Home Equity & Remodeling

Planning and Figuring

• The first step to take when remodeling a home is to determine how much bang you will get for your buck. In other words, compare the cost of the remodeling to the possible increase in home value. The increase in home value is not set in stone and will change based on the market. But you will be able to get a base line estimate. You should compare both the costs of the materials or contracted labor to complete the remodeling with this estimated value.

Estimating Home Price Increases

• To get a general idea of how much a remodeling project will affect the price of your home you will have to do your own research. Compare the listing prices of similar sized homes (based on square footage and number of bedrooms and bathrooms) that are not new or newly remodeled to those that are. Find these listings on the multiple listing service (MLS) database in a classified homes site or through a real estate agent. Your real estate agent may also be able to give you an estimate on how much of a price increase your planned project will give you.

Getting Remodeling Quotes

• The next step is to get quotes from contractors and builders in regard to your project. This will take a lot of time but it is important. Contact builders and renovation companies in your area and get quotes for specific projects like painting, new kitchen cabinet installations and basement refinishing. Have the square footage of your home handy when you call. Compare the quotes to the estimates you have from your real estate agent and home price research. Subtract the possible rise in home value minus the cost of the repairs to find out how much actual equity you will gain.

Selecting the Right Projects

• After you compare your estimates it is time to select a remodeling project. It is wise to choose one that benefits you as well as potential new buyers. If you plan to live in your home for a year or more before you sell, give more consideration to projects that you will enjoy like a new kitchen or complete basement renovation. Then decide which projects a potential buyer might appreciate the most. In a large family home, a newly remodeled kitchen will probably be a better selling feature than a new coat of paint because large families make a lot of use out of the kitchen. By the same token, a new basement room will also be a big plus for large family homes.

Do it Yourself or Contract

• Another decision to make is whether to do the renovation yourself or hire a contractor. You'll pay more to have a contractor finish your basement. This might cost anywhere from $5,000 to $10,000 depending on what the basement requires. To add drywall and a new floor you might spend $3,500 to $5,000. However, your own time may be just as valuable. This project requires at least 40 hours of labor which is several weekends worth of time. A contractor will also do a professional job, so the results may be more impressive to a potential buyer.