There are many words we could use to describe these unprecedented times that we’re living in. Despite the constant change and unknowns in our midst, many of us have found this to be a time to slow down. A time to conquer those long-awaited tasks that have been brushed under the rug for so many years. Like many others during quarantine, my beautiful wife and I decided that our house needed a little sprucing up. So began our journey of home improvement, along with the question: is it worth it?
We first looked at the most immediate things we could do that would give us a little homeowner pride. Our biggest annoyances were our fading paint and overly mature landscape (we were a little busy the last couple of years having babies, and trying to survive each day, that we allowed those items to go a little longer than intended.) While we wanted to address these issues earlier, it took quarantine for us to sit down and start the work of pricing, understanding what we wanted, and formulating a plan while asking ourselves a bigger question: is home improvement worth it?
Zillow’s CEO has called this time “The Great Reshuffling of America.” It seems that many people during quarantine have decided that they need to update their home, or simply move to a new one. I saw a meme recently that said “what’s the Central Florida housing market like? Remember toilet paper in March”. Homes are moving at lightspeed, and it’s only made more ravenous by lower interest rates. As a result, it seems that we are either making our homes more livable or moving to a more conducive environment to meet our lifestyles. One motivator to this trend could be that people’s issues with their homes are now staring at them in the face like never before, plus they may have more time and access to inexpensive funds for home improvement.
Home improvement as an investment
Whether in a remodel or new purchase, home improvement is usually a big decision because of the capital that is often required. Beyond capital, it’s important to consider that your home is not an investment by traditional standards. Rather, it is a purchase that you hope increases in value over time. Your home doesn’t usually create an immediate income and often requires annual expenses for upkeep, maintenance, mortgage payments, taxes, etc. Furthermore, if you move into a new home, appreciation is typically rolled into the next dwelling rather than taken as income earned. Owning a home is a form of rent control; once you’ve paid off your home, it more or less becomes a fixed cost since the bulk of the cost was paid off with the mortgage.
All in all, your home should be considered an “investment” similar to having kids. Over the years, your kids will likely cost you an incredible amount of time and money, yet they bring you joy and fulfill a purpose that goes beyond a balance sheet. Now, I’m not saying that a family shouldn’t invest in their living situation. But we should consider the reasons we’re remodeling our kitchen, putting in a pool, or buying more square footage. Are we trying to improve our quality of life, or is there a greed factor at play?
As my parents would say, “just because you can, doesn’t mean you should.” Right now, money is cheap, and sometimes the feeding frenzy of others creates a reaction of wanting in us that is not actually necessary.
Tips before stepping into home improvement
You should enjoy your home — it should be a refuge for both your family and your community. I believe one should have a sense of pride as they arrive home at the end of the day, and I also believe that your home should be a place your kids want to come back to (but not stay for an extended time!) and bring their friends. Whether making home improvements or purchasing a new home, I would encourage you to consider these three questions before starting the process:
- By making these changes (improvement or moving) is this where we want to be for the next 10 years or more?
- Will this increase our housing expenses beyond what is appropriate for our budget (30-40% of your income depending on other debt loads)?
- How will these changes affect the timeline of retirement through savings and paying off debt?
Bonus: If remodeling, consider doing the project in phases and working a capital expenditures line-item into your budgets.
In whatever projects you enter into, may your home be a place of peace and enjoyment for you and your family!