Renovate your home without wrecking your budget

Have all of those home improvement shows got you thinking about renovating your kitchen or knocking down some walls and expanding your living room? If so, you're not alone. In fact, homeowners are projected to spend an estimated $451 billion on home improvements and repairs from April 2024 through March 2025.Footnote ¹ Their motivations are generally twofold: to make their lives a little nicer by enhancing the space they live in and to protect their home's value.

In addition, since housing prices have risen substantially in the last decade, homeowners are frequently more willing — and able — to tap their residence's equity. And the right kind of renovation can increase your home's worth. But keep in mind that even a moderately ambitious renovation project can be expensive and time-consuming.

Before you start researching contractors and picking out paint colors, make sure your time and money will be well spent and that your project has the potential to add to your home's value — not just your stress level. Here are a few dos and don'ts to consider.

First, check out comparable homes in your area. Would your home suffer by comparison if you put it up for sale? How many bathrooms and bedrooms do they have on average? Do most have gourmet kitchens and finished basements? If you decide you want — or need — to keep up with the Joneses, then do a little research to see how likely it is that you'll be able to recoup the cost of your proposed renovation when you sell your home. (The slideshow below can help.) How much would it matter to you if you couldn't eventually recoup those costs?

As you think about your proposed renovations, also keep in mind that you could make your home more difficult to sell by adding too much to its value.

Putting in that gourmet kitchen might make your house the most expensive on your block if you try to recoup the cost when you sell. Plus, renovations don't always make up for their cost when you put your home on the market. According to the Remodeling 2024 Cost vs. Value Report (www.costvsvalue.com), for instance, you are likely to recapture only 49.5% of what you spend on a major kitchen remodel.Footnote ²

If, after pricing out your renovation options, you find that the cost — and inconvenience — outweigh the gains, you might consider looking for a house that already has the amenities you want. In a seller's market, you may even be able to sell your home without doing any renovations.

With any renovation project, it's easy to get caught up in the fun decisions — selecting your fixtures, appliances, colors and decor. But before you get too carried away, make sure your finances are in order.

A ballpark figure isn't quite enough — it's important to establish exactly how much you're willing to spend. There's an all-too-common phenomenon known as scope creep, in which you add a little of this and a little of that, and before you know it, your budget is blown. Knowing — and sticking to — your number will help you determine early on what you can afford — and help prevent disappointment and financial stress later.

When you start to plan for home renovations, it's important to consider how you'll cover the expense. If you have cash that you’ve saved, you could consider using it to pay for the renovation. It could also be helpful to know how much equity you have in your home to decide if a home equity line of credit is right for you. If not, you’ll want to look into different types of borrowing options.

Which is a better use of home improvement dollars — updating a serviceable but somewhat tired kitchen or replacing a houseful of old, drafty windows? When you eventually sell, potential buyers may love a new kitchen, but they're likely to balk at glaring structural issues.

Redoing your siding may not be as sexy as adding a master bedroom suite, but it can be pretty attractive when it comes time to sell. According to the Remodeling 2024 Cost vs. Value Report, if you buy new vinyl siding you can recoup 80.2% of the initial cost (on average).Footnote ² Not only does it give your house a visible facelift, but it can also make for a warmer, more energy-efficient home. However, you may want to consider consulting a local real estate agent to help you determine if investing in upgrades is worth it at this time.

Consider replacing your front door with a higher-quality version. First impressions matter, and the door is the first thing that friends and neighbors — and potential buyers — notice when they walk into your house. Rather spend your renovation budget elsewhere? Add a fresh coat of paint to the door and buy a new welcome mat.

Are you planning to stay in your home as you age? Then you might not want your proposed renovation to include additional stairs or a doorway or hall that might not be easily navigable with a wheelchair or walker. Think instead about things like a shower with seating and an anti-slip coating, or kitchen cabinets with pull-up and pull-down shelves.