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The Importance of Home Improvements & Equity

When a homeowner decides to take on a home remodeling project, the bathroom is a major place of interest to remodel and can add substantial equity to the house. This can bring value to your home in the form of Return on Investment(ROI). However, one must pay close attention to their budget and not overspend. If your budget gets out of hand and you spend an enormous amount on the bathroom remodel, you will be taking away any increase in value you might have had if you had stayed within the budget.

Budgeting can be difficult to understand with the concept of how to think of our homes as long-term investments. The main reason behind this thought process is because we tend to think of our homes as "just homes", a place where we live and not as a long-term investment. It is, however, a simple concept.

Simply put, you buy a house and make improvements to sell it for more than the original purchase price. This concept holds for homes as long as the market is favorable to sell.

The perplexing part that troubles people is when homeowners don't plan to sell their homes or plan for it to be sold in the future. Numerous people buy homes to live there forever. However, our life does have changes that occur and if the home has to be sold it's critical to make sure that we make a profit out of the deal of selling our home. Therefore, this will mean that any and all repairs completed on the home remain within budget so that there is no unnecessary spending, so all potential profits are not lost, instead go into your pocket.

In the long run, you want to build equity in your home so there is a profit when you sell. Equity is translated as the excess value of your home since you purchased it.

Another added value about equity is being able to borrow money against it. For example, if you were in a pinch and needed to make home improvements or pay for college for your kids, the equity in your home will be there as an asset for you and your family to use. Equity is established in kind of an imaginary account until the home is sold to someone else and then the money becomes real and is in your hand.

With all of that being said, here are some things you will need to ask yourself when planning a bathroom remodeling project:

-Is this home remodeling project going to bring value to the home?

-What precise amount of value will this remodel bring?

-On the other hand, will this home improvement remodel dip into the value of the home because of overspending?

For example, if you decide to remodel a master bathroom, it will take a lot more money to remodel than your everyday standard bathroom. In other words, if the remodel is priced at $5,000 and your home is appraised at $140K and you bought the house for $140K then you haven't built any equity. However, if you spend $5,000 on improvements, then the value of the improvements needs to ramp up the value of the home $5,000 as well or you will be in the negative when the home sells.

On the other hand, if your master bathroom improvement costs $5,000 and all the improvements add a total of $10,000 in value, you can then price your home for $150K because of the added improvements to the master bathroom. Now you have then made a $10,000 return on investment making the 10K part of your equity.

So now that we have an understanding of what monetary value a master bath remodel improvement will add to your home, it's now time to bring in the experts to evaluate your home. A seasoned real estate agent can do a market value assessment of your house for a reasonable cost, thus helping their future business.

The real estate agent should take a deep look at your home to experience all the added home improvements that will impact the selling price. Obtaining a fair market assessment should hold no legal obligation to the real estate agent, so don't feel coerced by the agent to work exclusively with them. Just play it casually and explain to them you are considering putting your house on the market and want to know the market equity value of a master bathroom improvement project. In the end, this information should enable you to determine a great cost estimation and help you budget for the master bathroom home improvement remodel.

Contact Pro Property Services today for all your home improvement projects!

Let us turn your bathroom into a MASTERPIECE!

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