Does it make sense to remodel your existing home?

Home remodeling is big business in the USA. This is how the story usually goes… “I don’t like the kitchen. Let’s build our new dream kitchen. I know you said it’s too expensive, but we’re investing in our home. Think of all the money we’ll get back when we sell this house. I know money is tight, but this is an investment, and an investment that will bring us years of joy before we inevitably sell our home, and get $2 for every $1 we spend on that bathroom remodel. Also, look at this tile, wouldn’t it be great? It would make me so happy.”\r\n\r\nIt’s a compelling case, and resell value of a home is important. That said, the case for a remodel is often compelling because we ignore some of the facts. Paul Simon said it well:\r\n”All lies and jest\r\nStill, a man hears what he wants to hear\r\nAnd disregards the rest.”\r\n\r\nIt was true then, and it’s still true now. We want to believe that we can make money by spending money on a bathroom remodel. We’ll happily ignore the facts that don’t agree with this thesis, and cling to a few that do.\r\n\r\nThere is anecdotal evidence that a home remodel sometimes makes good business sense.. During the run-up to the real estate crash, we were treated to many TV shows where a couple would spend money on their house, fix it up, and then sell it for a tidy profit. We were all told stories of people that keep buying homes, fixing them, and selling them for massive profits.\r\n\r\nThese stories are real. And they happened. The problem is that we can becomes fixated on them, and want to have the same experience. Unfortunately, these stories are not the norm. They are stories from a different time; one of irrational exuberance and easy profits in the real estate industry.\r\n\r\nThere’s one other way that the fiction that you see on TV doesn’t quite match up to reality. Let’s envision a few of the shows filmed in the real estate boom. It starts out with a couple. They both work two jobs, and are behind on their credit cards.\r\n\r\nThey sit down with the show host, and plan the improvements to their home. Then, they go on a nice relaxing holiday. They come back, enter their home, and look around in disbelief. Everything is perfect; better than they could have imagined. They sell the home for a large profit, pay of their credit cards, and buy an even bigger home.\r\n\r\nAgain, the only problem here is that this is not what happens in real life. In real life, the couple makes numerous trips to Home Depot. They spend their weekends, working, and cleaning. The contractors end up way over budget, and the home isn’t quite as nice as they expected. The couple might go to sell it, and the prospective buyer ends up saying “We don’t really like the new design of the bathroom anyway.”\r\n\r\nThis isn’t to say that home remodels don’t make sense. There are plenty of good reasons to remodel a home. Perhaps you love the area, but you need a new bedroom for the new baby. Or, maybe you got a raise at work, and you can afford a new rec room.\r\n\r\nIf you’re going to be living in your home for a while, by all means, spend the money to make it great. But, don’t do a remodel with the idea that it will be a good short term investment.