How Much Should You Spend on a Home Remodel? (Heres the Answer)

How Much Should You Spend on a Home Remodel? (Here’s the Answer)

It’s brian preston the money guy um all right brian let’s start this first one with a housing question uh i’m gonna put some context on this that’s not actually there because i can uh and joseph can’t stop me this question is from joseph uh he said you know right now housing markets crazy everything’s expensive everything is wild maybe we can’t move right maybe

Maybe moving is not an option anymore so instead we’re gonna think about doing a renovation we’re gonna think about doing a remodel we’re thinking about making our current house the home we want to be in forever this is joseph’s question is there a recommendation on how much money to spend on home remodeling is it like a percentage of net worth how should i go go

About thinking through that process so i i think it’s not uh how much i think it’s where you’re spending the money okay um in the house you know we’ve done some contents probably been years ago and uh you know things run together after a period of time probably been years ago means that part 10 years ago yeah i know we have done but i would focus on we know first

Of all the easy stuff the biggest bang for the buck that you get the highest rate of return mean that when you go to sell the property down the road you get your money back out the easiest thing first paint i mean paint is cheap it’s more labor intensive than it is cost of materials that’s something even you know you can do yourself but then after you get past the

Basics of just the aesthetic stuff like the paint and trim and little things like that now you focus on where in the house and that’s where the kitchen’s always important because that is the central hub of your house have you ever noticed when you um you know have any type of social thing in your house i don’t care if you think it’s going to be in the living room

Or family room or wherever you think it’s going to be if the food’s in the kitchen that’s where the people are going to be so focus on the kitchen focus on the you know the master bedroom and bathrooms those type of things are very important um so the the wear is a focus but then the second thing is just pay attention to are you getting too specialized you know

Here’s what i mean by this you will find because you need to think about this from a financial standpoint not from the emotional side is that when you start and i’ve built i’m now up to my third house that i’ve built from from the ground up um you’ll get overwhelmed with the decisions and will be this way with projects too is that you’ll be like man for an extra

Thousand bucks or 1500 bucks i can buy this version of tile versus or get this cool design in the tile on the backsplash or this i can put a different edge on the countertop you know that was you know for 2 000 bucks they’ll put this cool thing that makes it look like it’s a piece of trim you need to ask yourself when you combine all these things together are

All those upgrades really adding ultimate value to the thing or were these personal preferences because the bad thing is when you go to sell sometimes personal preferences don’t translate they don’t they don’t they don’t have a return on investment if you were so excited because the marble you’re using on the floor of your bathroom came from italy that probably

Doesn’t translate well when you can go buy at home depot or lowe’s a fake you know marble that that looks now look you will potentially because it’s a higher quality but it is one of those things you need to always balance be a financial mutant to figure out does this truly translate or am i getting too specific where i’m importing things in and then the market’s

Just not going to recognize that value and it’s also if you’re doing things that are so unique i’m always amazed when i’d go look at kitchens when we were before we built our house up here in in tennessee we thought we were just gonna buy existing homes sure and i was amazed at what people would spend their money on with like maybe a pizza oven get you money but

What if i don’t want a pizza or a movie theater in the basement what if i don’t watch it some of those things are even the swimming pool in the backyard now look this pandemic has created some weird things but realize some of those decisions i just talked about they might be 50 cents on the dollar of everything you spend versus getting the full 100 now i know the

Pandemics made things unique but it’s it’s uncommon that forever will be in a period where if you put your house in the market without due diligence you’ll get 20 offers that that will come to an end at some point so make sure you are well connected to the reality of what happens when things aren’t in these unique times um let me ask you a question related uh and

I don’t know the you know normal ask you questions i kind of know your answer i don’t know your answer for this one so this will be this will be a fun one when it comes time to do a remodel and like do that sort of stuff how do you balance like using debt to do a remodel versus like saving for cash to use a remodel does does one or the other always make sense are

There times when you should like kind of like any thoughts on that i mean just if that’s if this is something joseph’s thinking i mean it depends it depends on your financial situation i mean it’s um and look that’s why i always come back to the financial order of operations if you’re it’s great if you’ve got if you’ve got good emergency reserves and other things

And you’re you’re flush and you’re trying you’re having a hard time figuring out where to deploy your your cash that’s in the bank you’re probably not going to use that but i also understand some people you may be in that messy middle where you have a great income you have a great career trajectory but you just you just can’t get it all fit in but you know this

Is what this house needs especially in these unique times to make it where it’s usable for you and your family then i think of doing it but being reasonable about what that budget is i think it’s okay to use um debt as long as you have a plan because there’s a big difference between like a home equity line versus a home equity loan on when the term because whereas

We’re in a very unique time where interest rates are still low but there’s every indicator that things are going to start going getting a lot more expensive so if you are going to use debt you better know what your risk is on it going up to make sure that maybe it’s there i can i can cover that while i’m i’m paying this stuff back because all that comes into play

I mean that that’s a much more individualized plan once you do that but i at least can give some paint with a broad stroke to know worst case scenarios so you can make sure you plan accordingly

Transcribed from video
How Much Should You Spend on a Home Remodel? (Here's the Answer) By The Money Guy Show