Big Renovation Plans for 2025

Big Renovation Plans for 2025

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I didn’t make any resolutions for the new year. But I do have a big project in the works. And I mean big, as in clear-everything-out-of-the-lower-floor-of-the-house big. I’m finally going to finish that room in my basement.

It’s funny that this house has been around for nearly 100 years and no previous owner has taken this project on. Admittedly, it’s rather complicated, with uneven flooring, exposed pipes, and intrusive ducts. It could very well be that the money I invest in construction won’t pay off when I sell the house. But that’s not my objective. My objective is happiness.

I’ve lived and worked in this house for five years and for five years I’ve disliked that basement room. It’s good to keep in mind that I’m doing this remodel for me – not some future homeowner. That’s what will guide my decisions on this project.

So I went out and found a contractor, and before signing anything I called some of their clients. I asked about things that are important to me, like: Do they stick to their plans and their budget? Were there any surprises, and how were they handled? The clients said I could probably find a company to do the work cheaper that’s not full-service. But most of them said they had hired this company for more than one project. That all sounded pretty good.

I looked carefully at my budget to make sure I could justify the expense, including extra for overages if I decide to make changes mid-project. Since I’m the only person who needs to be happy with the outcome, then I’m the only person who needs to be okay with the budget. Preliminary floor plans have been drawn up. Now all I need to do is clear out all that stuff. That part is not making me happy.

If there’s a space in your house that you just don’t like, you may decide to remodel, too. I’ve been thinking about my remodel for five years, so I know it’s not something to be taken lightly. And you should be honest with yourself about the financial considerations:

How much are you going to pay? When I first talked to my contractor, they said, “How much do you want to spend?” I said, “How much do you think it will cost?” This is a super awkward part of the process, and I didn’t want to go with someone who was vague on cost. I knew what my savings would cover and we eventually narrowed it down to a price tag I could live with.

How are you going to pay for it? Some people use credit to pay for home improvements. If you expect that you’ll pay the bills off over time, keep in mind that a home equity loan or line of credit will most likely carry a lower interest rate. For example, the credit card rates at my credit union are 10.5 – 14.5% APR, while the home equity loan rates are 7.7 – 9% APR. Just keep in mind that a home equity loan uses your home as collateral.

Do you see the remodel as an investment? If you’re hoping to get back the full cost of the project when you sell the house, you’ll want to plan carefully so the improvements will appeal to potential buyers. In fact, you may want to talk to a real estate agent that knows about comparable homes in your neighborhood to assess your return on investment.

How will the project fit into your long-term financial plans? You may not be thinking about the impact of a home improvement on your future cashflow. But consider this: An addition could affect your property taxes and homeowners insurance. Installing a pool or home theatre could increase maintenance and energy costs.

Can you spend money to save money? Some home improvements may be tax-deductible or could lower monthly expenses. For example, improvements that increase energy efficiency might qualify for tax credits while also lowering your energy bill.

Are you making capital improvements? Remodeling costs that aren’t regular repairs and maintenance can sometimes be considered capital improvements. This could potentially reduce your capital gains tax when you sell the house. That’s why it’s important to keep accurate records – and receipts – of your remodel costs to help your tax advisor calculate the increase in your home’s cost basis.

There are a lot of different reasons to embark on a home remodel project. For me, it’s about livability and keeping my home in good condition. How you think about it financially depends on your relationship to your home. If you don’t have plans to move any time soon, then why not invest in improvements that make you happy? On the other hand, if you hope to extract value out of your home in the near future, you have other calculations to do. 

Your Arrivity financial planner isn’t going to tell you whether it makes sense to tear out that old bathroom, but they can help you figure out what you can afford or how to save for it. They’ll start with your goals and find a way to make them possible. Make an appointment with your financial planner if you’ve got a big project set for the new year. 

Things to consider when you’re planning a home improvement:

  • Make a file and save those receipts. There are a lot of reasons to document the cost of your home improvement, from taxes to a future sale. You’ll also want receipts for insurance and warranty purposes.
  • Check loan terms. If you choose to finance your improvements with a loan, get quotes from at least two reputable lenders and have them explain the loan terms to you. Make a solid plan for how you’re going to pay it off. 
  • Know when to listen to the “experts.” If you’re fixing up a house to sell, it makes sense to get advice from a realtor who knows your neighborhood. But if this work is just for you, then you’re the expert.

Tell us what you think! If you’ve worked with someone on the Arrivity team to create your financial plan, we’re looking for your feedback. Please take a moment to complete our short anonymous survey HERE.

Please contact us at 206.217.2583 or info@arrivity.com if we can assist you or someone you know with financial planning.

Liz is a Late Boomer in the sandwich generation who started an independent writing and brand consulting practice after years as a senior marketing executive. She lives in Seattle, Washington. Her mother lives nearby and her daughter is a recent college graduate.

The foregoing content reflects the opinions or perspective of Liz Behlke and/or Arrivity financial planners and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.