Accounting for home improvements

[Ken11]

Heres whats up and how i think about it.

Been acruing $ for a new roof. About 10k in that pot.
To my surprise hail issues led my insurer to replace my roof.
I only paid deductible and upgrade $

With that saved 10k we eye a master bath reno.
Home built 2002. Upgrades bring better sales prices cause the differences are significant. Reno cost 23k Gulp.

In my mind i figure it this way
Very conservatively assume 50% of reno cost will show up as increased home value.
Also assume a quicker sale with upgrades- worth a few grand to me. I think this even though we have no plan to sell in near future.

So, if having a larger more functional and beautiful shower, a modern vaniy at a reasonable height, new flooring etc. Is worth 8-10k "expense" to me then i proceed.

Thats where im headed. DW is stuck on sticker shock lol

Note that a new roof is maintenane and i assign that no value.

Mind games but necessary ones IMHO

 

[jonat]

The view I often read and agree with is that, unless you are specifically planning to sell your house in the immediate future, it makes no sense to consider "resale value" when looking at home improvements. Do the things that will make you happy in your home, as long as you can afford them.

However, DO keep track of such expenses as they can be added to the cost basis when calculating gain (or loss) on the future sale of your home. I keep a "house" account in Quicken which gets assigned improvement costs, and keep paperwork "forever".

 

[Texas Proud]

We had our bath redone close to the cost you have...

I love the shower... the only thing that I hate is they talked me out of having 3 body sprays in line with shower head but go with 4 in a rectangle... they are too far apart to get me in the back...

If you have a large enough area, I would add a bench and hand sprayer near there... never know when you might need that in the future...

Also, we did not do our with resale in mind, we just wanted a better shower... BTW, it was good we did it since the old one leaked and the wood was rotten all the way through...

 

[Independent]

If I wanted to get all analytical on something like this, I might ask myself how much I'd be willing to pay per day to use the new bathroom.

Imagine I borrowed the money to pay for it, then each day I put greenbacks in a jar in the bathroom to repay the loan. How much would I pay per day? I should be honest and recognize that the thrill of all new will wear off with time, so it's a decreasing amount.

Given my daily value numbers, I can try some sample holding periods:
I live here for one year, pay down $___ then sell and get $__ more from the sale.
I live here for three years, pay down $___ then sell and get $___ more from the sale.
....

The "pay down" amount goes up as I live in the house longer, but at a decreasing rate.
The "get more when I sell" goes down as I live in the house longer.

I'd look and see it there is any general message - it's always worth it to me, or never, or only if we happen to sell in a narrow window, or whatever.

When I think about my acceptable daily deposit, I nee to consider the opportunity cost. What else might I (or, more important, my wife) buy with that $___ per day?

BUT, I'm way out in the tail of the "analytical type distribution". I can do this for entertainment. Most people buy luxuries based on gut feel. That's probably more fun.

 

[karen1972]

If you have no plans to sell, then the bathroom remodel only has value to you. If you think its outdated at 15 years, then if you sell it 15 years from now ..won't it be outdated to the new people? and does it matter if its 15 or 30 years old, it still needs to be replaced.

I purposely bought a house that hadn't been touched in 30 years, yes I paid a little less but they didn't spend anything on the house either so win/win and I could just start from scratch and enjoy it from the beginning.

However, if you take monetary value out of the equation, new bathrooms can be awesome for all the things you described plus I know it made me happier in the morning, there is something about walking into something hotel like and having a great shower to make the morning start off right.

 

[NW-Bound]

If the expenses improve my quality of life, and if they do not cause my long-term WR to deviate from a reasonably value, I go for it. No extensive analysis necessary.

 

[Just_Steve]

DIY and save 15k.

 

[W2R]

When I sold my house two years ago, I was SHOCKED at what the buyers planned to do, and not do, to it. Honestly they removed the unusually beautiful granite countertops in the kitchen and completely changed everything in there around, yet they left the pink plastic 1970's tub/shower surround in the bathroom and changed nothing there. Whatever were they thinking? Oh well, it's their house now so they can do what they want.

Because of this, I would never assume that a random buyer would want any improvements that I might have in mind, or pay more because of renovations.

In fact, I am pretty sure that my landscaping improvements (from heavily wooded dense jungle to all grass) lowered the resale price, instead of raising it. Still, I wanted a low care yard with no trees to fall though my roof or the neighbors' during hurricanes, and I'm happy with what I had done to it. In this climate, my yard now requires zero care other than paying someone to mow regularly.

When I was buying my house, I knew before making my offer that I would need to have these improvements done. So, I counted this work as part of the cost of my house. I haven't had to do any interior improvements, other than buying keypad entry deadbolts for all exterior doors, and I just fit that into my usual spending money.

 

[Texas Proud]

If I wanted to get all analytical on something like this, I might ask myself how much I'd be willing to pay per day to use the new bathroom.

Imagine I borrowed the money to pay for it, then each day I put greenbacks in a jar in the bathroom to repay the loan. How much would I pay per day? I should be honest and recognize that the thrill of all new will wear off with time, so it's a decreasing amount.

Given my daily value numbers, I can try some sample holding periods:
I live here for one year, pay down $___ then sell and get $__ more from the sale.
I live here for three years, pay down $___ then sell and get $___ more from the sale.
....

The "pay down" amount goes up as I live in the house longer, but at a decreasing rate.
The "get more when I sell" goes down as I live in the house longer.

I'd look and see it there is any general message - it's always worth it to me, or never, or only if we happen to sell in a narrow window, or whatever.

When I think about my acceptable daily deposit, I nee to consider the opportunity cost. What else might I (or, more important, my wife) buy with that $___ per day?

BUT, I'm way out in the tail of the "analytical type distribution". I can do this for entertainment. Most people buy luxuries based on gut feel. That's probably more fun.

I did not do a per day calculation, but put my foot down when I found out how much it would cost to have the shower be a steam room... it was over $6K more!!! I said to DW that if she used it once a week for 10 years that was still over $10 per steam... she did see the problem so we did not put in a steam machine... however, we did put in a glass wall that we can close off and steam it up with the hot water.... no where near as good as a real steam room, but better than nothing...

 

[Danmar]

If the expenses improve my quality of life, and if they do not cause my long-term WR to deviate from a reasonably value, I go for it. No extensive analysis necessary.

Agree, we usually have 1-2 fairly big projects every year. Major Reno on Toronto Condo underway. DW insisted even though I wasn’t convinced. Last year had to rebuild our front deck and house rock facing in Canmore house. I don’t try to accrue for it or try to factor a payback. Just put it in the budget and proceed.

 

[gauss]

When I have thought about this, I always got hung up on the ~ %10 total sales transaction fee(s) in this state.

Why not let the buyer do the improvements and get what they really want and not have 10% of the improvements cost/value go to the RE Agent, County and State RE transfer taxes, title insurance etc.

-gauss

 

[HillCountry]

For low end house, sell as is to buyers might be good strategy.

But for high end, it’s different story.

 

[jonat]

DW and I know that our tastes are not mainstream, so we don't care about resale. Since our current goal is to stay in this house until we croak, it will be someone else's problem afterward. We don't like granite countertops and stainless-steel appliances, the current vogue. We also use good-quality sheet vinyl flooring.

As for DIY - it depends on your skills, time and temperament. Our last several remodel projects are not those we could have handled on our own.

 

[gauss]

For low end house, sell as is to buyers might be good strategy.

But for high end, it’s different story.

Good point. As the reno costs are a much lower % of the value of the property, the emotional factors may be more likely to take over. Thanks

 

[Bamaman]

Before I listed my house, I painted the bedrooms and put in new carpet. Then I painted the large master bathroom and installed new ceramic tile in the bath.

My house sold to the third person that looked at it for list price.

Total cost of paint was about $100. The carpets cost about $1000. THE COST OF THE TILE, THINSET AND UNDERLAYMENT--$135. Laying tile is cheap and easy for a homeowner.

When I see huge bills to rebuild bathrooms, I never understand where the money is spent. Money is better spent to make the house walk in ready--no required repairs needed.

 

[Cobra9777]

DIY and save 15k.

That's my thinking as well. And there are different degrees of DIY depending on the situation...

A couple years ago, I updated an upstairs bath for less than $2K. That included new: tile surround, trim kit, cement board and floor tile, granite, vessel sink, faucet, toilet, hardware, light fixtures, mirror, some minor electrical, and fresh paint. The only things I hired out were tile and granite. We kept the existing tub and vanity, which saved a lot.

We're right in the middle of updating the master bath. This one is more involved, starting with a complete wreckout to the studs. We're getting a new tub and custom shower with frameless glass enclosure but the basic footprint is unchanged. DW and I did most of the demo ourselves. The contractor is doing the tub, shower, drywall, floors, and electrical. DW and I will do everything else (vanity, sink, faucet, toilet, trim, paint, hardware). Contractor is charging us $12K for labor. Our cost for material is another $6K; so the total is $18K. We got a couple turnkey quotes that were in the $25-30K range, which just seems outrageous to me.

I don't do mental accounting or mind games with projects like this. We know we will downsize at some point but we're still doing whatever we want without much concern for resale value. We have a fairly large budget for large, non-recurring stuff like cars and home improvements. DW and I discuss priorities early in the year so we can align on what gets done this year and what gets pushed to later. We can also make trade-offs with the travel budget if needed (also a large discretionary category).

 

[Music Lover]

Before I listed my house, I painted the bedrooms and put in new carpet. Then I painted the large master bathroom and installed new ceramic tile in the bath.

My house sold to the third person that looked at it for list price.

Total cost of paint was about $100. The carpets cost about $1000. THE COST OF THE TILE, THINSET AND UNDERLAYMENT--$135. Laying tile is cheap and easy for a homeowner.

When I see huge bills to rebuild bathrooms, I never understand where the money is spent. Money is better spent to make the house walk in ready--no required repairs needed.

I'm planning a bathroom redo and will do most of it myself. The only thing I'm subbing out is the tub replacement. Painting, tiling, replacing flooring, toilet, and vanity are simple projects and I don't need to pay someone to do those jobs. I'm also adding a window which involves cutting through stucco, but I've done that before so I'm confident in my ability to do a good job.

 

[RenoJay]

As long as your honest with yourself that the recoup cost is probably 50% max, then I think your thought process makes sense.

 

[akck]

We too are renovating our bathroom DIY. Fortunately, we have a plumber son who’ll get paid in meals (actually, he’d gets the weekly family dinner anyway). We bought the tile 2 years ago, the vanity last year and finally settled on the flooring last month (takes us a little time to agree on them). Total cost of project should be < $5,000. Likely added value, $0, because it’s still just a bathroom. It might get the house sold quicker if we ever decide to sell. So our main benefit will be that we’ll get to enjoy a new bathroom until we decide to move, if ever. So any justification for moving forward on the project should be based on your enjoyment.

 

[davismills]

We constantly try to keep our house in a "ready to sell" condition. The last project was to upgrade ALL hardware to brushed nickel from hideous gold. We replaced all door hardware, plumbing fixtures, removed all wallpaper for paint, etc.

You haven't lived until you've replaced all the hinges on 25 doors. My DW told our friends that we were screwing all day. Alarmed looks until we gave more details.

 

[GreatLaker]

We constantly try to keep our house in a "ready to sell" condition. The last project was to upgrade ALL hardware to brushed nickel from hideous gold. We replaced all door hardware, plumbing fixtures, removed all wallpaper for paint, etc.

You haven't lived until you've replaced all the hinges on 25 doors. My DW told our friends that we were screwing all day. Alarmed looks until we gave more details.

Hopefully all with real wood door frames. Newer MDF door frames tend to crumble when hinge screws are removed.