If you didn’t get what you wanted for Christmas, here’s a chance to give yourself a gift that will keep on giving long after you’ve paid for it!  Home remodeling projects of all types and budget sizes have become increasingly popular for a number of reasons. 

First, the sluggish housing economy has made it more attractive for homeowners to invest in current homes rather than try to sell them for a potential loss. Secondly, as the nation’s 80 million Baby Boomers near closer to retirement, some 60% of them are choosing to retire in their current home according to a Hanley Wood 360 Housing Report survey. Investing in home improvements before retirement s them to “age-in-place” in their current homes rather than utilize assisted living or nursing home care in the future.  And lastly, according to the same Hanley Report, 78% of the nation’s existing housing stock is 30 years old or older, making home repairs and improvements a likely event for millions of homeowners.  In fact, over 50% of homeowners conducted repairs over $2,000 in the last two years according to the Hanley Wood Housing Report.  Home remodeling is the wave of the future, so here’s what you need to know if you decide to invest in a home improvement project this year:

1)     Pick a project that pays you back. You’ve heard the term before and have maybe even seen the HGTV show “Bang for your Buck,” and when it comes to home remodeling, this catchphrase is a homeowner’s best friend.  But how do you know? Fortunately for homeowners, Remodeling Magazine publishes a Cost vs. Value report every year, telling homeowners the average cost of home improvements and the average payback – including both national and regional averages.   National payback averages can run anywhere from a mere 42.9% for a home office remodel, to 73% for a steel entry door replacement.  But be careful not to rely solely on the percentage payback, as the hard numbers sometimes tell the real story.  For instance, while that 73% return on a $1200 investment in a steel door may only net you $900, the home office remodel will net you a cool $12,000 on your $29,000 investment. The payback is partially based on the percentage return, but also on the initial cost of the project – i.e., your budget, which brings us to the next tip.

2)     Pick a project that fits your budget.  If you can’t afford a $29,000 home improvement right now, then you probably don’t want to select a home office remodel as your project!  As mentioned before, with 78% of the nation’s existing housing stock at 30 years or older, many of these homes could use a good tune-up of the basics, which don’t cost quite as much, but can reap big rewards with energy efficiency gains now and resale down the road.  Window and siding replacements will cost you about $12,000 while a roofing replacement can run as high as $23,000 on average.  Balance the payback of your home improvement project against the amount of money you will put into the project, without overextending yourself.

3)     If you’re a “Boomer”, consider improvements that you to “age in place.”  Home builders are rushing to achieve “Certified Aging in Place Specialist” certifications to assist the 80 million Baby Boomers with home remodels that will allow them to remain in their own homes longer as they age.  Aging in place home remodels feature things like bathrooms with walk-in tubs, roll-in showers, and comfort-height commodes, and kitchens with pull-out shelves on lower cabinets, pull-down shelves on upper cabinets and 30” countertop heights for wheelchair bound Boomers.  Manufacturers like Kohler now have a dedicated section on their website just for “Aging in Place” bathroom fixtures.  But the list goes on and on, in an effort to keep older homeowners safe and independent in their own homes for as long as physically possible. If you fall into the Baby Boomer generation, it might make sense to look into which updates will be most important to you as you age and investing in those for your home remodeling project.

4)     Finance wisely!   According to the Hanley Wood 360 Housing Report, an overwhelming majority of homeowners financed their projects with personal savings, which is a reliable way to invest in your home’s equity without incurring additional debt. Setting up a home improvement savings account is easy, and can be funded long term by Share Certificates or short-term with a basic personal savings or money market account.  But don’t miss out on opportunities to invest in remodeling projects, all while keeping your money invested in high-yield savings AND reaping tax benefits through a home equity loan.   Currently at all-time low interest rates, home equity loans provide you with “cheap money” you can borrow that s you to keep your money in savings, potentially earning a higher rate of interest in savings or investment accounts than you are paying on the loan.  Plus, you don’t need to take a big chunk of change out of your investments at one time, which can hurt your overall return on the savings or investment account.  And don’t forget, home equity loans are generally tax deductible!

With a little bit of research and some savvy financial planning, you just might find that a home improvement project is the best gift you ever gave yourself!