How to Put Your Tax Refund Back into Your Home
There’s nothing like the thrill of opening that much anticipated tax return refund. The excitement is even greater when the funds are intended for a home renovation. Renovations not only improve the quality of your life, they can also add to the value of your home. Of course, some upgrades are more likely to see a better return on their investment than others. Now that you’ve got that tax refund in-hand (or on its way to you), where can you can the most bang for your buck?
Variables to Consider for Home Renovation
There are many factors to consider when budgeting for renovations. You’ll want to take into consideration the size, location, and average price of a home in your market. The costs of materials and labor will also vary depending on where you live. When it comes to adding on to your home or upgrading a kitchen or bath, the size of the room, the cost of individual features and fixtures such as cabinets, counter tops, and appliances all add to the cost of the project—but not necessarily to your return on investment (ROI).
While there are many variables to consider, small well-designed renovations and energy efficiency improvements are often more likely to give you a better return, than larger, more expensive upgrades. Adding central air if you live in a warm climate, or insulation and a new furnace to a home in a cold climate, can be a better investment than upgrading a kitchen. Again, so much depends on the desirability of the market you’re in and the number of homes for sale when you decide to sell. Ideally, what you don’t want to do is put more money into your home than you are likely to get back.
Home Renovation Remodeling Costs in 2018
• Build an Addition – National Average $42,232, Low End $6,000, High End $110,000
• Kitchen Remodel – National Average $22,112, Low End $4,000, High End $52,000
• Bathroom Remodel – National Average $9,663, Low End $2,500, High End $23,617
• Energy Saving Investments:
• Home Insulation – National Average $1.362 Low End $450, High End $3,000
• New Windows – National Average $5,037, Typical Range $2,584 – $7,493, Low End $300, High End $!5,000
• Utility Upgrades:
• Electrical – The cost of upgrading a 100 or 200 amp panel is $800 to $3,000.
• Plumbing (new pipes) – National Average $1.042, Typical Range $350 – $1,750, Low End $300, High End $!5,000
• Landscaping – National Average $3,280, Low End $350, High End $10,000
Finally, it’s important to note the distinction between upgrades and renovations. A new kitchen or bath can add significant value to your home when you decide to sell. Whereas repairs and/or upgrades to utilities—for example bringing an older electrical system up to code—may be necessary to meet the expectations of a future buyer.
This doesn’t mean necessary upgrades should be less of a priority, only that they are less likely to add to the overall value of the property, and could even result in the need to decrease your asking price. Conversely, a new roof, exterior painting, or adding energy efficient doors and windows can give you more wiggle room when it comes to determining your asking price and getting a better ROI.
A home renovation is not something to rush into. Careful planning, comparison shopping, thoughtful design, and choosing the right contractor all take time ultimately saving you money and aggravation.