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5 ways to maximize your home improvement spending
The following article is part of "The Home Renovation Revolution," a series that helps turn your home improvement aspirations into a reality. It is presented by Chase Home Lending.
Many homeowners are choosing to stay in their homes. Instead of selling, they are making improvements to enhance quality of life and appeal to potential buyers down the road.
Americans are expected to have spent a record $316 billion remodeling their homes in 2017, up from $296 billion the previous year, according to the Harvard University Joint Center for Housing Studies. Nearly $24 million will have been invested in kitchen remodels, and $19 million in bathroom renovations.
Here are five steps you can take to make sure your investments make the most sense for your budget:
1. Consider financing options
The best way to pay for home improvements is with cash. However, if you are short on funds, there are other options for accessing the money you need, such as tapping into your home's equity.
Home Equity Lines of Credit (HELOC) are on the rise, putting money in the pockets of homeowners to fund renovation projects. "A Home Equity Line of Credit gives homeowners access to funds, using their hard earned equity to renovate and improve their home throughout the years," explains Ben Trstena, a Chase Home Lending manager. A tax advisor can assist in understanding deductibility options.
The average homeowner gained about $13,400 in equity from the first quarter of 2016 to the first quarter of 2017, according to data analytics provider CoreLogic.
Homeowners in the West and Northeast are spending the most on home improvements and taking out the most home equity loans to complete renovation projects, according to Home Advisor, an online home services marketplace.
2. Boost curb appeal
Real estate professionals place a lot of importance on replacing entry doors, windows and siding to add curb appeal. The 2017 Cost vs. Value report by Remodeling magazine found that exterior projects had an average payback of 75 percent nationally, and interior projects returned 64 percent.
For example, a steel entry-door replacement, costing about $1,100 on average, is a curb-appeal project that is expected to return the most money, with an estimated 85.6 percent of costs recouped upon resale.
3. Energy efficiency
Lowering your home's heating and cooling bills with energy-efficient upgrades will make your home more comfortable and boost its resale value, especially in regions with extreme hot or cold weather.
Adding loose-fill insulation in an attic to prevent air leakage returns a higher value than its cost, according to the Cost vs. Value report. The project would cost an average of $1,268 nationwide with a payback of 108 percent.
4. Increasing efforts
Many Americans are splurging on major renovation projects such as a deck or kitchen remodels, with a total of $17 million spent on kitchen remodels alone, according to a report by Harvard University Joint Center for Housing Studies. However, these jobs require a lot of skill and labor, including moving plumbing and electrical lines, installing new appliances, cabinets, countertops and lighting.
The simpler the job, the more likely it will have a higher return on investments and the easier it is to build your way up to larger renovations.
In many cases, budget-friendly updates to a bathroom are more prudent than taking a sledgehammer to it.
5. Know your audience
Make sure the improvements you make are consistent with homes in your neighborhood. If your house is the most expensive one on the block, it will be difficult to resell.
On the other hand, if adding another bathroom or creating an open floor plan will help a house meet buyers' expectations in your neighborhood, you can expect a good return in the form of a higher sale price.
Brenda Richardson is a Chase News contributor. Her work has appeared in the Chicago Tribune and The Washington Post.