To Remodel or Not? That ’tis the Question!

All the DIY shows on TV can give some homeowners the itch to make changes to their own home, because not everyone is up for flipping or flopping.  (Most prefer to fix and then flop in their newly remodeled home!)  In the Iowa City area, we have a shortage of build-able lots for people to build on where they can select their own builder.  With the high cost of land and developing that land for building homes on, the developers tend to hold onto the lots/land so they can recoup their initial development costs.  The down side is that you are not able to buy a lot and pick your own builder.  We’ve seen a lot of frustration with this from people who’d like to build a new home.  And so – remodeling a current or older home has become much more prevalent.

One common experience most homeowners can agree upon after completing a remodeling project is that it costs more and takes longer than expected. It doesn’t really matter that you researched, planned, and received multiple bids, it will, invariably, cost more and take longer than you originally anticipated.96303159-250.jpg

Replacing floor coverings or painting is a project that a homeowner can easily get bids and contract with the workmen directly. A new level of complexity occurs when the project involves more specialized work for a remodeled kitchen, bath, wet bat, home theater room, retaining walls sheltering a cool new pond, four season rooms, etc.  Then you’re looking at city inspections, electricians, plumbers, drywallers, etc.

When you start tearing out some things, you may encounter some unexpected construction that needs to be corrected/fixed in order for you to proceed.   Another common occurrence to anticipate is that once things are torn up, you get another great idea which will change the process a bit more.  Be prepared for the ride-

But your home is your investment.  And in order to get the best return on your money, you do need to maintain said investment.  Bit by bit, you can change out light fixtures, flooring, paint, dented garage doors, and sand and restain/paint dog damaged window sills.  (Maybe that’s only in my house…)  Each day we’re usually so eager to “just go home” that we don’t look at our homes with a critical buyer’s eye.  And that’s ok.  But every so often, we need to critically look at our homes and see/smell what others see and smell.

Talk with others, and try to see some remodeling results when you think about who you want to use for your project.  Some contractors will run the remodel as if it were a new home construction, and take over the job so you don’t have to do all the scheduling.  Some of you are handy enough that you can contract out the licensed jobs, but take care of other aspects.  Either way, remodeling looks as if it’s here to stay.

Time to sell the big house?

As people near or enter retirement, one of the decisions that typically comes up is whether to sell their “big” home and buy a smaller one. If you know anyone who has been faced with that situation, selling one home and buying a smaller one may not save enough money to make it worthwhile.

There are sales expenses on the property being sold and acquisition costs on the replacement home. Generally speaking, homeowners may not mind a home with less square footage, but they usually don’t want to give up amenities or locations that they’ve become accustomed.

After a little number crunching, the move may not make enough difference in savings and they end up staying in their current home even if it doesn’t fit their needs anymore.

What if while this couple were still in their peak earning years, they acquired a home in an area where they would consider retiring and rent it during the interim. They could put it on a 15-year mortgage and possibly, even accelerate the principal payments to have it paid off by their anticipated move.

In the meantime, they could continue living in the “big” home until it is time to make the transition. Sell the “big” home that may be paid for by then and avoid up to $500,000 of capital gain. Take part of the proceeds and remodel the rental/transitional home and invest the proceeds for retirement income.

Ideally, the former rental would be mortgage free by this point, so the retirees would not have a house payment. Even if at this point, they changed their mind about retiring to this particular home, they still have a property that acted as a hedge against rising prices and have sufficient equity to purchase something else without using the proceeds from the “big” home.

It is difficult to know what the situation will be years from now when a person retires. It is clearly advantageous to have a plan that allows for options and choices. To find out more about purchasing your retirement home today, give me a call at (319) 331-7879