Renovation costs Archives

December 14, 2022

Exterior Renovations Yield Highest ROI in 2022

The shift to remote work in the past few years has led many homeowners to invest in renovations and repairs inside their home, but exterior projects can just as be beneficial — if not more — for a few different reasons. When it comes to making improvements to the outside of your home, certain ones have been shown to earn you a higher return on your investment than others. A recent study broke down the top outdoor remodeling projects based on average cost and value. Here are the exterior renovations that will give you the best ROI.

Garage Door Replacement

While not the most glamorous home improvement project, replacing your garage door — especially if it’s quite old — can go a long way toward boosting resale value. Currently, the national average cost of garage door replacement is $4,041, and it can add approximately $3,769 to the value of your home, giving you a 93.3% ROI.

Manufactured Stone Veneer

This decision mainly comes down to your aesthetic preference, but replacing a portion of your vinyl siding with stone veneer can significantly boost both curb appeal and resale value.

While this project is pricier — the national average cost is $11,066 — you can make back almost as much as you put into it, as it can increase resale value by $10,109 or 91.4%.

Siding Replacement

In terms of siding replacement, your ROI largely depends on the materials you’re using. Fiber-cement siding replacement can run an average of $22,093 and earn you just over 68% back, or $15,090.

For vinyl siding, the national average cost is $18,662 and the typical ROI is $12,541 — a 67.2% return. It’s also important to note that your return for siding replacement will vary based on your geographic region; for example, vinyl siding will give you a slightly higher ROI of 68.9% in East North Central parts of the country (including Cincinnati, Cleveland, Detroit, Indianapolis, and Milwaukee) than other areas.

Window Replacement

Like siding, the amount you’ll earn back on window replacements largely depends on the material you’re using. Replacing vinyl windows averages $20,482 and can earn you up to 67.2% ($13,822) back. Also like siding, vinyl window replacement can give you even more money back in many midwestern cities, up to 68.4% in some areas compared to other parts of the country.

Wood window replacement tends to be a bit more expensive — the national average is $24,388 — and you also don’t make back quite as much as you put in (typical return on investment is $16,160, a 66.3% ROI).

Deck Addition

Adding a wood or composite deck can be a smart move, both for your own enjoyment and future resale value. A wood deck, depending on size, will run approximately $19,248 and earn you an average of 64.8% back ($12,464), while a composite deck is a bit pricier — the national average is $24,677 — and your ROI will be slightly less at 62.1%.

Steel Entry Door Replacement

Finally, investing in a new steel door, which averages $2,206, will earn you back about $1,409 or 63.8%. The exact amount will depend on specific features; the example quoted includes a dual-pane half-glass panel and aluminum threshold with composite stop.

Selling vs. Renovating

With experts predicting continued high mortgage rates, low housing inventory, and longer time on the market in 2023, it’s worth seriously considering whether or not you want to put your home on the market immediately after making renovations — or hold off and enjoy the improvements that will put you in a more favorable position to sell down the road. While your next move all depends on your own financial situation and goals, you have a lot to gain by going forward with the renovations that will bring the greatest returns on your investment.

How to Fund Exterior Renovations

There are a number of different ways to fund exterior home renovations, including renovation loans and traditional options like home equity loans, home equity lines of credit (HELOCs), and cash-out refinances. However, it’s important to keep in mind that these options involve taking on debt in addition to your regular mortgage payments, which can strain an already tight budget.

A home equity investment lets you access cash from your home equity without any interest or monthly payments. There aren’t any restrictions on how you use the money, and you have 10 years to settle the Investment through a refinance, buyout with savings, or sale of your home.

If you could use some additional funding to put toward exterior renovations on your home, take our five-minute quiz to see if a Hometap Investment might be a good fit for you.

YOU SHOULD KNOW…

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

October 13, 2022October 18, 2022

Beginners’ Guide to BRRRR Real Estate Investing

tools in foreground, man nailing wall in background

It may be easy to confuse with a sound you make when the temperatures drop outside, but this slightly strange acronym has nothing to do with winter weather. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. This method has gained quite a bit of traction and popularity in the real estate community in recent years, and can be a smart way to earn passive income or build an extensive investment portfolio.

While the BRRRR approach has several steps and has been refined over the years, the principles behind it — to buy a property at a low price and boost its value to build equity and increase cash flow — is nothing new. However, you’ll want to consider each step and understand the drawbacks of this approach before you dive in and commit to it.

Pros and Cons of BRRRR

Like any income stream, there are advantages and disadvantages to be aware of with the BRRRR method.

Pros:

Potential to make a significant amount of money

Provided that you’re able to buy a property at a low enough price and that the value of the home increases after you rent it out, you can make back much more than you put into it.

Ongoing, passive income source

The primary appeal of the BRRRR approach is that it can be a relatively passive source of income; aside from your responsibilities as a landlord (or outsourcing these duties to a property manager), you have the opportunity to bring in consistent monthly rental income for low effort.

Cons:

The risk of miscalculating ARV

When determining the after-repair value (ARV), make sure you’re taking into account the quality of the upgrades you’re making — it’s not uncommon for individuals to cut corners on bathroom or kitchen finishes because it will be a rental property, only to have the appraisal come in less than expected due to this.

Investing in a rental property can be more expensive than a primary residence

Rental property financing (and refinancing) often involves a larger down payment requirement and higher interest rates than an owner-occupied home.

The time necessary to build up enough equity for a refinance

Growing equity takes time, and depending on current market conditions, it may take longer than you would like for the property to accrue enough to refinance it.

Responsibilities as a landlord

Unless you’re willing to hire and pay a property manager, you’ll need to handle any tenant issues that pop up yourself once you rent out the residence. If you plan to accrue many rental properties, outsourcing property management may make sense, but many landlords choose to manage the first few properties themselves to start.

The BRRRR Method, Step by Step

Buying

For your first property, you’ll want to familiarize yourself with the characteristics that generally make for a good investment. Ultimately, you’ll want to seek out a property you can purchase at or below market value — as this will increase your likelihood of making money. But you’ll also want to make sure that you’re making a wise investment that makes sense in terms of the amount of work the property requires.

There are a number of ways that you as a potential buyer can increase your odds of securing a home for as low of a price as possible.

These include:

Learning about any specific motivational factors the seller has in addition to price
Offering cash (if you need it, you can get a short-term, “hard-money” loan), then take out a loan after rehabbing the property
Renting the house back to the seller, which is common with the BRRRR method
Write a genuine letter to the buyer that explains your vision and goals for the property
Waiving contingencies and buying the home “as is” for a faster closing
Get creative with your offer (for example, requesting to buy the furniture with the property)

Rehabbing

Before purchasing a home and rehabbing it, you should do some rough estimations of how much you’ll need to spend on the improvements — including a breakdown of what you can DIY versus what you’ll need to outsource. Make sure to consider whether this rehab will justify a higher monthly rent and whether the value added will exceed the cost of the project.

Fortunately, there are some models that can help you calculate some of the expenses involved to make a more informed decision.

You can determine the ARV of the home by combining the purchase price with the estimated value added through rehab. One important thing to note is that the estimated value is not the same as the cost of repairs; it’s the value that you believe the repairs will add to the home overall. If you purchase a home for $150,000 and estimate that repairs will add approximately $50,000 in value, the ARV would be $200,000.

Once you land on the ARV, the next step is to determine the MAO (Maximum Allowable Offer).

This equation is slightly more complicated:

MAO = (ARV x 70%) – cost of repairs

So, using the above example, if the After Repair Value of the home is $200,000 and the cost of repairs is estimated at $35,000, the MAO would be $105,000.

It’s worth nothing that there are certain renovations and updates, like landscaping, kitchen and bathroom remodels, deck additions, and basement finishing, that quickly add more value to a home than other fixes.

Renting

There are two important components when it comes to turning your investment property into a rental: determining fair market rent and securing suitable tenants. Websites like Zillow Rental Manager and Rentometer can help you set an appropriate rental amount. It’s also important to do due diligence when it comes to finding tenants. In addition to Zillow Rental Manager, Zumper and Avail can provide screening tools to help you vet potential applicants and perform background checks.

Refinancing

Once the property gains enough equity, you’ll apply for a refinance. Keep in mind that while specific requirements depend on the lender, most will request a good credit score, a tenant who has lived in the unit for at least six months, and at least 25% equity left over after the refinance in order for you to get the most favorable rates and terms.

Repeating

This part is pretty simple — once you pull out the cash from one property for a refinance, you can use it to put a down payment on your next investment property, while the refinanced home continues to bring in rental income.

Explore Real Estate Investing Resources

There are a number of resources that can help you learn more about and get started with the BRRRR method. For example, BiggerPockets provides valuable content and forums where you can connect with others in the financial and real estate spaces who are successfully using this approach. There is also a wealth of information on YouTube.

Funding Your First Investment Property

If you’ve decided to pursue the BRRRR method for passive income, there are a handful of ways you can access the money you need for a down payment to purchase the property.

As a homeowner, you can take out a home equity loan to get a lump sum of cash. However, you’ll need to pay the loan back on top of your existing mortgage payment(s) and the application and approval process can be rigorous. A home equity line of credit (HELOC) provides a bit more flexibility, but monthly payments can fluctuate each month due to variable interest rates, and your lender can freeze your account at any time if your credit score drops too low. A cash-out refinance, which is part of the BRRRR process, is another possibility to access equity from your primary residence — and can allow you to lock in a lower interest rate. But since you’re taking out a new mortgage, you’ll have to pay closing costs and possibly an appraisal fee.

Finally, if you’ve built up equity in your home and need cash to cover the down payment or necessary renovations, a home equity investment may be a good solution. There’s no interest and no monthly payments, and you can use the money for anything you’d like without any restrictions. You can receive up to 30% of your home value in cash, and don’t have to make any payments for the life of the investment (10 years with a Hometap Investment).

It only takes five minutes to find out if a Hometap Investment might be a good fit for you and your BRRRR goals — take the quiz today.

YOU SHOULD KNOW…

September 25, 2020June 23, 2022

Pandemic Creates a Surge in Home Renovations

Social distancing prompts DIY projects and home repairs

As travel, events, and dining came to a halt in spring and into summer of 2020, homeowners have found themselves using their spare time to focus on their homes and yards. While lots of people are talking about DIY projects, many are putting their money where their mouths are. Check out some of the popular trends happening around home renovations today!

July 23, 2020June 23, 2022

Financing a Home Renovation: What Construction Loan Is Best?

Making home renovations has two obvious perks. First, you can make upgrades that fit your lifestyle and allow you to enjoy your home even more. Second, the upgrades you make now may help increase the value of your home, so that when it comes time to sell, you make a profit.

However, the way you fund your home renovation can have serious implications for your short- and long-term finances. For repairs that will cost more than you can afford to pay in a month, you may want to look at financing options beyond your credit card. That way, you can avoid paying the high interest rates that come with a credit card balance.

If you don’t have the savings stashed away to fund your renovations, you do have other options. You can build your cash flow for home renovations, use your home equity, or use a home renovation loan.

How Does a Construction Loan Work?

Construction loans — also known as home renovation loans or home remodel loans —are a common way to finance home improvement projects, as they often have lower interest rates than credit cards. With a home loan for construction, renovation costs are rolled into your mortgage, so you’re essentially making one payment each month that includes both the cost of your home and the repairs or upgrades you plan to make.

This can be beneficial if you’re purchasing a fixer-upper, but if you’re already in your home, the cons may outweigh the pros as you’ll be refinancing your home with a new mortgage. And, while renovation loans may be more appealing for homeowners without home equity, homeowners with home equity have additional options for accessing funds.

There are three main types of renovation loans that allow homeowners to make updates now rather than waiting to have enough cash saved.

FHA 203(k) Loan

Insured by the Federal Housing Administration, the 203(k) loan comes in two forms: standard and limited.

The standard 203(k) loan covers major structural repairs and other renovations that cost at least $5,000. There is no cap on repair costs, however, you have to hire a U.S. Department of Housing and Urban Development (HUD) consultant to oversee renovations and projects. The HUD lists the projects covered by a standard loan.

The limited 203(k) loan is capped at $35,000 for renovations, not including structural repairs.

Pros to 203(k) loans:

Can use a standard loan to tear down and rebuild on the foundation.
Potentially easier to secure funding; since they’re insured by the government, lenders may have less strict credit qualification requirements.
If your home isn’t inhabitable as you make renovations, you may be able to include up to six months of mortgage payments in your loan. You can continue to make monthly payments, but live elsewhere.

Cons to 203(k) loans:

No do-it-yourself work with strict requirements on what renovations are covered.
Must use an FHA-approved lender.
Cannot use this loan with the intention of flipping the house or on homes that are under a year old.
With the standard loan, funds that aren’t going to the seller (if buying the house) or to pay off an existing mortgage (if refinancing) are placed in an escrow account and released as rehabilitation is completed.
Improvements must be completed 60 days from the loan’s closing date for limited loans and within six months of closing for standard loans. You will need a detailed estimate of the cost of work to be done and timeline from your contractor before your loan is approved.

HomeStyle Loan

Offered by Fannie Mae, HomeStyle loans are one of the more flexible renovation loans in that there are fewer restrictions on what you can use the funding for. Homeowners can get 75% of “the sum of the purchase price of the property, plus renovation costs,” or 75% of the “as completed appraised value of the property” — whichever is less.

That means if you’re refinancing your home, an appraiser will estimate the value of your home post-renovations. If they determine the value of your property with renovations completed will be $300,000, then the financing amount can’t exceed $225,000.

Pros to HomeStyle Loans:

Can use funds for almost any renovation project, whether cosmetic or structural, including “luxury” updates like a swimming pool or landscaping.
Can use the loan on an investment property.
Can complete final work on a brand-new home, as long as the new home is 90% complete.
Like a 203(k) loan, you may be able to include up to six months of mortgage payments in your loan if you need to live elsewhere while renovations are completed.

Cons to HomeStyle Loans:

Like the 203(k) loan, your money sits in an escrow account and contractors get paid once they complete certain renovation tasks.
Must use a certified contractor who needs to include a detailed cost estimate of the work you want done — potentially before the loan is approved.

CHOICERenovation Loan

Guaranteed by Freddie Mac, the amount of money you can receive for renovations using a CHOICERenovation loan is similar to the HomeStyle loan in that you can make renovations that cost up to 75% of the as-completed appraised value.

Pros to CHOICERenovation Loans:

Can use the loan to repair your home if it’s been hit by a natural disaster or to fortify it against a future disaster.
If buying a home and taking out a loan like Freddie Mac’s Home Possible loan, you may be able to make DIY renovations in exchange for sweat equity (but you’ll need to go through an appraisal before and after improvements).

Cons to CHOICERenovation Loans:

All renovations must be completed within a year.

If none of the specialized loans above make sense for you due to use restrictions or approval criteria, yet another option for financing fixes is using a personal loan as a home improvement loan or home repair loan. They typically don’t require any collateral and provide funding quickly, but come with high interest rates and additional monthly payments, so it’s important to do your homework.

Read 5 home renovations to make before you sell >>

Other Home Improvement Financing Options

When you get a home renovation loan, you generally must use the funds toward making home improvements, often with strict requirements about what qualifies. The paperwork involved will be similar to when you first took out your mortgage.

That can slow down the process and, if your mortgage is locked in at a low interest rate or you only have a handful of years left to go on your mortgage, you may not want to mess with it (of course, if you can lower interest rates and/or the time left on your loan, you’ll want to do the math to decide if these options make the most sense).

Current homeowners should first look at how much equity they have built in their homes and the ways they can access that money. That way, you also won’t be saddled with closing costs and other fees associated with refinancing.

Compare your options: Get cash for your home equity

A home equity investment allows you to get a portion of the value of your home in cash now in exchange for a share of the future value of your home. Since it’s an investment, there are no monthly payments or interest. You settle the investment when you sell your house.

Once you have the cash, you can make whatever home improvements you’d like, including improvements on an investment property, vacation home, or multiple properties.

Some home equity investments, like that offered by Hometap, also offer renovation adjustments. That means you can request an adjustment to the agreed home value to account for any appreciation in the value of the property as a result of certain qualified renovations amounts costing $25,000 or more.

When you settle your investment, you provide Hometap with the evidence of the renovation, including receipts and photographs of the renovation work. If approved, following an appraisal, the amount of a renovation adjustment will be the difference (as determined by an appraiser) between the appraised value of the property post-renovation and the hypothetical value of the property without renovations. Accepted renovation adjustments are not guaranteed.

Read Matt’s story about how he used an equity investment to build a rental property for additional income.

Pros to home equity investments:

No time limitation on renovation projects; investment is settled within 10 years.
Homeowners can fund DIY projects, outsource to professionals, and have no limitations on who to hire or types of projects.
No interest and no monthly payments.
Cash is available to the homeowner in a lump sum in as little as three weeks.

Cons to home equity investments:

Investment is settled within 10 years, which means if the homeowner doesn’t plan to sell the home and use the proceeds to settle, they will use savings, refinance, or take out a loan.
Must have a minimum of 25% equity in the home to qualify.

Which Renovation Loan Is Best?

The best way to finance a home renovation will depend on the renovation you want to make, your current financial situation and future financial goals, among other factors.

Look into all of your options and consider the renovations you want to make. Some renovations have a higher return on investment than others, so you’ll want to prioritize projects that you may need, but also the ones that will help increase the value of your home.

See how homeowners have used Hometap to fund renovations »

Take our 5-minute quiz to see if a home equity investment is a good fit for funding your home renovations.

YOU SHOULD KNOW…

May 18, 2020June 23, 2022

3 Things You Should Do Before You List Your Home for Sale

Selling a home can often feel more stressful and time-consuming than buying one. Not only do you have to get your home in tip-top shape, but you also have to keep it that way while juggling showings, open houses, and everyday life. If you’ve already purchased your next home, the stress quickly multiplies as you potentially juggle multiple mortgages while you wait for your home to sell. Understanding the best time to put your house on the market and the most effective ways of preparing your house for sale will ease that stress (and hopefully speed up its time on the market).

To make the process easier, Zillow recommends giving yourself at least two months to get your home ready for its listing debut. Here are three steps to take during that time to ensure your home-selling experience is as low-stress—and lucrative—as possible.

1. Run the Numbers

Before calling a listing agent, you want to make sure you’re emotionally and financially ready to sell your home. Only you can answer whether you’re ready to move.

Finance personality Dave Ramsey recommends staying in your current home until you’ve built enough equity to pay off your remaining mortgage balance and put 20% down on the purchase of a new property.

You’ll also want to make sure you have enough cash in the bank to cover the costs of movers, storage, and making any necessary repairs or upgrades to both the new and existing homes.

When is the best time to sell a house?

If you have the flexibility, wait until May to sell your home. Homes sold in the first two weeks of May traditionally sell six days earlier than the average listing. They also net more than $1,500 more on average. Of course, the best time to sell your home can depend on other factors and can vary regionally, so it’s worth doing your research and asking real estate agents for their opinion. The best time to sell a home in Massachusetts, for example, may not be the same for the market in California.

2. Find Comparable Homes in Your Area

To calculate how much equity you have in your home, you can get a formal appraisal or you can look at what real estate agents call “comps.” Short for “comparable sales,” comps are homes that recently sold in your neighborhood and are similar in condition and size to your own.

These can help you gauge how much you can get for your property when it’s time to list. They can also help you judge how long it may take to sell your home. If all of the similar comps were on the market for months, you may be in for a long ride. Be sure to pay attention to how much they sold for and how much they were listed for.

Read How to Predict the Appraisal Value of Your Home for more details.

As you’re scrolling through nearby comps, consider the condition of each home. Do they all have updated bathrooms? A recently renovated kitchen? This will give you a sense of what renovations you can make on your home to attract the attention of potential buyers, sell your home faster and increase your profits.

3. Determine Which Renovations Are Your Best Investments

Now’s not the time to strip your home to the studs or build an addition. But with a few smart tweaks and weekend projects, you can increase your home’s appeal—and profit potential.

For more details on which home renovations are your best investment, read Selling Your Home? Get Top Dollar by Tackling These Renovations First

Focus on First Impressions

Sprucing up your home’s exterior is an easy way to make the best first impression with potential buyers.

“Curb appeal can be improved by some basic efforts such as power-washing the home’s exterior,” says Rhoda Wheeler, a Realtor at Hoffman Real Estate Group. She also recommended spending a weekend refreshing the mulch, trimming back overgrown plants, and placing a few eye-catching flowers near the entryway.

Adding a fresh coat of paint to the exterior walls that face the street, or at least touching them up, can also boost your home’s curb appeal.

Clean Up the Kitchen

Many real estate agents agree that the kitchen is one of the most important rooms in the home. But chances are yours doesn’t need a gut job to get the attention of potential buyers.

Small upgrades like freshly painted cabinets or new door hardware can make your kitchen, and your home, more appealing.

If you can swing it, some new appliances could also help your home sell faster. These may not offer you a full return on investment (you’ll typically only be able to recoup about 87% of the costs on a minor kitchen remodel). But if a new $600 range helps your home sell faster, then it may seem worth every penny.

Beautify the Bathroom

The bathroom is another space that can make or break a sale.

“In most cases, almost overwhelmingly, it is beneficial to get a bathroom remodel done before selling a home,” real estate agent Jacki Shafer told Homelight. “My attitude has always been to put your very best foot forward whenever possible. If your bathrooms are tired and need sprucing up, it’s always a good idea to do that.”

Even if you can’t pull off a major remodel, you can freshen up a dingy bathroom by re-grouting the tile, replacing the caulk, and buying new mirrors and fixtures. A fresh coat of light-colored paint can also make a bathroom more appealing.

How to Fund Your Renovations

Once you have your to-do list made, it’s time to estimate the expenses and compare them to your anticipated returns.

Read 5 Ways to Build Your Cash Flow for a Home Renovation

The best way to fund your home renovation really depends on you. You can dip into savings, take out a loan, put them on plastic, or you can avoid high-interest credit card fees by utilizing a home equity investment. You can receive a percentage of your home’s equity now in exchange for a share of the home value at the time you decide to sell. With no interest or monthly payments, Hometap may be a smart way to fund the upgrades that will hopefully lead to a bigger payout on signing day. And with no monthly payments, you can focus on making the repairs and moving into your next home.

Find Out if Hometap Can Help You Fund Your Home Upgrades Before You List

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

November 21, 2019May 19, 2022

Home Maintenance Costs, Income Fears Weigh on San Francisco Homeowners

San Francisco consistently ranks as one of the most expensive cities to live in, whether renting or buying. The median monthly mortgage payment is $3,590 (a 102 percent increase from 2012) while the median monthly income is $8,022.

With equity built up in their homes but little-to-no cash on hand for more immediate expenses, 87 percent of San Francisco-area homeowners feel house rich and cash poor, and 24 percent of those respondents feel this way most or all of the time.

Why Is This Happening?

Since its infancy, Hometap has been studying the house-rich, cash-poor phenomenon that has been building since the Great Recession. The widening gap between wages and housing costs as well as the lack of attractive options to access home equity is largely to blame for this crisis. In fact, according to Hometap’s recent homeowner study, 74 percent of San Francisco-area homeowners report their housing costs are rising faster than their income while 65 percent say they’re spending a higher percentage of their income on housing than ever before.

Why Does It Matter?

Our study of nearly 700 homeowners aimed to track the impact the house-rich, cash-poor crisis is having on homeowners across the country. What we found when we took a closer look at San Francisco homeowners is that while most can make their monthly mortgage payments, they’re stressed by the uncertainty around future income and anticipated costs of home maintenance.

See the national results of Hometap’s Homeowner Study

Eighty-four percent of San Franciscans answered that they’re moderately to extremely stressed about future income, while 87 percent answered the same regarding maintenance costs.

Despite surging employment rates, day-to-day cost of living likely has many residents concerned about making ends meet. While “side hustles” or second and third jobs are tough to accurately track, as many are under the table, San Francisco is known for employees working multiple jobs to afford rent, mortgages and other common costs.

Like most other expenses, home maintenance and repair costs come at a premium in San Francisco compared to other U.S. cities, averaging $4,653 annually.

The best way to prepare for costly emergency repairs is to set aside money each year—and keep it there even if you don’t end up using it. HGTV recommends saving 1–3 percent of your home’s value every year for home maintenance and repairs. Saving now can save you stress later.

The vast majority of San Franciscans (92 percent) agreed that the gap between income and mortgage costs will get worse. However, in such a sought-after city, home values continue to soar, and those who believe they’re building equity in their homes (89 percent) are likely very accurate.

Access Your Equity, Eliminate Stress

If you’re like most homeowners, you have other financial goals you want to meet besides homeownership. But 63 percent of San Francisco-area homeowners say high housing costs make it difficult to achieve other financial goals, whether that’s paying off debt, starting a business, or any number of goals.

Homeowners may have difficulty achieving financial goals because they can’t access their home equity. In fact, 70 percent of San Francisco homeowners in our study don’t feel like they have good options for turning the equity in their home into cash. That may be because 42 percent don’t want to take on a loan and the debt, interest, and monthly payments that come with it. Another 22 percent say they could sell their home to access equity but would prefer not to.

As a homeowner, you do have options. You can access home equity via a home equity loan, home equity line of credit (HELOC), cash-out refinance, or home equity investment—and not all of these options involve taking on additional debt.

Do you relate to this house-rich, cash-poor feeling? Compare your options for accessing your equity.

If you haven’t purchased a home yet or are looking to invest in a second property, there are several hot spots where it pays to be a homeowner. In California, that hot spot is Sacramento. Those who want proximity to the Bay Area at a more affordable price are looking to Sacramento where the average home price is under $400,000—for now. Prices are expected to increase by 33 percent over the next three years.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

November 8, 2019March 22, 2023

Home Maintenance Costs Top Cause of Stress Among Charlotte Homeowners

In a recent study of Charlotte-area homeowners, a staggering 91 percent responded that they think they’re building equity in their homes. And yet, the same study revealed that 81 percent of Charlotte-area homeowners feel house rich and cash poor, and 22 percent of those feel this way most or all of the time.

When we looked into what might cause this discrepancy, a few things stuck out. For one, Charlotte’s rapid population growth is outpacing supply, driving median home sale prices up 5.2 percent in the last year.

Why Is This Happening?

Since its infancy, Hometap has been studying the house-rich, cash-poor phenomenon that has been building since the Great Recession. The widening gap between wages and housing costs as well as the lack of attractive options to access home equity is largely to blame for this crisis. In fact, according to the Hometap study, 66 percent of Charlotte-area homeowners report their housing costs are rising faster than their income while 51 percent say they’re spending a higher percentage of their income on housing than ever before.

Why Does It Matter?

Our study of nearly 700 homeowners aimed to track the impact the house-rich, cash-poor crisis is having on homeowners across the country. What we found when we took a closer look at Charlotte was that some of the biggest stressors around housing costs is due to the uncertainty around future income and anticipated costs of home maintenance.

Eighty-five percent said home maintenance costs are moderately to extremely stressful, and more than half of those surveyed (55 percent) aired on the side of very to extremely stressed about these anticipated costs.

See the national results of Hometap’s Homeowner Study

Property taxes are a moderate contributor of stress in the Charlotte area, as well. About one in five Charlotte-area homeowners is very or extremely stressed about the amount owed in property taxes.

If you haven’t purchased a home yet or are looking to invest in a second property, there are several hot spots where it pays to be a homeowner. In North Carolina, that hot spot is Raleigh, which is projected to be the fastest-growing metropolitan area over the next five years. But hurry if you want in: Home prices are projected to continue rising.

Another major stressor for Charlotte homeowners is security of future income. Despite the city’s population growth, Charlotte lacks a strong job market. The city placed No. 102 out of 182 in a recent ranking of best cities to find jobs, which may influence homeowners’ confidence in their incomes as it relates to housing costs. Eighty percent of those surveyed said they were moderately to extremely stressed about the security of future income.

Around the country, millennials feel the most pressure: 63 percent are extremely or very stressed about future income. Younger homeowners, 78 percent, also expect the gap between their wages and housing costs to get worse. Charlotte-area homeowners also feel that pressure: 74 percent expect the wage-housing gap to increase.

Access Your Equity, Eliminate Homeowner Stress

If you’re like most homeowners, you have other financial goals you want to meet besides homeownership. But 54 percent of Charlotte-area homeowners say high housing costs make it difficult to achieve other financial goals, whether that’s paying off debt, starting a business, or any number of goals.

Homeowners may have difficulty achieving financial goals because they can’t access their home equity. In fact, 66 percent of Charlotte homeowners in our study don’t feel like they have good options for turning the equity in their home into cash. Thirty-five percent responded that they don’t want to take on a loan and the debt, interest, and monthly payments that come with it. Another 19 percent say they could sell their home to access equity but would prefer not to.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

April 24, 2019May 17, 2022

Good Estimate vs. Bad Deal: How To Evaluate Your Home Renovation Estimate

How do you know if you’ve received a good home renovation estimate? Looking at price alone can blind you to some of the telltale signs of a bad deal.

That’s why we’ve talked with the experts and compiled three checklists to help you evaluate your estimate with eyes wide-open.

4 Must-Haves for Any Good Estimate

Project Scope: Begin at the beginning with a clear picture—in writing—of the project, specifying exactly what it does (and doesn’t) include.
Timeline: How long will that remodel take? Nail down a start date and projected completion with caveats for any unforeseen circumstances.
Payment Schedule: How much and how often does your contractor expect payment? Here’s where you may have some negotiating power and can suggest payment based on phases of completed work to keep the project on schedule.
Change Orders: Renovations sometimes meet with unexpected changes to account for what’s behind the walls, floors, or ceilings. Money magazine advocates for insisting on written approval before any change in the original plan can commence. Protect yourself from skyrocketing fees with a clause on how your contractor will handle changes, how much they will cost, and how long they will take. Don’t rely on that verbal handshake as confirmation of clear communication between parties.

The above tips are standard for qualified and reputable contractors. If you meet with any resistance, consider walking away as your vendor may not have the knowledge or skills to do the job well.

3 Warning Signs of a Bad Deal in the Making

A Low, Low Price: If the price is too good to be true, it probably is. A lowball estimate that’s wildly inconsistent with others you’ve received may signal inexperience that can cost you more down the road.
No Binding Arbitration: Agree on how you’ll disagree now to avoid costly litigation later. A binding arbitration clause in your contract (a standard inclusion) spells out how you’ll resolve disputes.
No License: No work permit, no work. A skilled contractor knows how to apply for and secure a permit. Without one, your project can be shut down. Consider the work permit as insurance that the job will be done right, and insist your contractor follows the rules.

4 Ways to Get the Best Estimate Possible

Now that you know what to include in your contract and what to look out for, how do you find the right person for the job?

Read Reviews: Do your due diligence by reading about other people’s experiences on sites like Google, Yelp, HomeAdvisor, Next Door, and Angie’s List.
Ask for References: As with any job, ask for references—and then put on your reporter hat. Realtor.com suggests asking references about a contractor’s reliability (showing up on time), accessibility (reachable and responsive to questions), and truthfulness about the final price.
Get It in Writing: Specificity is your best friend. Get as much detail in writing as possible before you commit to the contract. Refer to the four must-haves above as a checklist on what to include.
Trust Your Gut: Do you feel comfortable around the vendor? Are they moving or talking too fast and pressuring you in any way? If something doesn’t feel quite right, follow your instincts. After all, this person will be in your home for days, if not months!

Keep the above lists as a reference for evaluating your next home renovation estimate. Preparation is key to realizing the remodel and making the most of your hard-earned money.

If you need assistance funding your renovation, a Hometap Investment can help. Tap into your home’s equity without interest or monthly payments.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

YOU SHOULD KNOW…

April 1, 2019March 22, 2023

10 Not-So-Secret Ways to Cut Costs on Your Home Renovation

Whether you’re planning a small upgrade or a big restoration, home renovations are costly. But there are ways to cut costs and stick to your renovation budget without cutting corners. Follow our top-10, tried-and-true ways to save money at every stage of your home renovation project.

1. Budget Wisely

Busting the budget is a top concern for many homeowners. That’s why it’s critical to start with a realistic budget from the outset—and stick to it. In fact, it’s always a good idea to pad your bottom line for those unexpected surprises that could otherwise grind your renovation to a halt.

2. Pass on the Plumbing

Work with what you have when it comes to existing plumbing locations. If you’re set on a bathroom or kitchen makeover, leave the sink, tub, or toilet locations where they are, suggests Remodelista. Most U.S. plumbing lives inside your walls, and it can be expensive to change.

3. Prep Before the Pros

Even if you’re not handy around the house, you can still save cash with some of the simpler tasks. As A Beautiful Mess reminds us, the pros charge by the hour. Opt for DIY demo, prep, painting, and cleanup to add hundreds back into your budget. However, be sure to not bite off more than the basics, otherwise you run the risk of repairs.

4. Put a Pin in Remodeling

Unless a gut renovation is absolutely necessary, reusing what you have can save a fortune. Realtor.com suggests getting creative with your existing features and fixtures. Freshen up your kitchen, for example, by staining cabinets, swapping knobs, or switching up molding.

5. Splurge for Keeps

What’s worth a little extra in your remodel? It’s a personal decision, but Extra Mile suggests looking to the permanent fixtures—the tub, windows, and appliances—for guidance. Countertops, by contrast, can be easily popped off and upgraded later, says Danny Lipford, home improvement expert.

6. Put Some Paint on It

Color can transform a space in a spectacular and cost-effective way. Before you ditch the old vanity or kitchen cabinets, give them a whole new look with a fresh coat of paint. Coupled with updated fixtures, a splash of paint can spruce up a space at a fraction of the cost.

7. Source Your Stone Direct

Granite countertops look great, but they can come at a steep price. HGTV advises going directly to the granite supply yards to score a sweet deal on what’s known as remnant stone. If you don’t have a lot of counter to cover, this is an ideal cost-saver.

8. Get Thrifty with Materials

As the saying goes, one man’s trash is another man’s clawfoot tub. (Or something like that.) Find the finishes you were searching for—at a fraction of the price. Thrift stores, Craigslist, even neighborhood garage sales are great sources of material.

9. Skip the Recessed Lighting

You may be surprised to learn that recessed lighting puts a big dent in your budget. Zillow reveals the reason why: labor. Cutting open the ceiling and insulating the cans requires time (and a skilled professional). Opt for mounted or hanging fixtures instead.

10. Take Advantage of Free Consultations

Home improvement stores have expanded their services by offering free on-site consultations. Before you balk at being sold, hear out the experts on how to proceed with your renovation plans. Free advice never hurts, and you may walk away with better ideas than when you started.

With the best-laid plans, your home renovation won’t break the bank. Some homeowners fund their renovation goals by using their home equity instead of their savings.

With no monthly payments or interest, a Hometap Investment can be a smart solution to realizing your renovation plans.

YOU SHOULD KNOW…

March 31, 2019March 22, 2023

Age in Place With These 4 Home Upgrades

If you or a loved one is choosing to forgo a nursing home or assisted living facility to stay home and age in place, there are four renovations you should make now to prevent accidents and make your life more comfortable as you age.

Replace Your Shower or Tub

Bathroom safety is one of the primary concerns for aging in place. According to the Centers for Disease Control and Prevention, more than one in four people aged 65 and older will fall each year. Most of these falls happen in the bathroom, given the additional moisture and slippery surfaces.

To create a more functional bathroom that minimizes fall risk, you need barrier-free access to your tub or shower. If you have to step over anything to get in to your tub or shower, you’re leaving yourself open to a fall.

Estimated Cost: $150-$4,000

You can add a few low-cost accessories like an anti-slip mat in your tub and shower as well as a bench and grab bars that your local handyman can install. Updating your entire shower is more expensive, especially depending on factors like whether or not you need new plumbing. However, this is an opportunity to also replace surrounding tile with anti-slip flooring and to remove any barriers to entry.

Update Your Flooring

Minimize the risk of falls throughout your house. Carpets, especially area rugs, make it easy to trip or get your shoe caught. And while you may not use a wheelchair or walker (and may not want to consider it ever happening), it’s best to prepare now for potential future needs. Materials like hardwood, vinyl, or laminate make it easier to get around.

Estimated Cost: $1.50-$8.00 per square foot

Hardwood floors may be lurking under your carpets and can be saved with sanding and resurfacing. Refinishing costs anywhere from $1.50 to $4.00 per square foot. If you’ll need brand-new hardwood floors, the cost is higher at $6 to $8 per square foot, plus a bit more for installation.

Of course, if you or a family member is able, the DIY route is cheaper. Online tutorials make it easy to install flooring yourself. Vinyl and laminate flooring is cheaper to buy and often cheaper to install, too, but consider how the material may affect your home’s value. While The Spruce says it’s hard to verify whether hardwood makes for a higher resale value, many real estate agents say homes with hardwood sell faster and for more money.

Add New Windows

Easier to clean, open, and close, new windows can help ensure you get the fresh air your house needs as well as ensure you can open your window in an emergency. Plus, the natural light from windows is important to see what you’re doing for safety’s sake and has a significant impact on your overall health, including your mood.

Estimated Cost: $550-$1,050 per window

Retirement Living Information Center suggests using double-hung windows. The size of your windows, material you choose, and other factors can influence the final per window cost.

Reposition Your Laundry Room

Once upon a time, carrying loads of laundry up and down stairs may have been bearable, but it’s not worth the risk of a fall. Make life easier on yourself and consider relocating your laundry room to the same level as your living space.

Estimated Cost: $120-$7,000

If you opt for a new laundry room, the average cost of renovating an 80-square-foot space is between $6,000 and $7,000. Fixr breaks down the cost, showing the various expenses—like plumbing, rewiring, carpentry, and new machines—that go into creating a new space.

If you only need to install washer and dryer hookups, the cost is significantly less—between $120 and $180, depending on location, materials, and other factors. Thumbtack lets you estimate the cost for your area.

Fund Your Renovations

If you haven’t set aside money for home renovations, you can still age in place. For some homeowners, tapping into their home’s equity can be a smart way to fund the renovations needed to safely age in place. See if tapping into your home’s equity to future-proof your home makes sense for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.