As we approach the deadline for filing personal income tax returns for 2016 many homeowners are anxiously awaiting a refund. Those receiving a sizable refund this year may want to consider putting some of that money to work for them by investing it in their homes.
If you have clients thinking about making some updates here is some information they may find useful:
Taking on a home improvement project could help make a home better fit the needs of its owners, increase enjoyment of the home, and potentially add to the value or resale potential of the property.
Choosing a Project
If financial investment is the highest priority, then it makes sense to stick to the improvements that are likely to offer the greatest return, or add the highest percentage of the cost to the value of the home. Each year Remodeling Magazine releases a Cost Vs Value report analyzing how popular remodeling projects stack up in terms of their average cost and what they add to resale value.
On average, most projects tend not to add enough to the home’s property value to fully recoup the cost. Of course not every project will fit the average. For example, if a home is very dated and is located in a neighborhood where most of the properties have been fully renovated, it might be possible to see a great return on investment by updating the kitchen and expanding the master suite.
Here are some of the projects most likely to offer a higher return on the investment:
- Attic Insulation: Very appealing to consumers as improved insulation makes the home easier to heat and cool, saving on energy costs. This relatively low cost upgrade can make a big impact.
- Entry Door Replacement: Replacing the front door with a new steel door makes the home safer and can increase curb appeal as well. The front door is a popular place to experiment with a splash of color as it’s not a large area to repaint should you want to make a change later on.
- Minor Kitchen Remodel: With an average cost of just over $20,000 this might not seem like a “minor” project. But when you consider the high cost materials in the kitchen: appliances, cabinets, countertops, it’s easy to see how prices can easily reach the Major kitchen remodel level with an average cost of more than $62,000. The smaller renovation is more likely to offer a greater return, 80.2 percent on average versus 65.3 percent.
Improving Investment Potential
When renovating a home with an eye on investing in the property it’s important to keep the focus on what the average homeowner will find compelling. You might love that unique tile for the entry floor, but if the goal is for future buyers to love the home, it’s a good idea to stick with current trends, and when in doubt, stay more neutral.
Home décor magazines, Pinterest, and Houzz are great sources of what design features are most popular right now. While what’s “in” will vary a great deal based on home style, region, and more, here are a few trends being embraced currently:
- Bright Whites: We’re seeing lots of white on walls, cabinets, exteriors, furniture, artwork, and more. Too much of a blank canvas? (And too tough to keep clean?) Other neutrals, such as beiges, pale greys, and tans are still very popular as well.
- Keeping Things Open: Open floor plans with fewer walls and large great rooms rather than closed off kitchens, dining rooms, and living rooms have been common for some time. This trend is expanding and has led to things like open shelves in kitchens, bathrooms, and other rooms, and large windows inviting the outside in. A side benefit: all this openness is great motivation to reduce the clutter and unnecessary items we tend to hold on to.
- Gold Tones: Warm golds and bronze shades are becoming favored over silver tones for hardware throughout the home. Try not to go too bold with these choices however as replacing cabinet pulls, doorknobs, and other hardware can be costly should you tire of your choice quickly.
Think Outside the Home
While it’s not the norm to recoup the full cost invested in a home improvement project, when you head outside and tackle the yard it’s a whole different story. Landscaping improvements can often offer an excellent return on investment.
According to the 2016 Remodeling Impact Report: Outdoor Features from the National Association of Landscape Professionals and the National Association of Realtors® there are many projects that often result in 100 percent or more of the cost recovered at resale, while also making the home more enjoyable.
For example reseeding the lawn was estimated to offer a 417 percent return on the cost. Other projects that real estate agents recommend as adding value to homes include landscaping upgrades, a new patio, or a new wood deck.
Investing in a First Home
For those currently renting and interested in buying a home, that tax refund could help make the dream a reality. It could cover the down payment and closing costs for a low money down financing option, or go towards moving expenses or a home maintenance emergency fund. Investing in a first home could be a great way to enjoy the benefit of that tax refund for many years to come.
Photography by [karen roach] © shutterstock.com
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Tags: tax refund, taxes