6 Ways to Avoid Costly Home Renovation Mistakes

Finally ready to start that big home improvement project youve been thinking about forever? Youre going to want to read this first.

Many of us are spending more time at home in 2020, which could mean having more time to take on home improvement projects. But home renovations arent just a way to fill time; you want the results to be worth the hard work. The key to any successful project lies in careful planning including financial strategizing long before the power tools come out.

Roughly three in five American homeowners (61 percent) have taken on home improvement projects since March 1, 2020, spending $6,438 on average. That’s according to an August 1820 NerdWallet survey conducted online by The Harris Poll among 1,414 homeowners.

Whether youre outfitting your home with a new office or classroom, or taking on long-intended improvements such as painting or installing new flooring, here are six tips to help ensure youre heading into the right project, the right way.

Consider Return on Investment

Any project may be worth your time if doing it makes you happy. But if you plan to sell your homesoon, make sure you focus on projects that give a good return on your money. Many renovations cost thousands of dollars but wont increase the value of your home by the same amount.

For example, it costs about $50,000 to add a new bathroom, but homeowners typically recoup only about 54 percent of the cost in increased home value, according to Remodeling Magazines 2020 Cost vs. Value Report. A minor kitchen remodel, on the other hand, returns about 78 percent of its cost, so that type of project might make more sense.

Consider calling local real estate agentsto ask them about the return you might receive from a home renovation project. Some local markets or neighborhoods may reward certain upgrades more than others.

Create a Budget

You dont want to run out of cash in the middle of a home remodeling project. But unless youre careful, your project may get more expensive while its underway. That nicer tile may add only $7 per square foot, but if your kitchen has 100 square feet of floor space, watch out! To avoid running short on cash, add up your expenses before you start the project. Then add 10 percent or 20 percent to the total to allow for cost overruns.

To get an idea of how much youll have to spend on a specific project, look at what others have spent on comparable projects using aproject estimate calculator or perusing a site like HomeAdvisor.

Choose the Right Funding Option

Since March 1, according to the Nerd Wallet survey, 34 percent of homeowners who undertook home improvement projects paid for them with cash on hand, 25 percent used money saved specifically for those projects, and 14 percent applied money from their economic stimulus check. As long as these projects arent being funded to the detriment of more important expenses, tapping available cash or savings can be a good way to keep from paying interest on your home improvement project.

If you need to finance your project, explore your options carefully. Among them are a home equity line of credit, a personal loan, a cash-out refinance or even credit cards. But they come at varying costs depending on the interest rate and how long it will take you to pay off the loan. A home improvement financing calculatorcan help you weigh these costs and make a savvy decision.

Research Contractors

If youve decided to hire a professional, get written estimates from different contractors. As those estimates roll in,check their references and ask about their credentials. At a minimum, make sure each contractor is properly licensed to do the work on your home. You can also ask about their membership in trade associations. Many reputable contractors belong to professional trade groups such as the National Association of the Remodeling Industry or the National Association of Home Builders.

A good contractor will guarantee the work and offer a warranty. You can check Better Business Bureau ratings to see if others have had complaints about companies youre evaluating. If there have been complaints, check to see how they were resolved.

When you select a contractor, make sure you get your agreement in writing.

Secure Home Renovation Permits

Permits help protect your home and your safety. Without the necessary approvals to perform work on your property, theres a chance the renovation wont meet local building codes. It could even affect your ability to sell your home in the future.

Contact your municipality for details about what permits you must have for your renovation project. And follow up to make sure your contractor has permits in hand before beginning the work.

Understand Price/Quality Trade-Offs

Youre probably planning to pay hundreds or thousands of dollars on a remodeling project. Its understandable to look for ways to save money, but dont automatically cut corners by using the cheapest materials.

Talk to your contractor about the trade-offs between quality and price for your project. Youll probably be better off selecting the best-quality products that fit your budget. Otherwise, you could be stuck making costly repairs after a few months because you skimped on quality.

A home remodeling project can givea big boost to your homes aesthetics and market value if you avoid costly mistakes. By setting a budget, researching contractors and using quality materials, you can help avoid expensive pitfalls and enjoy your homes new design.

Survey methodology is available in theoriginal article, published at NerdWallet.

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Elizabeth Renter is a writer at NerdWallet. Email: [email protected] Twitter: @elizabethrenter.