Most homeowners can agree that finding a flawless home designed to suit your style impeccably is rare. Few buyers have an unlimited budget or the resources to customize a new house or condo, which is why remodeling after purchasing your home is a popular workaround.
According to the National Association of Realtors (NAR) 2017 Remodeling Impact Report, Americans spent $340 billion on remodeling in 2015. Over half of homeowners in urban areas like Chicago said they would be willing to remodel their home rather than move.
Unless you’ve purchased a home with the sole intention of renovating and budgeted accordingly, there’s bound to be some downtime between the closing and interior upgrades. Setting a budget now gives a better idea of the amount needed to make your Chicago home just right.
- Gauge the costs
Thanks to the internet, homeowners now have the ability to roughly estimate potential home renovation costs before contacting a local contractor. To set your expectations, check out Houzz’s Remodeling Costs calculator to learn how much your fellow Chicago homeowners invest on home renovations. According to Houzz, the average cost of a Chicago kitchen remodel is $24,416 on a $450,000 home. The average household income for those completing a kitchen remodel is $145,000. The lower third of Chicago homeowners who remodel spend an average $6,000 on their kitchen makeovers. However, if you were to keep your existing countertops and implement some more minor do-it-yourself fixes, like painting the kitchen cabinets and swapping out the hardware, you could theoretically keep costs under $1,000. If you do opt to handle several cosmetic changes on your own, keep safety a priority and hire a professional for major overhauls that involve electrical, plumbing or tearing down walls. No dollar saved is worth compromising the health and wellbeing of your household or nearby neighbors’.
- Gather quotes
Step two in budgeting for a home renovation is finding several reputable contractors and inviting them to your home for an in-person consultation. Most home improvement professionals provide estimates free of cost but always ask before scheduling your initial appointment. Bear in mind, many renovation estimates do not include the cost of materials, so you’ll have to count the cost of supplies like appliances, tile, bathtubs, sinks, and toilets separately. You may be able to purchase various materials through your contractor at a discounted rate, or you can visit your local home improvement center to select the fixtures you want and budget accordingly.
Many renovations wind up going over budget due to contractors unearthing necessary repairs, or if homeowners opt for more expensive materials and finishes than originally planned. When remodeling on a strict budget, ensure your contractor is willing to listen and execute your wishes with little room for interpretation. Finally, the cheapest labor isn’t necessarily the best labor. Ask for referrals from past projects and scope out online reviews to avoid dishonest or unlicensed individuals and companies.
- Consider a loan
Unless your home is in dire need of renovating and is currently unlivable or dangerous, taking out a loan for cosmetic updates is rarely a financially savvy decision. You’re better off putting aside money slowly or cutting back on other expenses to save for interior upgrades. Nonetheless, there is something to be said about happiness in your home, and many homeowners are willing to pay more in interest to complete their renovations sooner rather than later.
There are a few different loans you can consider to help finance a home renovation. One is refinancing your mortgage, which largely depends on your current interest rate. If you purchased a home in Chicago over the last few years with great credit history, your mortgage rate is probably hovering at or around 4 percent. Now that interest rates are on the upswing, refinancing is probably not a good idea unless your interest rate was higher initially due to poor marks or outstanding debt, or you purchased your home prior to 2010(ish). Alternatively, a home equity line of credit (HELOC) and home equity loans both allow you to borrow against your equity or your financial investment in the property. The former has a set limit you can borrow against over time while the latter, often referred to as a second mortgage, requires you to take the cash out all at once.
- Set a budget
Sometimes, the biggest risk of a home renovation is over-upgrading. To avoid a lost investment, some home value experts recommend allocating no more than the value of the room toward its remodeling needs. Kitchens, one of the most commonly remodeled spaces, typically account for 10 to 15 percent of your home’s value. For example, homeowners who shelled out $450,000 on a two-bedroom condo in Gold Coast would set a max renovation spend at around $45,000 or less. That number assumes your space needs a complete overhaul with new kitchen cabinets, floors, plumbing – the works.
Don’t forget to account for lesser-known costs like extra labor, hotels, pet boarding, take-out dinners, professional cleaning, increased utility usage, waste disposal, and construction or remodeling permits. Most contractors will outline permit fees, which are usually only needed if your project involves extensive demolition, plumbing or electrical work, mostly to ensure all work is completed up to code with the city’s standards. Most municipalities do not require a permit for cosmetic changes such as painting, re-flooring, tiling and the like.
- Prepare for the worst
Do you ever really know what’s hidden beneath your home’s surfaces? Unfortunately, homes built prior to 1975 have an increased risk of mold and asbestos. Removal can cost thousands and delay your project timeline significantly. There’s also the risk of running into outdated plumbing in the form of galvanized pipes that are corroded. These can be replaced with PVC or copper for an additional $250 to $1,000. Older electrical wiring may also need replacing since homes built before the mid-20th century weren’t designed to withstand the power of today’s appliances and gadgets. Upgrading old electrical wiring can cost anywhere from $1,300 to $3,000, even more, if you need new three-prong outlets plus knob-and-tube wiring removal. Lead paint is another common find when renovating older homes, which can cost another few thousand dollars depending on home size. While you can buy a kit to test for lead paint on your own, you will need to hire a professional to remove lead paint before you start any scraping or cutting since the dust and debris can be dangerous to your health.
Aside from adding value, home renovations may increase your happiness. According to NAR’s survey, 75 percent of owners have a greater desire to be in their homes once the project is complete and 65 percent have increased enjoyment.
Overall, try to prioritize home renovations that increase value first and foremost. The latest and greatest interior trends are always changing, making it difficult to pinpoint upgrades to attract more homebuyers in 5 or 10 years. However, quality withstands trends. Opt for long-lasting materials that match the home’s overall style. Steer clear of ultra-contemporary or trendy styles that compete with more traditional settings. Finally, more subtle designs are the go-to because they can be easily adapted in the future with fresh paint and hardware. You can always personalize with décor and keepsakes for a cozier, but clean, feel.