Renovating Your Home
Do you live in a great location but your home is just not looking very fresh, well perhaps you should look at renovating your home. Often renovating can be a lot cheaper than buying a more updated home and by renovating you are ensured that your home will suit your style and needs.
When considering how to pay for the renovations you must determine:
- budget
- length of time from starting the project to completion of the project
- do you have a slush fund to pay your contractor until the bank advances your money to you
In many cases it is best to arrange for a secured line of credit. This way you can draw against the line whenever you need funds while paying a low interest rate and paying interest only on the funds advanced.
At times you may need to look at a draw mortgage. Draw mortgages are typically required if you are doing extensive renovations that entail demolishing part or the entire original home. In these cases you will need to get a set of plans drawn up for the new home and you will have to get those plans appraised. The lender will then advance money on a draw basis. The typical draw is:
- 40% of the cost to complete is advance to you at lock up
You have your roof, walls, windows and doors in place and you can physically lock the property
- 30% of the cost to complete is advance to you at drywall
All plumbing and electrical is complete and you have dry walled
- 30% of the cost to complete is advance to you at completion
Interest rates are typically charged on a Prime + basis. You will then wish to wrap the total monies borrowed into a conventional mortgage once you are 100% complete with the renovation.
Real Estate Investing Education
Education
in Real Estate Investing: Your Home Improvement Best Return on Investment
by
Mike Palmer
Consumer Reports magazine recently detailed an unbiased look at remodeling. What they found was an important nugget of education in real estate investing: First and foremost, don't believe the hype when evaluating your home improvement best return on investment. While you hear stories of friends buying a fixer-upper, slapping a new coat of paint and putting down new carpets, and turning it around for fast profits, it's rarely that easy. You may not be getting the full story there. The surprising truth of the matter, according to Consumer Reports, is that "remodeling and upgrading are generally poor investments."
"Even kitchens and bathrooms, long considered the most profitable improvements to undertake, [recover] only 50 to 75 percent at sale - and only if you sell a year after the remodeling is complete," says the study.
What renovations add the most value? Your best investment in home improvement is to ADD SQUARE FOOTAGE to your house. Adding more room is most likely to add value. But there's a caveat here - this works only if you're bringing your square footage up to neighborhood standards. According to Consumer Reports: "You'll get the biggest bang for your buck by keeping up with the Joneses, not by going them one better."
"Over-improvement yields diminishing returns. So don't add an in-ground swimming pool or a third story if you're the only one on the block to have one. Refrain from exotic decorating. [And] don't undertake a big-ticket remodeling project if you plan to move within a year - you won't have the time to enjoy it, and new owners will most likely want to do something different. Instead go for maintenance and repairs, clear clutter, and paint."
Our recommendation for your home improvement best return on investment? Scope out your neighborhood's recent and historical home sale prices, factoring in any additions or projects that may have added or diminished their sale prices.
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