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Home Remodeling
Home Remodeling
Main | Renovation Guide |
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Guide to Home Renovation
Deciding What You Want |
Ideas and
Information | Planning and Budgeting
Choosing a Remodelor |
Getting Started |
The
Remodeling Process
Planning and Budgeting
Set Priorities
Since you have listed your short- and long-term needs and wants and
defined your purpose, you can begin deciding what you want to
accomplish. This is a time to ask yourself what do we really need and
what would be nice to have. Put the list in the order of must haves
first and extravagant dreams last.
Cost Guidelines
Construction costs vary from region to region and are dependent on
factors such as materials cost and the availability of labor. Other
variables include the amount of demolition needed, site preparation,
which rooms are being remodeled (bathroom or kitchen vs. bedroom or den)
and the condition of the existing structure.
Return on Investment
While the return on investment may not be your first concern, it may
help you decide which part of your overall plan to undertake first. A
recent survey in the Birmingham, Alabama area indicated the following
return on investment for the following types of remodeling projects.
Your actual return may vary based on location and market values at the
time of sale.
Project Cost Recouped
|
Attic Bedroom |
109% |
|
Basement Refinishing |
115% |
|
Bathroom Addition |
105% |
|
Bathroom Remodel |
113% |
|
Deck Addition |
83% |
|
Exterior Paint |
48% |
|
Family Room Addition |
101% |
|
Home Office |
79% |
|
Major Kitchen Remodel |
110% |
|
Master Suite |
95% |
|
Minor Kitchen Remodel |
127% |
|
Re-roofing |
61% |
|
Siding Replacement |
102% |
|
Sunroom |
89% |
|
Two-story Addition |
113% |
|
Window Replacement |
60% |
Product Substitution
Whether you choose the cost plus or fixed price method of compensation,
you want to get the best value without compromising on quality. There
are product options available that do not significantly affect
performance. Ask your remodelor to help identify areas where a less
expensive alternative may be appropriate. Some of these areas may
include floor covering, woodwork, exterior cladding and more.
Cost Plus versus Fixed Price
There is sometimes a real or imagined conflict of interest between the
contractor and the customer. The customer wants to spend less and the
contractor wants to earn more. Forming a good relationship between
contractor and customer up front can eliminate this conflict of
interest. Discuss the contractor's methods of compensation and ask if
they have a preference.
There are basically two types of contractual relationship between the
customer and the contractor:
1. Cost-plus (also called Time and Material)
2. Fixed price
Cost-plus is a contractual relationship in which the contractor is paid
for the cost of the services provided and in addition is allowed an
agreed profit margin. In a cost-plus contract the total cost of the
project is only known after the project has been completed, although
they usually work toward a budget target.
Cost-plus is often appropriate for small, undefined projects, for which
it is difficult to identify the project's requirements in advance. The
customer who wants to retain more control of the renovation process may
prefer cost-plus. Some renovation activities or decisions may be managed
by the customer.
Advantages of a cost-plus contract are:
1. Retention of control over renovation
2. No commitment needed for a full project contract
A fixed price contract can only be applied to a well-defined project.
Both customer and contractor must be able to define the final
deliverable product or service. Once this has been achieved, one of the
main weaknesses of the fixed price contract will have been removed.
Advantages of a fixed price contract are:
1. A fixed budget for the project
2. Most of the renovation risks are transferred to the contractor
3. Minimal involvement in the renovation process
Even though the interests of the contractor and the customer may be
different, both parties may still prefer fixed price contracts. If the
project is detailed and clear, and if the relationship between the two
parties is well defined, then fixed price contracts can be beneficial to
both the contractor and the customer.
Financing
Personal loan
For smaller projects you may want to consider a personal loan. This
allows you to make regular, fixed payments over a short period of time
(up to five years). For larger projects a home equity loan lets you
spread your payments over a longer period of time.
Home Equity Loan or Home Equity Line of Credit
Home equity loans and lines of credit are usually for a shorter term
than first mortgages. The most common type of mortgages runs 30 years,
while equity loans typically have a life of five to 15 years. A home
equity loan, sometimes called a term loan, is a one-time lump sum that
is paid off over a set amount of time, with a fixed interest rate and
the same payments each month. Once you get the money, you cannot borrow
further from the loan.
A home equity line of credit (HELOC) works more like a credit card. You
are allowed to borrow up to a certain amount for the life of the loan --
a time limit set by the lender. During that time you can withdraw money
as you need it. As you pay off the principal, your credit revolves and
you can use it again. This gives you more flexibility than a fixed-rate
home equity loan. |
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