What's the best way to finance a kitchen/bath reno?

[STEMorbust]

Hi all, I've seen this topic raised several times but am still fuzzy on the order of operations.

My wife and I bought our house early last year for $465k. Our mortgage is 30 YR at 3.125%. The monthly PMI is $110.

With Covid, our desirable neighborhood in a desirable city has boosted the value of the home considerably. The 'zestimate' (take with a grain of salt) is $630k. Comparable houses are selling for as much or more with cash added.

We'd like to do a kitchen/dining reno to change the 1960's galley kitchen into a more modern layout with new cabinets, counters, appliances, flooring. Total cost I'm estimating tops out at $40k with plenty of room to shave. We're also considering bundling a few bathroom changes (new showers, floors, tile) if this is a bulk loan/contract.

Here are my questions:
- What do we need to do in terms of reappraising and refinancing? Should we?
- Does a HELOC make sense?
- Emotions aside, does this renovation make sense?
- If paying cash were an option, would that be 'best'?

Our goal is to make an intelligent decision around the long-term ROI of the house, be that saving on PMI or adding more than a 1:1 return on money invested in this renovation.

[Sibley]

You have a functional kitchen and bathroom, yes? So this is a want, not a need. Definitely pay cash. Consider what you can reasonably DIY. Also, the prices of materials right now are sky high, along with delays. Waiting until you can pay cash may help lower the costs.

If your reno involves removing a load bearing wall, then no. Just no. It's too easy to screw up the house.

If your kitchen wasn't functional, then I'd have a different answer. It wouldn't involve a $40k budget though.

[srad]

A quick call to your mortgage company advising them of the new values may be all you need to remove the PMI, You might have to pay for an appraisal for them to do this.

How to finance it?  i usually go with the answer, CASH.  If you don't like that answer, you can get a heloc or refinance.  Aside from borrowing money from the parents, those are pretty much the way to pay for a reno.

My opinion for doing a reno on a perfectly functioning kitchen, is if you plan to live in the house for an extended amount of time and you have the money, sure go for it.  I don't like seeing people get into debt for marble countertops and a fancier range...  Because In 10 to 15 years (or less if you have no design sense) it will be just as dated as what you have now.

[yachi]

I was going to say:
-Emotions aside, does this renovation make sense?
No.

Your renovated kitchen will slowly age until, 20-sum years from now it'll again be outdated.  The majority of the appreciation is happening regardless of the improvements being made.  People just have some pent up demand for housing at the moment.  That's not to say the prices are transient, but you don't have to renovate your house till you feel it's "worthy" of the new valuation.

You're asking on a 'let's help eachother get rich and quit our jobs' forum, not a 'let's look rich by borrowing for consumption' forum.

You may be able to refinance your house as-is and get PMI taken off. 

[Metalcat]

Does the renovation make sense?

In terms of what?
As a life improvement? I don't know, maybe, I have no idea how much your current kitchen and bathroom negatively affect your day to day life.
As an investment in the value of your home? No, not at all, anything you do today will be dated as fuck and show wear and tear very quickly. Plus you can't possibly predict what trends of the future will be in terms of layouts and functionality.

So this is a simple consumer purchase. It's either worth it to you to spend the money on this or it isn't.
So if you want these renos more than anything else in the entire world that 40K (+interest, +whatever you go over budget, +opportunity cost), then yeah, go nuts and spend a small fortune on altering your house.

If not though, don't try to pull fancy math on yourself and justify it as some kind of reasonable investment because of house value or future house value or any kind of nonsense like that.

It's a simple consumer spend, and it's either worth what it will cost you or it isn't. Only you can decide that.

[STEMorbust]

Thanks all. We're first-time homeowners and still learning our way around this stuff.

The clear consensus is that a renovation should be treated like a consumer good and is not worthwhile in the scope of wanting to retire early. I'm confused on that. Isn't the reason that house flipping exists because it's possible to put money into a property that has a return beyond 1:1? Or am I falling for Hallmark-style consumer deceit?

Cash is doable for us; we'll likely be waiting until the winter to get a cabinet order fulfilled anyway. The current kitchen is in original form with laminate counters, marmoleum floors, and very little storage. With DIY demo and cabinet install, our project estimate is $30k pending RTA/Ikea cabinet quote. I feel strongly that this work would be reflected in home value.

[Metalcat]

But you're not selling it.

Flippers make a profit from *only* updating things in a way that maximizes on current trends, while leaving as is anything that they can get away with.

Doing a dream reno, and then living in that reno for years to come is not the same as flipping a property. Not even close.

Within 5 years, your brand new kitchen will be out of style and have wear and tear. It will no longer be a selling point, but just yet another off trend kitchen that buyers will contemplate renovating themselves.

The longer you live in your reno, the more true this is. However, the longer you live on your reno, the more worthwhile it may be as a consumer purchase.

That's why it's so important to be honest with yourself about what this spending actually means. Otherwise you will end up spending WAY more on consumption than you intended to because you fooled yourself that it was an investment.

Big renos only make sense in two scenarios:

A: to flip a house, which means, you never live in the reno, so it's not about what you want, it's purely driven by what the market wants

B: where the reno had a huge impact on the usability of your home, and you live there for so many years that you milk every speck of value out of the upgrade in terms of using it and loving it

If you dump a pile of money into a huge reno, and then move 5+ years later, unless your reno added a bedroom/bathroom or finishes a basement, then congrats, you just spent a fortune on only benefitting from a reno for a handful of years, and the next person basically gets a major discount on a relatively still up to date reno. This is the equivalent of buying a brand new car and selling it two years later, you just take the depreciation hit, the next buyer gets the deal.

ETA: so yes, if your kitchen is horrible and you update it to much better, then you may get some value out of it in the future, but nowhere near 1:1, so there's no point in thinking of it that way.

[joe189man]

Our goal is to make an intelligent decision around the long-term ROI of the house, be that saving on PMI or adding more than a 1:1 return on money invested in this renovation.

others answered how to get out of PMI, How long are you planning on owning the home? Do you have or want kids? if you want the home longer than 10 years and want or have kids in that time i would wait to do any major cosmetic updating. our kids are rough on things and i could see them damaging kitchen cabinets or new finishes if we redid our kitchen

in 10 years your remodels may be out of style or not be "shiny and new"

getting more than a 1:1 return on renovations is optimistic

we did cash finance a major master bath remodel, it was functional but there was some mold to deal with and an unused soaking tub

I am quite confident that your estimated remodel cost is low

[kei te pai]

Your house is not an investment account. Your house is not even a piggy bank.
 Unless it is unsafe, live there for a while before spending money on renovations, for all the reasons above.

[tweezers]

Our scenario is a bit different because we bought a home in borderline tear-down condition knowing it would need a huge remodel (which we did even before moving in).  Our house had a galley kitchen too, and part of the remodel involved taking out a wall to make it part of the dining area.  Assuming your layout is similar (i.e. small and separate kitchen) and you plan on being there a while, I would absolutely go ahead with a remodel.  Opening up the kitchen to the dining and main living area was a big quality of life improvement for us even just for being able to have an eye on the kids while cooking and cleaning up, not to mention entertaining (in the before times).  Worth every penny to us.  If you moved there in early 2020, I'm sure you know what you want by now.  Incidentally, our kitchen doesn't appear dated, although we intentionally selected a classic craftsman style fitting for the house (also craftsman).

For our remodel, and when we built a garage a few years ago, we opened up interest-free credit cards and put everything on those instead of doing a HELOC or using cash.  These basically served as an interest-free loan (close to $40K) for 18-24 months, which we paid off before the interest period kicked in.  I did this when I remodeled my first house too and this strategy has saved me/us thousands in interest and allowed us to continue maxing our retirement/HSA contributions.  Obviously, this is only advisable if you have stellar credit there is no risk of not paying the balance in full before interest kicks in.

Definitely do what you need to do to get rid of PMI ASAP. 

[STEMorbust]

Thanks @tweezers for mentioning your experience! That's a great point -- I know that at least the Home Depot card has frequent 0% offers. We're responsible credit card users and would pay it off in the promo window.

I spoke to the bank and have info en route for dropping the PMI.

We aren't sure how long we'll be in this house, could be anywhere from 3 - 15 years. I'll work to cut down costs and aim for around $20k. We'll be happier and, with this being the area you immediately walk into in the house, I believe this will contribute some 'wow' factor for a future sale (even if our choices are dated at that time, pretty sure it'll be better than laminate and marmoleum). Thanks all for the recommendations on financing options. We're going to save up cash and finance as we go.

[SunnyDays]

Even the best reno will not get you your money back.  I believe it's more like 75-80% for kitchens and bathrooms.  Best case scenario.  Worst case, if it's not "on trend" and in mint condition by the time you sell it, maybe 50%.  Since you just recently bought it, I assume you're staying awhile, so I would keep it as is if it's functional (galley kitchens can be the most efficient design if open doors aren't banging into each other).  What I would do financially is put the money you would spend on it into an investment (in whole or over time) and use only the returns for funding the project.  Your capital remains untouched.  Then you will know how badly you want it if you have to take the money out of investments.

[srad]

Thanks all. We're first-time homeowners and still learning our way around this stuff.

With DIY demo and cabinet install, our project estimate is $30k pending RTA/Ikea cabinet quote. I feel strongly that this work would be reflected in home value.

Check out some cabinet places before going the Ikea route.  I use a custom cabinet guy, I'm doing an 11x13 kitchen right now and cabinets are going to be around 17k,  But that's all real wood, and 100% custom.  Make a lot of calls.  It took me a while to find this guy and this is the fourth kitchen he will do for us.  There are also semi custom cabinet companies out there that do some pretty good work.  I'd go that route before using Ikea.    Also installing cabinets is kind of a pita, I pay the few extra hundred dollars for it.

[Metalcat]

Thanks @tweezers for mentioning your experience! That's a great point -- I know that at least the Home Depot card has frequent 0% offers. We're responsible credit card users and would pay it off in the promo window.

I spoke to the bank and have info en route for dropping the PMI.

We aren't sure how long we'll be in this house, could be anywhere from 3 - 15 years. I'll work to cut down costs and aim for around $20k. We'll be happier and, with this being the area you immediately walk into in the house, I believe this will contribute some 'wow' factor for a future sale (even if our choices are dated at that time, pretty sure it'll be better than laminate and marmoleum). Thanks all for the recommendations on financing options. We're going to save up cash and finance as we go.

It might add *some* value down the road, no one said it wouldn't, but I seriously think you're overestimating how much, and it shouldn't affect your decision making.

Besides, how much impact it will have doesn't just depend on how much nicer it makes the house, it depends on the market. In a crazy seller's market, details don't matter. I sold during an intense seller's market and pretty much all of the units in my condo complex sold for the same price. Some units were more updated, some were more 1970s original, but they all sold for about the same price.

In a crazy buyer's market, yeah, details will matter, but buyers will nitpick that yours isn't recently updated. Also, that's a shitty time to sell, so you the more your updates will impact your sale value, the worse the time to sell and you should avoid selling anyway. At that point, waiting for a better seller's market will have much more.umpact on your house value than the renos you did nearly a decade ago.

Treating it like consumption is the smartest way to handle it, then if it somehow does improve your property values down the line, then that's a bonus, but banking on that makes no sense.

None of this means the renovation isn't worth it. I'm just recommending that you use sound financial reasoning, and it sounds like you've decided to do that, so that's great.

Enjoy the renos.

[STEMorbust]

Appreciate it, all! Thanks @Malcat for the reality check :)

[PDXTabs]

Isn't the reason that house flipping exists because it's possible to put money into a property that has a return beyond 1:1? Or am I falling for Hallmark-style consumer deceit?

House flippers, AFAIK, do a lot of the labor themselves. They are often professional general contractors with good contact who do this job full time. Every retail homeowner estimate that I've seen for ROI is at or below 1:1. This random article on the internet that I found only lists one home improvement that has a positive ROI, and that's a minor bathroom remodel:
https://www.fortunebuilders.com/top-10-home-improvements-with-the-highest-roi/

However, if you do the labor, then yea. You could probably get better than 1:1, but then from day one it starts depreciating. This is especially true if you find used parts for cheap or pour your own cement countertops or something. I have a friend that did both.

[Metalcat]

Isn't the reason that house flipping exists because it's possible to put money into a property that has a return beyond 1:1? Or am I falling for Hallmark-style consumer deceit?

House flippers, AFAIK, do a lot of the labor themselves. They are often professional general contractors with good contact who do this job full time. Every retail homeowner estimate that I've seen for ROI is at or below 1:1. This random article on the internet that I found only lists one home improvement that has a positive ROI, and that's a minor bathroom remodel:
https://www.fortunebuilders.com/top-10-home-improvements-with-the-highest-roi/

However, if you do the labor, then yea. You could probably get better than 1:1, but then from day one it starts depreciating. This is especially true if you find used parts for cheap or pour your own cement countertops or something. I have a friend that did both.

As I said earlier, it will depend a lot on the market as well, in a super hot market, it's unlikely that anything short of high end renos will have much of an impact. Also, there's a huge difference between DIY renos and professionally done renos. Some people are great at renos, but most amateur renos are pretty self evident.

Also, as you mentioned, professionals are well connected know how to get less expensive supplies and trades, which has a huge impact on the price:return ratio.
So they're working at the advantage of cheaper supplies AND nicer results.

There are a lot of units that sell each year in my condo complex, and the DIY renos don't move the needle much in terms of sale price compared to the obviously professional level renos.

[Metalcat]

Appreciate it, all! Thanks @Malcat for the reality check :)

Any time, that's what we're here for.

Society brainwashes you to believe a lot of bullshit that makes it hard to see money objectively, and that is never more true than when it comes to anything to do with real estate. The more you train yourself to see through the bullshit, the more control you have over your financial/quality of life outcomes.

[CindyBS]

Materials/supplies for a renos are very expensive right now.  I wouldn't do any work on a house that is not necessary until the materials markets and supply chains catch up and settle down.  Also, many contractors are completely backed up with work from the pandemic and can charge a lot of $$ due to demand. 


FWIW, I live in a LCOL/MCOL city that is not in the hottest areas of the countries (not the coasts or huge cities).   Our house has no first floor bathroom, it is over 100 years old and most houses in the area have put in a bathroom but did not have one originally, and a good kitchen but with laminate counters.  We're moving to take advantage of the hot real estate market to cash out $$ on our larger house and downsize.  Every realtor we interviewed said it is not a good ROI to update our kitchen, put in another bathroom or other large investment in the house.   They all recommend painting (that god awful popular light grey), decluttering, and fixing some minor items in the house but NO major updates.  They all estimated our house would sell in less than a week, most likely a day or 2,  with very nice profit for us.

[Dave1442397]

Great points to consider here. We've been in our house 20 years, and the 1960 kitchen was updated in the mid-'90s. My wife would love a new kitchen, but I always have a list of things that come first, so it has never happened.

We have a master bath that is a disaster. My in-laws owned the house before us, and their idea of hiring someone was to ask around the immigrant community until they found someone who did renos on the side. They had the bathroom redone in the '80s, and it's terrible. The shower/tub isn't even functional right now, and I haven't bothered spending money on fixing it because the whole enclosure is just not good. They used floor tile on the walls, and a plumber told us that water is seeping through it in places. Not worth fixing that hot mess.

[Metalcat]

Great points to consider here. We've been in our house 20 years, and the 1960 kitchen was updated in the mid-'90s. My wife would love a new kitchen, but I always have a list of things that come first, so it has never happened.

We have a master bath that is a disaster. My in-laws owned the house before us, and their idea of hiring someone was to ask around the immigrant community until they found someone who did renos on the side. They had the bathroom redone in the '80s, and it's terrible. The shower/tub isn't even functional right now, and I haven't bothered spending money on fixing it because the whole enclosure is just not good. They used floor tile on the walls, and a plumber told us that water is seeping through it in places. Not worth fixing that hot mess.

So you just don't use your shower/tub??

There's a huge difference between upgrades and repairs, what you are talking about is a necessary repair for function. I would personally never leave a bathroom non-functional, but if you genuinely don't need it and aren't selling anytime soon, then I suppose just leaving it is an option. Although I would be concerned knowing there was leakage for years and not addressing that.

[ChpBstrd]

We'd like to do a kitchen/dining reno to change the 1960's galley kitchen into a more modern layout with new cabinets, counters, appliances, flooring. Total cost I'm estimating tops out at $40k with plenty of room to shave. We're also considering bundling a few bathroom changes (new showers, floors, tile) if this is a bulk loan/contract.

It depends on your prioritization of FIRE vs nice things. This same decision comes up over and over again for us regarding housing, cars, computers, and time spent working. Very few people take an extreme FIRE approach (living as someone’s roommate in a slum house and eating rice and canned beans every day while earning a six figure income at two jobs they walk to) and those who prioritize nice things will never retire securely.

My usual approach is to compromise somewhere between the extremes that seems rational to me. That has led me in a DIY direction that has saved me a fortune over the years. In your situation I’d consider making some simple changes that will make your place more pleasant without investing five figures into decor fads. Without seeing the space, here are some ideas:

1) There are countertop coating products which can be had for $100 that will make dingy dated counters look nice for the next several years.
2) Keep those old high quality plywood cabinets! They hold up dishes exactly as well as new ones that cost thousands. Give them a coat of enamel in a fashionable color according to an overall scheme. If the doors are dated, you can replace just the doors and hardware and they will look new. Spend 10x as much for new and you get the same end result, except in particle board that is more likely to crumble or mold.
3) Dated or scratched up bathroom tubs and tiles can be enameled for a few hundred bucks and it will look fine for years. Nobody cares if you spend $10k on a Pinterest perfect glass tile bathtub with a special spray nozzle aimed at your bum.
4) A lack of counter space or storage space is a lot easier to address with furniture than with knocking out walls. Put a pantry wardrobe or sideboard in the dining room for extra storage. Antiques can work here. Similarly, a closet devoted to cleaning supplies might work better as a pantry or hiding place for the stand mixer, slow cooker, toaster, etc.
5) There are products that allow one to install a backsplash without all the difficulties of tile.
6) Flooring a galley kitchen can be a weekend job for anyone with a chop saw and a table saw. Both are routinely sold at yard sales and on Craigslist. Floating laminate is relatively easy and costs like $3.50/sf for the fancy stuff. Rolled vinyl can actually look good and the ease of cleaning is unbeatable.
7) Think long and hard about how much you’ll actually enjoy a different floor plan. Everyone wants to “open up” kitchens to other parts of the house, but they don’t think about how much fun it is to see a pile of dirty dishes from the living room or to hear the dishwasher or ice maker running while trying to watch a movie or converse at the dinner table. Plus, the temptation to yell across an open floor plan means you will live with lots of yelling and fewer close conversations.  Closed floor plans are out of style now, but I prefer the peace and compartmentalization of chaos they offer. You might miss peaceful places that stay clean and uncluttered.
8) If your appliances work fine but are cosmetically challenged, have you considered painting or paneling them? Black enamel can do a lot in the right hands.

[sonofsven]

As far as payment, if you don't have an inheritance or extra money sitting around then you're looking at a cash out re fi, a HELOC, or credit cards.
I've used Home Depot 0% cc to stretch out payments for 18 months. I don't like all their products, though (or them, as far as that goes).
You can use card purchases to rack up a bunch of points but I would only do that if you can pay it off monthly.
Interest on a cash out refi and heloc is deductible if used for home improvements.

[Dave1442397]

Great points to consider here. We've been in our house 20 years, and the 1960 kitchen was updated in the mid-'90s. My wife would love a new kitchen, but I always have a list of things that come first, so it has never happened.

We have a master bath that is a disaster. My in-laws owned the house before us, and their idea of hiring someone was to ask around the immigrant community until they found someone who did renos on the side. They had the bathroom redone in the '80s, and it's terrible. The shower/tub isn't even functional right now, and I haven't bothered spending money on fixing it because the whole enclosure is just not good. They used floor tile on the walls, and a plumber told us that water is seeping through it in places. Not worth fixing that hot mess.

So you just don't use your shower/tub??

There's a huge difference between upgrades and repairs, what you are talking about is a necessary repair for function. I would personally never leave a bathroom non-functional, but if you genuinely don't need it and aren't selling anytime soon, then I suppose just leaving it is an option. Although I would be concerned knowing there was leakage for years and not addressing that.

We just stopped using that shower/tub years ago. It can wait. We'll get the kiddo through college before I'll spend money on that.

I don't consider it worth repairing, when we plan on ripping it all out and getting rid of the tub, which is how it was originally. When they added the tub, they also removed an adjoining closet in the master bedroom. We really need to start over.

[yachi]

Great points to consider here. We've been in our house 20 years, and the 1960 kitchen was updated in the mid-'90s. My wife would love a new kitchen, but I always have a list of things that come first, so it has never happened.

We have a master bath that is a disaster. My in-laws owned the house before us, and their idea of hiring someone was to ask around the immigrant community until they found someone who did renos on the side. They had the bathroom redone in the '80s, and it's terrible. The shower/tub isn't even functional right now, and I haven't bothered spending money on fixing it because the whole enclosure is just not good. They used floor tile on the walls, and a plumber told us that water is seeping through it in places. Not worth fixing that hot mess.

So you just don't use your shower/tub??

There's a huge difference between upgrades and repairs, what you are talking about is a necessary repair for function. I would personally never leave a bathroom non-functional, but if you genuinely don't need it and aren't selling anytime soon, then I suppose just leaving it is an option. Although I would be concerned knowing there was leakage for years and not addressing that.

We just stopped using that shower/tub years ago. It can wait. We'll get the kiddo through college before I'll spend money on that.

I don't consider it worth repairing, when we plan on ripping it all out and getting rid of the tub, which is how it was originally. When they added the tub, they also removed an adjoining closet in the master bedroom. We really need to start over.

Don't forget to pour a little water in the drain periodically to keep the P trap filled and keep those gasses and odors at bay.

[Fishindude]

You already have a hefty mortgage and are paying PMI, so that indicates you borrowed about all you could afford at the time.
Don't get yourself further into debt just to make the kitchen nicer.   First priority should be to do away with PMI, then save and pay cash for any renovations.   Just because your house is currently worth more, doesn't justify borrowing more.  It's not like you are selling the place and will get your hands on those appreciation dollars.

And please don't buy IKEA cabinets, they are junk.   Deal with a local lumber yard or cabinet shop and get something that is well built and will hold up.
Your first number of $40k might not be far off and could in fact be light?   We spent $40k on our kitchen 15 years ago.   Save until you can afford to do it right and do a nice job.

[3quarters]

I agree with @ChpBstrd -- are there smaller DIY things you can do to improve the look without gutting it? For example, our bathrooms had dated vanities but instead of replacing them we painted the cabinets (well, which takes time, technique, and a good primer), replaced the cabinet hardware, and did a store-bought countertop finish. No one would have ever been fooled that it was real stone, but the effect was night and day for less than $100 and a couple weekends.

There's paint specifically for tile, for floors, for cabinets, for countertops, for pretty much anything. I never got around to painting the dingy 80s bisque tub surrounds in our house before we sold (with legit tile paint, of course) but I bet it would have been awesome.

That said, DIY may be a bad idea depending on your ability and the market. Our house was just a few steps above starter and already had a "quirky cottage" vibe. If your market is more "country club" or "urban chic" perhaps it's best to put the paintbrush away.

[STEMorbust]

Hey all, following up to let you know that we avoided chasing the shiny object on this one. We installed new counters (Ikea butcher block), apron front sink, fancy faucet, repainted the uppers and lowers, and had two large solar tubes installed to bring in 10x more light. While it's not perfect in terms of functionality, we will have spent <$5k and it looks and feels WAY better. We're really happy with the decision. Thanks all for the input, it helped tons.

[yachi]

Hey all, following up to let you know that we avoided chasing the shiny object on this one. We installed new counters (Ikea butcher block), apron front sink, fancy faucet, repainted the uppers and lowers, and had two large solar tubes installed to bring in 10x more light. While it's not perfect in terms of functionality, we will have spent <$5k and it looks and feels WAY better. We're really happy with the decision. Thanks all for the input, it helped tons.

Thanks for the update.  A few weeks ago I was stuck in a waiting room and watching HGTV.  Maybe it's just the shows I was seeing, but for kitchen renovations they were taking out quality durable stone countertops and replacing them with something else.  It was often to change the color, but also the size of the kitchens they were working on.  Just goes to show that even a durable "forever" product is very temporary when you bring in the stylish TV people.  I was quite disgusted.
Meanwhile my kitchen is rocking formica countertops with chrome trim.  Honestly I think I could pull out the chrome trim and replace it with caulk or something.  So looks like I get to skip at least one kitchen countertop style!

I didn't see this mentioned, but on the "flipper" comment.  In my area, flippers buy houses from the 1950's and 1960's with cash from auctions or inherited estates.  They make the purchases at significant discounts.  Then the renovate with their own crews, but I'm convinced they'd make just as much money immediately selling the house using a Realtor, and putting their crew to work for a homeowner.

[svosavvy]

Hey great job not succumbing to the sucka "house is an investment" cult.  If you live in it or drive it, it's consumption.  What has helped me not go off the deep end on houses and cars which are advertised as "investments" is to think of them like fancy loaves of bread.  If I buy a loaf of bread and eat half, is someone really going to want to give me a lot of money for half a loaf of bread. 

I was just thinking of this as I am coming up on 20 years at my place which is the only house I ever bought.  Though my life has changed and my place is less perfect logistically I am so happy I have avoided multiple closing, seller, buyer, etc fees from multiple moves.  Those avoided costs have really put me way ahead.  We have raised our kids in a very dated but functional house.  They never noticed or at least didn't say anything.  When they would wreck something I would laugh b/c it was an excuse to replace something that needed it anyway.  We are now slowly doing diy reno.

It's funny we have a new rambunctious puppy and he has left his mark on our brand new diy entry door I installed and fussed over two months ago.  I think I was more pissed about that than anything that ever got destroyed when the kids were little.  Anyway good luck on your journey.  You are doing great. 

[STEMorbust]

Hey all, following up to let you know that we avoided chasing the shiny object on this one. We installed new counters (Ikea butcher block), apron front sink, fancy faucet, repainted the uppers and lowers, and had two large solar tubes installed to bring in 10x more light. While it's not perfect in terms of functionality, we will have spent <$5k and it looks and feels WAY better. We're really happy with the decision. Thanks all for the input, it helped tons.

Thanks for the update.  A few weeks ago I was stuck in a waiting room and watching HGTV.  Maybe it's just the shows I was seeing, but for kitchen renovations they were taking out quality durable stone countertops and replacing them with something else.  It was often to change the color, but also the size of the kitchens they were working on.  Just goes to show that even a durable "forever" product is very temporary when you bring in the stylish TV people.  I was quite disgusted.
Meanwhile my kitchen is rocking formica countertops with chrome trim.  Honestly I think I could pull out the chrome trim and replace it with caulk or something.  So looks like I get to skip at least one kitchen countertop style!

I didn't see this mentioned, but on the "flipper" comment.  In my area, flippers buy houses from the 1950's and 1960's with cash from auctions or inherited estates.  They make the purchases at significant discounts.  Then the renovate with their own crews, but I'm convinced they'd make just as much money immediately selling the house using a Realtor, and putting their crew to work for a homeowner.

Ha! For what it's worth, we got our new (to us) faucet from a friend because chrome is back in style and they were replacing their stainless fixtures.

[STEMorbust]

Hey great job not succumbing to the sucka "house is an investment" cult.  If you live in it or drive it, it's consumption.  What has helped me not go off the deep end on houses and cars which are advertised as "investments" is to think of them like fancy loaves of bread.  If I buy a loaf of bread and eat half, is someone really going to want to give me a lot of money for half a loaf of bread. 

I was just thinking of this as I am coming up on 20 years at my place which is the only house I ever bought.  Though my life has changed and my place is less perfect logistically I am so happy I have avoided multiple closing, seller, buyer, etc fees from multiple moves.  Those avoided costs have really put me way ahead.  We have raised our kids in a very dated but functional house.  They never noticed or at least didn't say anything.  When they would wreck something I would laugh b/c it was an excuse to replace something that needed it anyway.  We are now slowly doing diy reno.

It's funny we have a new rambunctious puppy and he has left his mark on our brand new diy entry door I installed and fussed over two months ago.  I think I was more pissed about that than anything that ever got destroyed when the kids were little.  Anyway good luck on your journey.  You are doing great.

Thanks! That's good to hear. My wife and I were moving every few months for the years leading up to Covid so I think we're experiencing homeowner ADHD now. It's funny to think about kids' perspectives. I certainly did not think twice about the shortcomings of my own home growing up except for the obvious lack of drum set and in-ground pool ;)

We had a similar experience with our furniture and dogs. The weekend we decided to review sample swatches to get a fancy Made in USA couch, our dog jumped the end table and knocked 1) a half melted candle and 2) a full beer onto our current $300 Craigslist couch. That was enough to convince us to keep that couch around for the foreseeable future.

[PMG]

I love a good thread like this!  Thanks OP for coming back with the update!  We recently did a similar bathroom remodel where we reused and diyed. We’re so happy with the results. Is it perfect? No. Magazine luxury? No. But it’s so nice and so much easier to use and a good update that aligns with our house, our life goals, and our needs. So satisfying.

[Zamboni]

Thanks for the update, OP! Glad you were able to find an affordable solution that makes the kitchen much nicer for you.

Hey all, following up to let you know that we avoided chasing the shiny object on this one. We installed new counters (Ikea butcher block), apron front sink, fancy faucet, repainted the uppers and lowers, and had two large solar tubes installed to bring in 10x more light. While it's not perfect in terms of functionality, we will have spent <$5k and it looks and feels WAY better. We're really happy with the decision. Thanks all for the input, it helped tons.

Thanks for the update.  A few weeks ago I was stuck in a waiting room and watching HGTV.  Maybe it's just the shows I was seeing, but for kitchen renovations they were taking out quality durable stone countertops and replacing them with something else.  It was often to change the color, but also the size of the kitchens they were working on.  Just goes to show that even a durable "forever" product is very temporary when you bring in the stylish TV people.  I was quite disgusted.
Meanwhile my kitchen is rocking formica countertops with chrome trim.  Honestly I think I could pull out the chrome trim and replace it with caulk or something.  So looks like I get to skip at least one kitchen countertop style!

I didn't see this mentioned, but on the "flipper" comment.  In my area, flippers buy houses from the 1950's and 1960's with cash from auctions or inherited estates.  They make the purchases at significant discounts.  Then the renovate with their own crews, but I'm convinced they'd make just as much money immediately selling the house using a Realtor, and putting their crew to work for a homeowner.

Maybe . . . but working for a homeowner is a pain. My brother works in construction and he has basically stopped doing homeowner renovations. He only does new construction now. While he had mostly positive experiences with renovating for homeowners, some homeowners complain, they change their minds, they wring their hands at unexpected (but normal) surprises, they make bad style decisions that they then regret, they have aggressive or yappy dogs running around, they call at all hours, they don't always pay their final bills, etc. It's way less mental stress to just get a few more $$$ out of unoccupied home by flipping it.

[waltworks]

Kitchen reno for $40k is hilarious, unless you plan to DIY the whole thing.

As others have said, you should assume this is 100% sunk cost/consumer spending. It could be worth it, or not, but it's not an "investment" in any meaningful sense.

-W

[Trying2bFrugal]

But you're not selling it.

Flippers make a profit from *only* updating things in a way that maximizes on current trends, while leaving as is anything that they can get away with.

Doing a dream reno, and then living in that reno for years to come is not the same as flipping a property. Not even close.

Within 5 years, your brand new kitchen will be out of style and have wear and tear. It will no longer be a selling point, but just yet another off trend kitchen that buyers will contemplate renovating themselves.
The longer you live in your reno, the more true this is. However, the longer you live on your reno, the more worthwhile it may be as a consumer purchase.

That's why it's so important to be honest with yourself about what this spending actually means. Otherwise you will end up spending WAY more on consumption than you intended to because you fooled yourself that it was an investment.

Big renos only make sense in two scenarios:

A: to flip a house, which means, you never live in the reno, so it's not about what you want, it's purely driven by what the market wants

B: where the reno had a huge impact on the usability of your home, and you live there for so many years that you milk every speck of value out of the upgrade in terms of using it and loving it

If you dump a pile of money into a huge reno, and then move 5+ years later, unless your reno added a bedroom/bathroom or finishes a basement, then congrats, you just spent a fortune on only benefitting from a reno for a handful of years, and the next person basically gets a major discount on a relatively still up to date reno. This is the equivalent of buying a brand new car and selling it two years later, you just take the depreciation hit, the next buyer gets the deal.

ETA: so yes, if your kitchen is horrible and you update it to much better, then you may get some value out of it in the future, but nowhere near 1:1, so there's no point in thinking of it that way.

We just got a new house and when wife wanted to change refrigerator, cooking range, kitchen top, bathroom to be done, these were my exact feelings i shared with her. We arent flipping, but planned to live for atleast 2 years before we move to new house. So we planned to paint garage, may be fix lighting to better efficient ones so when we do sell (we plan to rent if we could afford to keep it and we live in same location), it gets the money back to us. So we learn stuff, use it when we were living there and get the money spent. But she agreed for not doing the kitchen top/bathroom. Wants just the cooking top to be replaced. I dont want to change something perfectly working fine, but if cooking range got some sentiments, i have to honor it.

[Metalcat]

We just got a new house and when wife wanted to change refrigerator, cooking range, kitchen top, bathroom to be done, these were my exact feelings i shared with her. We arent flipping, but planned to live for atleast 2 years before we move to new house. So we planned to paint garage, may be fix lighting to better efficient ones so when we do sell (we plan to rent if we could afford to keep it and we live in same location), it gets the money back to us. So we learn stuff, use it when we were living there and get the money spent. But she agreed for not doing the kitchen top/bathroom. Wants just the cooking top to be replaced. I dont want to change something perfectly working fine, but if cooking range got some sentiments, i have to honor it.

That's the thing, there's nothing wrong with changing things in your home to make it a better place to live, just don't lie to yourself that it's an "investment". I've done a bunch of updates to my new apartment over the past two years because I wanted to and they were worth it to me to spend on. But I've kept all of my upgrades inexpensive because they're not investments, they're purchases.

So I refinished my own cabinets, did glue-up tiles over the popcorn ceiling instead of hiring a professional to smooth it out. I really like the tiles though and they reduce sound, so that was a win, which is also why we're looking into cork flooring, which would be fun to DIY as well.

Customizing your home is part of the benefit of owning, it's just a matter of staying honest with yourself about what things cost and whether or not the gains they give you are worth road costs compared to any other possible purchase, including buying more free time.