Are Your Home Upgrades Money Down the Drain?

US News
Rhonda of East Doncaster in Melbourne's east says she has been told she is now "on her own" with her kitchen renovation
.

View photo

Rhonda of East Doncaster in Melbourne's east says she has been told she is now "on her own" with her kitchen renovation

If you're thinking about making an improvement to your home, how will you decide how much you can afford to spend? It's summertime, and you might be tempted to put in a fancy new deck, splurge on patio furniture or build the barbecue pit you've been dreaming about. Will a killer backyard add to your home's sale price when you eventually put it on the market, or is a prospective buyer going to breeze right by your elegant gazebo?

Read on to learn when a home improvement is an investment - and when you should think twice, and save your money.

[See: 8 Energy-Efficient Home Improvements That Save Money.]

Curb appeal is always worth it. What's more exciting: a nicer backyard where your kids can play and you can welcome family and friends - or new shrubs for the front walkway? You obviously might be more excited about the former, but the latter is the smart money move.

"If you're going to do any work to the outside of your home, I think it's most important to ensure the front yard and front of the home are in top-notch shape," says Adam Koos, a financial adviser in Dublin, Ohio. "If the curb appeal isn't there, you're unlikely to get people walking into your house for a showing, let alone making it through the house to the backyard." Remember: If you're trying to optimize your home's exterior, you'll need to make sure buyers want to walk through the front door first.

If you're really thinking about home resale value, think small. Home upgrades may not ever be a surefire moneymaker, but unless you're Martha Stewart, don't even think about listing your home the way it looks today. "It's important to make low-cost improvements before listing your home," says Todd Moerman, managing partner of Integrity Investment Advisors. "These include cleaning everything, painting and brightening rooms, removing clutter and purging closets and storage. Sprucing up the yard, adding flowers and a fresh welcome mat are simple ways to improve value quickly with little expense."

[See: 6 Tips for a Budget-Friendly Home Makeover.]

Moerman explains that potential buyers aren't just looking for a house; they are looking for a way to live and want to see your property as their new home - which means creating a peaceful, orderly environment that isn't overwhelmed by your possessions or your sense of style.

Your home may be an investment, but it's no retirement asset. Austin, Texas, based financial adviser Garrett Prom says he worries about people who justify spending money on their home as an "investment." In a world where so few people have adequate retirement savings, pouring money into your property before making sure you have enough saved for your old age is simply a poor financial strategy. "If the deck or landscaping is something that you want to do because it brings enjoyment to your life and you have the disposable income to pay for it, then do it," Prom says. "You may get some of the money back when you ultimately sell the house - or maybe even a profit - but I am confident you could have earned better returns if properly invested."

[See: A Step-by-Step Guide to Homebuying.]

Don't forget to factor in your enjoyment. Homeownership is only worth it if you take pride and pleasure in your home. Prom says he supports homeownership, but he does not encourage clients to view it as an investment. "A home is something to be proud of, to enjoy like any other tangible item," he says. New York City-based financial adviser Robert Braglia spells it out for homeowners: "The days are gone where any home improvement, on a vacation property or a primary residence, is automatically reflected in the value. The true questions are: Will you enjoy it, and can you afford it?"

Think long and hard about whether you can afford major upgrades - and whether you'll genuinely enjoy them. If making your home a better place is something you can afford and will bring you happiness, it's always worth it.

Amelia Granger is a senior analyst for NerdWallet, a website dedicated to providing unbiased financial information and helping consumers find the best financial advisers, savings accounts, credit cards and other financial products.



More From US News & World Report

Rates

View Comments (52)