How much one should spend on a remodel depends on a number of factors. As a former real estate developer and owner of Habitar Design, a design and home remodeling company in Chicago, I’ve advised many clients about this over the year. It’s not hard to figure out. There just a few questions to ask yourself.
Question one: How long to you plan to stay there?
If it’s two to five years, six to twelve years or twelve to forever the advice is different.
Many people want to buy a place to get into the market and build equity but they’re not sure what will happen next. Perhaps they’ll move to a new city for work, start a family or find a new partner. The average stay is two to five years. Many clients in their early thirties are in this situation.
When building equity is of major import, spending should be strategic and limited. If you don’t like your kitchen, consider painting the cabinets, a new backsplash and possibly a new countertop. A lot can be accomplished with fifteen to twenty-five thousand dollars or less.
That’s what you want to spend. It’s not time to create the kitchen of your dreams because your dreams might not be the next buyer’s dream, which means, you won’t recover what you put in. The goal is to spend less, make it nice for yourself within limits, and recover a lot of your investment at sale.
For more on how to spend wisely, click on our blog here.
A six to twelve year horizon is more common for buyers in their later thirties to early fifties with lives less prone to change. Changing jobs and relationships might take them in new directions but less often. This means think about resale but not nearly so much.
If you’re in a position to spend on your new home, it’s time to get the kitchen and bathrooms of your dreams and a fireplace upgrade. The sooner you put them in the longer you can enjoy them, hopefully, for many years.
But life always has it’s surprises. This means temper your design with some consideration of the next buyer. Don’t do anything radical.
In a other words, you might not like fireplaces, but unless yours really annoys you, don’t take it out. The next buyer might want it. On the other hand, improve your fireplace and you might be paid back at sale for it.
You can make choices specific to yourself that won’t cost much to reverse. Purple cabinets are only a coat of paint away from being white, but purple bathroom tile are not.
The advise is different if it’s going to be your last place. Do whatever you wish and spend whatever suits you. Most of your design choices won’t be in style when the next owner moves in. If you’re going to live there a long time, chances are you’ll update things yourself.
Question two: What are the comps?
This is important to know because you can only spend so much before pricing yourself out of the market. You might want to spend 60k on a killer primary bathroom but if condos in your building are selling for 250K you won’t get much of it at sale.
No matter how great your Chicago condo is on the inside, it won’t be valued much higher than a similar condo across the hall. Even if a buyer loves your unit and is ready to pay what you ask, the appraiser will not value it that way. Getting a mortgage for your unit will be difficult until your unit’s price falls into line.
This is less of a problem on the higher end units where there’s a lot more variability in pricing. The best way to know if your unit will support the expenditure without pricing yourself out of the market is to call your real estate agent. They can be a great resource.
One more thing, in an improving neighborhood, you can do more because the neighborhood will catch up.
Question three: What are you comfortable spending?
If you have limited resources, like many of us do, then your comfort level should guide your decision. Don’t spend so much you’ll lose sleep. Even if you’re a multi-multi millionaire, don’t spend what you don’t want to. Stay within your comfort zone and you’ll be happier. There’s always next year for phase two.
On the other hand, if you want what you want and have the means, spend whatever you want. In all the years I’ve been doing this, no one has ever expressed regret over getting what they really wanted. Many have expressed regret about not going for it.
One final piece of advice, a great interior designer will help you create a design that suits you and will more likely endure. They’re worth the investment.
Mitchell Newman, is the owner of Habitar Design and Stratagem Construction, a high-end interior designer and a top quality construction company in Chicago. Previously he worked as a real estate developer, developing numerous condominiums on both the northside and southside of Chicago. He is a physician by training and a graduate of the University of Chicago. His companies operate according to the same principals he applied when taking care of patients, namely, always put your client’s concerns first.