroom, would I at least increase the value of my home by about 60%

Also, can a renovation cost be added to the home mortgage loan by any chance

Thanks!
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May 28 2012 - US
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Answers (6)

"The difference is that remodeling is a money decision as far as I am concerned."
 This is a slightly shortsighted viewpoint and largely inaccurate... There is absolutely no emotion in your remodeling decisions or material choices? So if you were doing a remodel, you would make every material selection based on cost alone, instead of choosing products and materials that you 'like' or that appeal to you? I'll give you that the decision when to remodel may be solely financial, but why and what to remodel are quite often driven by our emotions.
 Even if that is true of yourself, The majority of people in the world DO make choices and decisions based on their emotions. And if they don't factor those emotions into their projects to some degree, then they will have other negative emotions as a result from their remodels.
 An industry trade group I belong to does a study every year where they ask consumers if they could do their remodel over again, would they spend more, less, or about the same? Over the last 5 years, over 65% of consumers would spend MORE. The reason? Because they settled on some aspect of their remodel, and they've regretted that decision... Regret is a powerful emotion and quite a negative one to have especial after spending however man hard earned dollars on the remodel.

 I agree that homeowners need to be careful to not over improve and repeating myself, there are many factors to consider, on top of that, each persons goals and needs for remodeling are going to be different too.
  The problems with many of the response here on Zillow is that it seems everyone 'assumes' the overall value of the house for resale is the only deciding factor, which is just not the case in real life. The reason for my lengthy responses to help get these homeowners thinking about WHAT they are doing and WHY they are doing it to begin with.
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May 29 2012
Profile picture for sunnyview
"You simply cannot ignore a homeowners enjoyment of a remodeled space and jump directly to resale, unless that remodel is being done specifically for resale."

The difference is that remodeling is a money decision as far as I am concerned. I do not ignore the homeowners enjoyment of space or their home, but I have seen one too many owners over improve their home or out build the neighborhood with bad results. It is not smart to do that from an emotional standpoint or a financial one. 

Remodels for functional systems are a bit different than remodels for aesthetic enjoyment or resale. Owners do have to replace systems, but the most high efficiency or "best" new system are rarely the best investment. With most homeowners selling their home within a an average 5-7 year window, it does not make sense to build your dream house if you will not be able to sell to recoup a reasonable cost if the need arises.

I would not add an upscale kitchen to a basic starter house just like I would not put a solar system on a house that is already at the top of the neighborhood. Real estate should not be a palette for HGTV dreams unless you are rich and do not care if you see your money when you sell in a few years.

Owners can make their house a home, but they should know what improvements are for them and which ones will be recouped on resale. Wise owners separate their emotion from their investment.
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May 29 2012
Hi Sunnyview,
 Thank you for quoting me, but there really was no need to disagree, as I said 'almost' (which means, not always) and my second sentence addressed the over personalization that some home owners put into their remodels. Contrary to your point though, that very personalization does in fact directly increase the homeowners intrinsic value (enjoyment) of the property.
 You've actually agreed with me, but in a slightly round about way.

 The Cost versus Value Report you reference is a great resource and we all thank you for sharing it. But I do caution everyone who uses this as their only source of information, that way too many people look at only the dollars and cents involved. You simply cannot ignore a homeowners enjoyment of a remodeled space and jump directly to resale, unless that remodel is being done specifically for resale. Also as homes age, things break, wear out and/or become out of date making improvements absolutely necessary, regardless if you will recoup the investment or not.

 Respectfully,
Thomas Richard
TRS Designs, Inc
 
 
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May 29 2012
Profile picture for sunnyview
" Improvements will almost always increase a homes dollar and intrinsic value..."

I have to disagree. Improvements do not always increase a home's value. Many people remodel and then are financially hurt when they go to sell the most expensive house in the neighborhood or a houe that does not have renovations with broad appeal.

You can look up common remodel projects in Remodeling magazine's cost vs value report for yourself. Although buyers may like the improvements, very few projects return a high percentage of what they cost.

Before you remodel, look at the cost side and the houses in your area to see if you will ever see the money you put into the house again. Also make sure your house is close enough to the median for your area to give a good supply of houses above and below you when you go to sell.
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May 29 2012
Hi Raj,
 Improvements will almost always increase a homes dollar and intrinsic value, but there are many factors to consider when improving any home or property. Obviously personal choices and preferences will affect the preceding statement, but in general, improvements by their very nature will improve the home.
  Here are some the main factors or considerations:
 -Actual Dollar Value
 -Personal Enjoyment
 -Re-Saleability
 -Mechanical, Functional, and Aesthetic Improvements
 -Return on Investment
 -Length of time you will remain in the home
 -Location of the home
 -Condition of similar properties in the area.

The improvements you mentioned will definitely improve the home and certainly increase your enjoyment of the space over the next 5-6 years, but they will be current enough that you can expect a return on that investment in home value, increased interest in the home, and possibly better condition when compared to other homes in the area.

 
 I'm guessing you phrased this question wrong, but if not; You will definitely not increase the homes value by 60%, but you could potentially recoup 60% or more of your improvement costs. There is also the intrinsic value you will have of increased enjoyment of the home over the next 5-6 years. People often lose sight of this when focusing on dollars and cents, but this is one of the most important aspects of the improvements, your enjoyment of the space and utilization of the amounts you've invested in it.

 I hope this helps and/or provides some food for thought... Good luck with your new home and your upcoming remodeling.
 Thomas Richard
 TRS Designs, Inc

 
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May 29 2012
I would speak to an agent (maybe two or three) and ask how much those renovations would increase the value of the home right now. Of course there is no way to say what the home would be worth in a few years. The kind of value increase you are hoping for seems unlikely.

There are mortgage loans that will allow you to purchase the home and do renovations. Be sure you discuss this type of loan with your lender as not everyone is capable of writing this type of loan.
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May 28 2012
 
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