For as long as people have built and owned houses, home renovation has been important. It may not always have been called “home renovation,” but people have always been looking for ways to improve and change the construction and design of their homes.
Of course, home renovation has really taken off in the last few decades. There has been an explosion in TV shows, blogs, and stores that specialize in home renovation. Why has it become a billion dollar market, and a common interest for homeowners?
There are two main reasons for this: Lifestyle and financial gain. We like to plan home renovations because they represent our dreams and aspirations for a comfortable, stylish, and functional lifestyle. This is a big part of the reason why there are so many TV shows on the subject; we like to see other people’s ideas and tastes in home renovation, in order to refine our own plans.
The other part, of course, is financial gain. For most people, the home is the center of their financial world. It’s the most valuable asset they have, and a vital path toward building wealth for the future. Home renovations are therefore a valuable investment – but like any investment, there’s a certain amount of risk involved.
Specifically, people want to know whether they’ll “recover” their home renovation investments, in terms of their home’s market value. Even if you have no plans to sell in the immediate future, these investments can affect your market value, which in turn can affect your possibilities for refinancing.
Unfortunately, there is no clear-cut answer as to whether your renovation or remodeling project will boost your home’s market value. It really depends on three major factors:
1. Is the renovation well conceived?
Some renovations, like kitchens and bathrooms, are considered highly bankable under normal circumstances. Even if your increase in market value is less than the cost of the renovation, you’ll get the added benefits of increased buyer appeal and improved lifestyle for as long as you live in the home. But kitchen and bathroom renovations can be poorly conceived and designed, leading to disappointing results in terms of market value. This happens more often than you might think!
2. Is the renovation considered an improvement for your neighborhood?
Like it or not, the market value of your home is inextricably linked to the other homes in your neighborhood. For example, if the average home in your neighborhood has four bedrooms, but your home currently has only three, converting an attic to a fourth bedroom could notably add to your home’s value. On the other hand, if you have four bedrooms but eliminate one in the process of creating an open floor plan, your market value and buyer appeal could actually decrease.
3. Did you hire a reputable and skilled contractor?
This is a huge factor in whether or not your renovation will pay off in the long run. A skilled home renovator will be helpful during the planning and design process, and can offer valuable insights even if your designs are already mostly decided. In terms of execution, the spectrum can be broad. Reputable and skilled companies almost always deliver a superior result and a higher increase in market value.
Best of luck on your home renovation journey!