Hello. I would like to get opinions on this. Everything I read or hear is 50/50 on whether remodeling (even if minor) is a good decision.
Like many, we bought our house at the peak of the market and got hit when prices dropped. Not too bad compared to other markets but still. We knew the house needed updates and have done many already. I know the current average value I see online for our house does not take into account the improvements made but it would still be low.
Now we are at the point that we want to remodel the kitchen but I am afraid because of the market. The layout of the kitchen is not good at all but the (few) cabinets are in decent shape. They are just very outdated since the house was built in the late 90's. The kitchen and bathroom floors need to go asap. We already installed wood floors in all the other main areas.
Financially we are fine and our mortgage is up to date. We are actually looking at HARP 2. While this is not our forever home, we are not planning on moving anytime soon. We would lose money and it does not make sense. We live in a very nice neighborhood with good schools and big lots. The house just needs updates.
Some say not to look at it as a pure investment and enjoy the improvements because we are stuck anyway. We are leaning towards that...in making this the house we want. However, when I add the purchase price and the total cost of improvements, the house will have to appreciate a lot before we can break even. I am always worried about the "what if"s.
BTW, in case someone is wondering, comparing to other houses in the neighborhood I don't think we are not over improving. The lowest current value of other newer houses is still higher than our total (past and future estimated) costs combined.
Sorry this was long. I am curious to read other opinions.
Post by car.ramrod on May 16, 2012 13:34:12 GMT -5
This happened to us in our last house. We were super underwater but we still needed to update. It sucked to lose all that money but in the long run we would do the same thing again because we really enjoyed it while we lived there and in the market where most houses sit for over 6 months we got three offers in less than 6 weeks. There was one house on our same street that sat for over a year but it did not have any updates. Don't think of the updates in terms of what you will get out of it because generally now a days in most markets the return will always be less than the cost, but if you want to do it and will like it then it is worth it. Just think of it as a sunk cost and if it helps you sell faster in the future great but it definitely won't guarantee a higher sale price.
If you don't plan to leave in the very near future, go ahead and do the updates that you want to and enjoy then.
My only suggestion would be to consider where you can cut costs. You said the house was built in the 90's and the kitchen needs updating. You can do a mid-range kitchen renovation instead of a complete demo. Maybe paint the cabinets instead of tearing them out and putting new ones in? Or change out the hardware (sometimes that can work wonders in giving it a fresh look!) or maybe even re-face the cabinets (get quotes, it might be less). Go for the upgraded countertops, but not the most expensive (unless that's what you realllly want).
We knew we were putting the house up on the market in 2012, and knew that we wouldn't be making any money (and when you count how much money we have made in improvements over the years, we are actually losing a pretty big chunk of change) - yet we still replaced the dishwasher when our old one died (but instead of buying the bells-and-whistles one at Sears, we got a nice, mid-range one at the outlets), and we still replaced the flooring in the front room (knowing that if we kept it as is, people would walk into our house and walk right back out). We enjoy our improvements and even though we are selling, I still feel it was worth it (especially the flooring, I could show you a before/after, HUGE difference).
I know the current average value I see online for our house does not take into account the improvements made but it would still be low.
BTW, in case someone is wondering, comparing to other houses in the neighborhood I don't think we are not over improving. The lowest current value of other newer houses is still higher than our total (past and future estimated) costs combined.
I'm a little confused. Where are you seeing an 'current average value' of your house - like a property tax assessment or zillow? If so, I wouldn't really count on either of those to give you a value of your house. Also, you said other newer houses are selling (I think?) for more than the costs combined of your renovations. So to me, it sounds like you aren't underwater unless I'm misunderstanding something. I guess you'll find out when you refi and get an appriasal to see the actual value of your home.
Regardless of the situation, I would make the house what you want it to be. You said you aren't planning on moving for a while so you might as well make some changes to enjoy your house.
Post by vanillahip on May 16, 2012 19:18:16 GMT -5
We're right on the cusp of breaking even/ losing some money. And our house still needs updates like woah! (Especially if I want to rent it quickly for a decent amount of money when we purchase our second home)
I'm still making some updates (I say *I* because I'm the handy one, H couldn't care less about flooring and lighting and hardware lol) but I'm keeping it cheap. Instead of gutting the kitchen (which I'd LOVE to do!) I've repainted the cabinets, will be laying new flooring (vinyl, groutable tiles) and I'm going to do a concrete skimcoat over our blahhhh laminate counters. I'm choosing to do the most necessary projects but I'm keeping everything on a much smaller budget than if this were our forever home.
If you're going to be there for even 5-10 more years, just do whatever you want within your financial means! In 10 years some buyer will probably want to rip out and replace whatever your updates were anyway, so don't worry too much about it. Ditto PP, you may not get your money out of it but you will definitely see a return in the # of showings/ offers you get on a nicely updated home vs. leaving it as is.
I'm with the others - if you're going to be there long enough to enjoy them, I would do it. Maybe don't go all out with top of the line upgrades, but bathrooms/kitchens sell houses and are good to update.
We are also underwater. We want out as soon as we can get out. That has made us hard press to commit to anything that seems like a long term commitment to the house. This included doing a refi or any upgrades. However, we have no out in sight and we are here for an undetermined amount of time. I realized I had to do these "long term commitments" to make myself happy while we live here. We just did the HARP 2 and the new loan terms have given me some peace about the house. Not to mention the $400 a month savings will help build up savings so we can get out. We also just did new carpeting and it has breathed new life into the house. I went middle of the road to ensure it didn't look like cheap crap and ensure that would last until we do sell but also didn't break the bank.