Remodeling as an investment
The Washington Post
Amanda Abrams, June 2018
Suppose you suddenly came into a nice sum of no-strings-attached money. Perhaps you received an unanticipated tax refund or a surprisingly generous year-end bonus. Or maybe a relative died, leaving you a lavish bequest.
Whatever the source, you probably have no shortage of ideas on how to spend it. For most people, it’s a list of competing priorities: finally taking care of that lingering student loan, making a deposit in a child’s college savings account, investing in the booming stock market, or just putting it in the bank and finally relaxing about expenditures after a long spell of scrimping.
But what about your house? It is, after all, the biggest investment most families make, and money spent improving it is generally borne out later in resale value. Just as important, most people spend more time in their house than anywhere else, and making sure it’s genuinely comfortable, and not just functional, can go a long way toward boosting your quality of life.
The question is where to begin. The choices are many, and each has its own price tag and set of variables attached to it. That’s where the experts come in. We talked to a number of contractors, landscape architects, do-it-yourselfers and interior designers to hear their recommendations and get a sense of the possibilities at several price points: $7,000, $20,000 and $50,000.
Obviously, it’s not one-size-fits-all. The cost and caveats for a 1,200-square-foot Capitol Hill rowhouse will be very different than for a 5,000-square-foot house in Potomac, Md. Prices also vary widely depending on materials and on whether you do the work yourself or hire someone else to do it. So consider these suggestions as guides, rather than definitive prescriptions.
If resale value is a key consideration, homeowners will probably want to focus on a few specific options.
“If I were to say spend money on any one thing, it would be the kitchen — and the bathroom if you have extra money,” says Jonathan Montgomery, an appraiser with the Real Estate Appraisal Group, a Takoma Park-based business. “But anything you can do to improve the look of the home, that’s where you spend the money.”
If you’re not planning to move anytime soon, though, you might have different considerations. And what these ideas highlight are that the best changes aren’t necessarily the big-ticket items. Those can be satisfying, but there are a number of more subtle improvements that can dramatically improve the feeling and value of a house.
It might not seem like a lot of money, but $7,000, used well, can have a substantial impact on a house. The question is where to direct it.
“At $7,000, that’s typically where you’re thinking of doing a minor improvement or upgrade to a large area, or a major overhaul to a small area,” says John Petersik, half of the Richmond-based duo chronicling their DIY adventures at Young House Love.
For many people, the kitchen — often a relatively large space — is their first thought. It’s a room that’s used frequently and that might have a public function, as well. Unfortunately, $7,000 doesn’t go far when it comes to replacing old appliances with shiny new ones. But if you’re willing to do some of the work yourself, it’s still possible to have a considerable effect.
“You can redo the kitchen counters and paint the cabinets to refresh the look,” Petersik said. “It’s not a full remodel, but gives you a fresh space.”
You’d have to paint your own cabinets — “If you hire someone, it’s almost as much [money] as getting new cabinets,” says his wife, Sherry Petersik. Although it’s tedious, it’s not particularly hard work. The bulk of the money can be spent on countertops, which, depending on the size of the kitchen, could be low-budget Ikea butcher block, granite or somewhere in between. And if there’s money left over, you can add a simple peel-and-stick tile backsplash or a cute light fixture to gussy things up.
The same amount could be used to upgrade a small bathroom, taking it down to the studs and adding new tile, redoing the shower and upgrading the fixtures. At that price range, the renovation wouldn’t be fancy, but it could include several new elements.
“We converted a half-bath in our basement to a full bath,” says Christopher Bulka, real estate agent, speaking of his former house in Mount Vernon Square. He and his husband hired a contractor to turn an adjacent closet into a shower; the final result, which cost roughly $7,000, included not only the tiled shower, but also a new vanity and light fixture. “The majority of the cost with this was labor — tile is expensive to put in,” Bulka said.
But $7,000 can also be used strategically for a more subtle but impactful result. If your house has hardwood floors that are old, scratched or otherwise not at their best, you could hire someone to refinish them. Once the furniture goes back in, every room would look a little fresher.
Or, you could use the funds for a twofold improvement that similarly brightens up the house. First, paint the home’s interior. Then hire a designer to help improve the lighting, particularly in more public spaces such as the living and dining rooms, where good lighting can enhance the space. “In over 20 years of working with clients, I have yet to walk into a home that was properly lit,” says Debbie Wiener, who runs Designing Solutions in Silver Spring. “Most of us are mostly home at night, when there’s very little light. That’s why lighting is so impactful.”
With $20,000, you could take on one of the most popular renovations: a full upgrade of a kitchen or bathroom. For a kitchen, $20,000 would be enough for a mid-level redo: new counters, cabinets, sink and a couple of upgraded appliances. That money would go further if you bought the cabinets ready-to-assemble and hired someone to install them.
Or, you could seriously upgrade a medium-size bathroom, renewing everything and potentially adding luxuries such as a steam shower, heated floor or free-standing tub.
But there are less-obvious areas that might also need attention. “For $20,000, depending on the size of the house, you can replace your windows,” says David Robertson, a contractor in the District. It is not a particularly glamorous investment, but it can be necessary, if the house is leaking hot or cold air or simply looks dated. It’s difficult to estimate how much a full set of window replacements costs, Robertson said. It depends on how many windows the home has, plus whether you want to go with vinyl or wood; the latter will cost more. But $20,000 should be enough for nice-quality windows in an average-size house.
Raleigh, N.C.-based DIYer Brittany Bailey, a Northern Virginia native who blogs at Pretty Handy Girl, decided to invest roughly that sum on the outside of her house.
“Exterior landscaping: patio, retaining walls, stone stuff,” she said.
Bailey and her husband hired a landscape architect to redo the back yard, a project that included tiling a 280-square-foot patio with pavers and adding a low wall, path and plants. They spent about $800 on the design and about $20,000 on the entire project. Bailey saved money by making a wooden pergola herself for $500.
The price will depend on how fancy you want to go, and the cost of plants varies greatly: a mature tree can be as much as $2,000, Bailey said. But taking on some of that work yourself or seeking out a wholesale nursery could reduce the price.
Bailey has another suggestion for homeowners looking to seriously protect the value of their homes: tackling those deferred maintenance jobs.
“As unexciting as it sounds, I highly recommend making sure that all the standard maintenance is done on the house,” she said. “So if you have water issues — like a leaky roof or under the house — that’s the kind of stuff you really need to put money into.”
That might mean replacing the roof, getting the gutters repaired, having the siding painted or finally getting to the bottom of why the basement is so damp. There’s no real estimate for how much those repairs might cost; the price depends on the state of the house. But $20,000 could probably take care of most of them, with enough left over for a fun splurge.
With $50,000, a homeowner can afford a dream renovation, such as a high-end kitchen remodel that includes top-of-the-line appliances and cabinetry. Another option would be to add to the house’s usable space by turning a screened porch or garage into a fully finished interior room.
Bulka, the D.C. real estate agent, combined those two jobs at his current home, a Bloomingdale rowhouse. “This house had a sleeping porch on the back, and it wasn’t super usable,” he said. Meanwhile, the kitchen — which abutted the porch — was already gutted when he and his husband bought the house and was essentially a blank slate. With the help of contractor Robertson and his Something Different Contracting team, they broke through the wall, enclosed the porch and converted it into one large kitchen with new cabinets and appliances.
But you don’t have to cut into walls to make a dramatic impact. Maybe decorating isn’t your thing: You don’t have the time or ability to furnish your living and dining rooms in a way that you like. For $50,000, an interior designer can help you choose a look and pick out furniture and accessories that will make the rooms shine.
“That amount allows you to do the extras,” said Wiener, of Designing Solutions, who estimates that about 10 percent of that budget would go to the designer; the rest could be spent on furnishings. “Not just the rug, sofa, coffee table and media cabinet, but also maybe some great lights, a bookcase and great window treatments. The good stuff always costs more.”
And don’t forget the home’s exterior. Mark White, who runs Arlington’s Gardenwise landscape design firm, says $50,000 can transform a small back yard — say, the 400- or 500-square-foot space behind a D.C. rowhouse. “We can make the garden space an extension of the house,” he said.
That’s just what Doug Hattaway did in the back yard of his Dupont Circle rowhouse, which had been dominated by a giant second-story deck.
After removing the deck, he hired Gardenwise to redesign the space.
The result is an outdoor area tiled with flagstone and granite that includes planters, a couch, a gas grill and a small fountain.
“It feels like a cozy room,” said Hattaway, whose family uses the space virtually year-round.
“It’s really nice to walk in and see the space and the trees; it’s soothing to look at and be in.”
How to set your budget for a big home improvement project
By Daniel Bortz March 2017
No matter what we’re shopping for, few of us like sticking to a budget. But when you’re doing a major home remodeling project, knowing precisely how much money you have to spend and staying within that budget is crucial.
“As contractors, we design our projects to our clients’ budgets,” says J.P. Ward, architect and vice president of business development at Anthony Wilder Design/Build in Cabin John, Md. “Homeowners need to know what their budget is upfront and be realistic about what they can afford.”
Considering a big home renovation? Here’s how to set your priorities, establish a spending limit and stick to your budget.
Determine your goals The first question you have to ask yourself is why you want to renovate, says Ridley Wills, owner and design director at Wills Co., a design-build firm in Nashville. Are you remodeling your kitchen because you want more counter space? Do you want to create an open floor plan? Are you tired of not having enough space to entertain guests? “Figure out what your goals are and then figure out your budget,” Wills says.
Drill down to specifics
Before you start crunching the numbers, decide on what details you want, says Tom Miller, a Portland, Ore., home remodeler and president of the National Association of the Remodeling Industry. “The biggest consideration is pinning down decisions and selecting materials and finishings before the job begins,” he says. “That gets you to a reliable budget.” For example, do you want hardwood floors or carpet? Black or stainless-steel appliances? Providing a contractor with a list of exactly what you want can help you formulate an accurate budget.
Assess your financing options
Unless you’re going to pay for all remodeling expenses with cash, you’ll need to borrow money for the project. One option is to obtain a home-equity line of credit (HELOC), which allows you to borrow money on an as-needed basis, up to a certain limit, using the equity in your home as collateral. You’ll receive an introductory rate for the line of credit that can change after a set period of time.
Alternatively, you can apply for a home-equity loan, where you receive a lump sum upfront, typically at a fixed interest rate, and pay back the loan in monthly installments.
Because the prime rate — the most prevalent interest rate index used to price a HELOC — is rising, the HELOC is not the “slam dunk” it used to be, says Richard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.” Your best approach is to meet with a mortgage lender to explore your options.
Consider resale value
If you’re planning to stay in your home long-term, “it may make sense to splurge to create your dream space,” Ward says. However, if you’re thinking about selling the home within a few years, focus on your potential return on investment.
Your return on investment is largely based on what your house is worth. (You wouldn’t want to install a $50,000 kitchen in a $200,000 home.) That being said, some improvement projects can add more value to your home than others. You can compare the average cost of 21 popular remodeling projects with the value those projects retain at resale in 100 U.S. markets using Remodeling magazine’s annual Cost vs. Value report.
Get a 'hard' quote
Although most home contractors will give you a free estimate for your renovation, you generally have to pay money for a “hard” quote, where you’ll receive a detailed outline of the project’s costs and the timeline for the job. Most contractors are too busy to give free quotes, Miller says. “Quotes also take hours of time to formulate,” he added.
You can sign a time-and-materials contract, where your payment is based on the time spent by the contractor’s employees and any subcontractors’ employees to perform the work, and for the materials used in the construction. If you’re looking to stick to a budget, though, you’re better off signing a fixed-price contract, where you pay the contractor a set lump sum for the project upfront.
Set aside money for surprises
Wills recommends setting aside an additional 10 percent to 15 percent in cash to accommodate hidden expenses. “You don’t know what you’re going to find before you start tearing down walls,” he says. “Electrical work may not have been done to code. There could be asbestos or mold hiding behind plaster. You just don’t know.”
The best-case scenario: “If you don’t spend the extra money, you can put it toward furnishings.”
Be smart about cutting costs
You certainly don’t want to cheap out on important products or materials, but there are ways to trim your budget without sacrificing the quality of the workmanship.
Here are five strategic ways to save money:
•Opt for lower-cost finishings. Choosing different finishings, such as vinyl flooring over tile, can help you save. For instance, slab granite costs $40 to $75 per square foot, compared with only $10 to $40 per square foot for laminate countertops, according to home remodeling resource Fixr.com.
•Refurbish older items. Instead of replacing high-cost items, such as home appliances, you can curb expenses by salvaging what you have (assuming it’s in good working condition). Case in point: Refinishing or refacing existing cabinets can save you up to 30 percent compared with buying new cabinetry, according to Angie’s List.
•Tackle small tasks yourself. You can reduce labor costs if you’re willing to do some of the work yourself, such as light initial deconstruction (pulling up carpeting, removing bathroom tile) or painting a room after the contractor completes construction.
•Time it right. Home contractors tend to be busiest during the spring and summer, so you may be able to save by commissioning the work during fall or winter. For example, you might nab a deal by building a new deck during winter, when deck designers are less busy. The caveat: Some times are better than others for certain projects.
•Resist adding things along the way. As the renovation moves along, you may be tempted to tack on another small item here and there, but change orders can be expensive, as “asking for extra things during construction often adds to the duration of the job and the labor,” Ward says. In other words, don’t deviate from your budget mid-project.