Will I see a return on investment if I add-a-level or remodel a room or two? That’s a question we hear a lot.
Unless you bought the house at a reduced cost to begin with, you most likely will not see a huge return on your investment when the home improvement project is complete. But that isn’t to say that you won’t see return via a unique value: lifestyle quality. Here’s why homeowners often overlook a vital outcome of adding a new addition or redoing a room in their house.
Allow us to quickly correct a common misconception about owning a home. A home is not an asset, it is a liability. A liability that needs consistent maintenance and requires resources to operate. And most importantly, does not produce an income. Now, if a home were being rented to a tenant, then the latter would not be true, but in most scenarios a home is a liability.
Occasionally, we will see homeowners under the impression that their house is an asset, and updating its components makes it worth more than it was to start. Though renovations technically increase home value, this isn’t why home improvements are done.
There could be a homeowner that renovates their kitchen, basement, and master bedroom — adding all top-of-the-line products and materials — but still struggles to sell their home when the time comes. A million different reasons could prevent a home from selling, but one outcome that often correlates is that they added too many unnecessary upgrades. Their house may now have 5bedrooms, an open-concept kitchen/dining room, and a basement with a bedroom and washroom, so they increase their asking price. Problem is that the rest of the houses for sale on their street have none of that and are significantly less expensive. Now, this forces the homeowner to wait and see if it eventually sells or drop the price to match the rest of the houses, leading to an overall loss of profit.
That causes even more headaches and stress than when the home improvement projects were underway. To prevent that, look at home additions and residential remodeling from an alternative angle.
While you probably won’t see a full return on your home improvement investment in terms of money, you will see a ROI on your wants or needs being satisfied. Ultimately, adding a second level or extending out the back of your house was done for a reason, right? A homeowner’s living situation will improve after a home improvement project which is the biggest return on can hope for.
People should approach home improvements with the mindset of solving a problem. Home improvements can improve your quality of life in more ways than one. If you’re not happy with your current kitchen or living room, stop thinking about the problem. Instead, think about what changes you can make to either of these rooms which solves your issue. By changing your home to meet your needs in new and creative ways, you will have a better quality of life.
That is the return on your investment. One hundred percent of the time, if the homeowner acknowledges an improvement in their daily lives, the add-a-level or dormer or kitchen remodel was worth it.
Instead of always going to a friend’s house for parties or gatherings, your new second level is a perfect space to have guests over. Relatives can now enjoy an actual bedroom instead of a couch when they stay the night.
Investing into solving your problems is worth far more than an extra $2-5kthat may come from selling a newly renovated home.
A home investment doesn’t just mean a house is now worth more than before. There is a list of additional costs that come with a home investment, such as paying more in interest, taxes, utilities, and maintenance costs.
If an investor were to calculate an estimated value, they would factor all these costs in. And an investor would only do an evaluation if a homeowner decided they want to sell after a finished renovation job. Some homeowners decide to invest in their home and then never sell, which all goes back to our crucial point: your return on investment will be in non-monetary forms.
Furthermore, an investor would never buy a home that has livable value already. So, homeowners looking to do renovations purely because they believe it will increase their house value are in it for the wrong reason.
Don’t fall into the mindset that any and every home improvement project is worth doing. Start the process backwards by determining what the desired “after” solution is, and work towards planning out the different avenues to get there. Don’t spend just to spend, always solve your main wants and needs first!
We don’t say these things to turn homeowners away from the idea of investing into their home. Often, adding to an existing home instead of buying a new one is far better of an option. We want to make sure that homeowners starting the process of home improvements know the facts.
Will your home instantly be worth more than it was before the project? No.
Will your home satisfy your needs and improve your overall quality of living? Absolutely.
And if you really think about it, isn’t that the whole reason a home improvement job is even being considered? Invest in a project that returns a great personal value to you and those who live in the home; not those who may purchase the home later down the line
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