When to Stop Funneling Cash into Home Improvement

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Updated on Thursday, September 10, 2015

Purchase agreement for house

I moved into my first house in June. The first time I tried to turn on the heat when it started getting chilly in November, I discovered the furnace needed to be replaced with a new one. Thankfully, the house sale included a homeowner’s warranty, which mostly covered the cost of the replacement.

But my out of pocket cost was still $900 — not chump change when you’re young, just out of college, and wondering how you’ll pay for all the fixing up the slightly-fixer-upper house you bought is going to need.

The Benefits of Snagging an Outdated Home

The house wasn’t a complete wreck, but it was built in 1987 and it needed upgrading and updating. In addition to the furnace that died immediately, the AC units were over 20 years old (and how they still functioned the entire time I lived there is beyond me) and the siding and shutters all could have used a new coat of paint outside.

The hardwood floors downstairs were mismatched, thanks for half of them being replaced when a pipe burst over the living room when the previous owners lived there. The kitchen countertops were original white laminate that had faded with time and use to something not-so-white, and all the cabinetry was original to the home too.

And the master bathroom had that wonderful feature that home builders in the 80s were for some reason way too fond of: carpet instead of tile.

There were other to-dos on the home improvement list, too: painting, refinishing the staircase, changing out the old brass hardware for something a bit more modern, updating light fixtures… most everything was cosmetic. As they say on HGTV, the house had good bones.

But still, it sounds like a lot of projects — and it was. The tradeoff was a low price on the home and a relatively small monthly mortgage payment. That helped free up cash flow to dedicate to tackling these projects, one at a time.

The idea was always to take advantage of the low purchase price, spruce the place up with these cosmetic fixes, then sell for a profit. It sounded good in theory, but there had to be a line that determined when it was time to stop funneling cash into home improvement projects.

Focusing on Biggest Bang for Smallest Buck

The first step was to determine what projects made the biggest impact in the house — and cost the least amount of money. Part of the criteria for “least amount of money” was “does it fit in my normal monthly budget?” meaning I didn’t have to save up before knocking out the project.

Painting and changing out the hardware came in first on that list. Redoing the stairs came the next month. Things like window treatments and a little landscaping followed after the stairs.

(And of course, it was all DIY. That made it exponentially cheaper, but it also took a lot longer!)

[22 Options for a Home Improvement Loan]

Choosing Big, Costly Projects Wisely

Eventually, the easier and cheaper projects were complete — and that line item in the budget started going toward maintenance and repairs instead. That’s part of home ownership no matter what condition a house is in. There’s always something to fix, maintain, or replace.

Deciding how much more money than necessary to put into the house required consideration of more factors than just, “how much would this boost the value of the house?” and “how much can I afford?” Both of these questions are, obviously, important — but the first one is particularly tricky.

Let’s address the how much can you afford one first. Ultimately, this is what you need to pay attention to and prioritize. It’s not wise to put thousands of dollars on a credit card for home improvements, because it’s highly unlikely you’ll turn around, sell your house for a profit, and use the cash to pay off your credit card balance before it’s due and starts accruing interest.

The other question is harder because it’s easy to justify spending money for the sake of making money down the road. But a $20,000 kitchen remodel or $10,000 bathroom redo doesn’t necessarily translate into a $20,000 or $10,000 boost in the value of your home when you go to sell.

That depends on comparable properties in the area, what the market is doing at the time, when you want to sell — and what buyers want. Your idea of a great home improvement might be someone else’s idea of a perfectly good kitchen ruined by bad taste.

Personally, the only big, major project that I thought was worth taking on was ripping up that awful bathroom carpet and replacing it with tile. While redoing the hardwood floors and updating the kitchen would have added value to the house, it likely wouldn’t sell for a high enough price to recoup my investment in the home improvement projects due to the comps in the area.

It’s easy to talk yourself into thinking spending money on your house is an investment. But like any investment, it’s not without risk. And in this case, unlike investing your extra cash into the stock market, you don’t earn a return over time. You only earn a return — if you get one at all — when you sell your home and pay off your mortgage.

While home improvement projects can help boost value in your house, it’s a fine line. Don’t just assume funneling more cash into repairs and updates will guarantee a better sale price. Look at all the variables involved, do your research, and figure out when you need to draw your own line on when to stop putting cash into your house.


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