By Jim Tibbs
This monthâ€™s column is a continuation of the topic that I introduced in January: Setting Yourself Up for Remodeling Success. The first installment of this article reviewed three of the four key steps for starting a remodeling project. Step 1-Think big picture about your home improvement needs. Step 2- Prioritize those needs with your spouse or partner. Step 3- Get inspired by the possibilities for the home you want to create. In this column we focus on Step 4- Setting Your Remodeling Budget, also known as Remodeling Econ 101.
Lesson One- Determine your target audience.
One of the first questions that I ask prospective clients is how long they intend to live in their house after it is remodeled. My reason for asking is to determine if the improvements are intended primarily for the current owners or to make the house attractive to potential buyers.
Usually the response is some combination of these two objectives.
If you are selling your house within the next five years, resale value should be a prime consideration in your decision-making. Focus your budget on improvements that will deliver high return at time of sale. If your time horizon is 5-10 years, then I recommend balancing resale priorities with improvements that are customized for your familyâ€™s needs. If your time horizon is more than 10 years, the primary objective is to create a comfortable and attractive space that your family will enjoy for many years to come.
Lesson Two- Estimate the upside potential of your homeâ€™s value.
Use Zillow.com to research the estimated value of the homes in your neighborhood. Evaluate how your existing house compares to the neighborhood average and what the upside potential will be with improvements.
If you are remodeling an existing living space, the increase in value is derived from the value or cost of the improvements themselves. If you are increasing the amount of living space with a bump-out, addition, or garage/basement conversion, the projected increase in value is based on the incremental square footage combined with the value of the improvements you are making. Doing this analysis will help you determine the upside potential for the value of your house and will also help you to establish a cap on your remodeling budget to avoid over-investing relative to what the market will bear.
Lesson Three- Determine the budget range for your priority projects.
Once you have completed Lessons One and Two, you are ready to assign a preliminary budget range to your priority projects. The simplest and most accurate way to do this is to use Remodeling Magazineâ€™s Cost Versus Value chart for the San Francisco Bay Area.
(http://www.remodeling.hw.net/2013/costvsvalue/division/pacific/city/san-francisco--ca.aspx) This is a user-friendly chart that lists the most common types of remodeling projects and the average cost and return on investment for each. The chart is organized by midrange and upscale budgets, which will provide you with the low and high end of your preliminary budget range. Prepared with this information, you are ready to seek the counsel of a design and construction professional to help you further define and implement a successful remodeling project.
Jim Tibbs is the creative director of HDR Remodeling. If you would like to learn more, please read his blog at http://hdrremodeling.wordpress.com or follow him on Twitter at @HDRremodeling1.