'Tis the Season for Home Renovations

Renovating your home can be an exciting process, but it can also be overwhelming and costly without proper planning. If you’re considering a renovation, the winter months may offer certain benefits. Let’s explore the key advantages and considerations, along with steps to help ensure your project’s success.

Why Renovate Your Home This Time of Year?

Winter might not seem like the ideal time for home projects, but it can offer unique perks.

• Contractor Availability: With less demand after the busier summer months, many contractors have more availability, allowing you to negotiate better rates and receive their undivided attention on your project.
• Material Discounts: The holiday season often brings discounts on materials, helping you get better value for your budget.
• Spring Housing Market: If you plan to sell your property, renovating during the winter can prepare your home for the active spring market.

Key Factors to Consider

When planning a home renovation, consider these important factors that can help you maximize the value of your investment and ensure the project aligns with your financial goals.

• Property Valuation: Some home improvements have the potential to significantly enhance the value of your property, so be mindful of upgrades that could appeal to future renters or buyers.
• Tax Planning: Research relevant tax credits that you may qualify for, especially if you plan to make any energy-efficient renovations to the property. Incentives such as the Residential Clean Energy Credit and Energy Efficient Home Improvement Credit (EEHI) may allow you to claim a portion of your expenses for qualified improvements.^1,2
• Homeowner’s Insurance: Depending on your provider, certain upgrades such as installing a home security system, reinforcing your roof, or updating outdated electrical systems can potentially lower your insurance premiums.³

Funding the Project

No matter your financial situation, home renovations require planning. For minor upgrades, consider using cash savings to avoid accruing interest. If you intend to borrow money to fund a larger project, be sure to evaluate your options to determine what best suits your financial situation.

• Home Equity: Reinvest the equity you’ve accrued in the property through a home equity loan, home equity line of credit (HELOC), or cash-out refinance. For more information, check out my recent article on How to Leverage Home Equity in Your Financial Strategy.^4,5
• Personal Loan: Obtain a loan from a lending institution to fund the project. This option may provide quicker funding and offer less usage limitations, but typically comes with higher interest rates.
• Rehab Loan: Also referred to as an FHA 203(k) Loan, this option allows you to finance (or refinance) a mortgage to include your renovation expenses as part of a single loan.

Getting Started: Tips for a Successful Renovation

By researching and outlining your preferences beforehand, you can help keep your renovation on track and within budget. Here are a few tips to consider:

• Identify Wants vs. Needs: Depending on your budget, consider prioritizing high-value upgrades and addressing immediate needs first. Upgrades such as new entryways, kitchen and bathroom remodels, and exterior finishes typically offer good returns on investment.⁶
• Contractor Research: Get quotes from multiple contractors and compare their service offerings to determine the best fit for your project and budget. Ask for references to ensure you’re hiring a reliable professional.
• Understand Local Regulations: Before starting any renovation, be sure to familiarize yourself with local zoning laws, building codes, and permit requirements to avoid potential fines or delays.

Consult with a Professional

With mindful planning, renovating your home during the holidays can be a savvy financial move, allowing you to improve your home while saving money and increasing its value. However, before making any major financial decisions, consult with your wealth advisor and tax professional to ensure the project will align with your overall financial strategy.

If you would like to discuss your real estate equity and investment strategy or home improvement goals, please reach out for a consultation.

¹Home energy tax credits. IRS.gov, July 31, 2024.
²The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
³9 Tips for Lowering Your Homeowners Insurance. LibertyMutual.com, August 28, 2024.
⁴Loudenback, T., & Yale, A. J. How to Pay for a Home Renovation. BuySide from WSJ, November 13, 2024.
⁵Steinberg, S. FHA 203(k) Loans: A Complete Guide. RocketMortgage.com, February 14, 2024.
⁶Dickler, J. These home remodeling projects offer the highest return on investment. CNBC.com, May 20, 2024.