Home Improvement Budgeting: Which Costs Should You Plan For?
The leap from renting to owning is one of those classic markers of adulthood, and with that leap come new responsibilities from mortgage loan payments to homeowners insurance. One cost that catches some new homeowners off guard, though, is maintenance. After all, in the renters’ world, these costs are typically covered by the monthly rent check.
That leaves new homeowners with a lot of questions. How much should you expect to spend on home maintenance each year? Should you tackle the projects yourself, or call in a professional? Which projects are worth your time and money in the end? And should you finance it with your credit cards, a home equity line of credit, a personal loan — or save up to pay it all with cash. To get a better idea of what to expect from this new set of costs, let’s take a look at some of the national averages for home improvement.
Improvements are a reality of home ownership
A survey from Hanley Wood shows that of about 3,000 homeowners and renters, six in ten said they had done some home improvement in the past two years.
Repair rules, but efficiency and prevention also matter
The same survey shows that maintenance and repair are the most common categories for home improvement projects, but energy efficiency and preventative maintenance also rank high on the list. Here is a breakdown of project types (respondents could choose more than one option):
- 65% did maintenance and repair work
- 42% did energy efficiency projects
- 30% did work to prevent future maintenance
- 30% did work to improve the resale value of the home
- 24% did projects to add more amenities
Hiring a home improvement professional vs. DIY
Whether for the sake of frugality or to gain a sense of accomplishment, many homeowners take projects on themselves rather than shelling out the cash to call in a professional. Depending on the scope of the project, this can be the more affordable option, but remember to take safety and legal concerns into account before tackling a project yourself.
According to the Hanley Wood survey, 43% of respondents completed the project themselves, while 34% hired a professional contractor and another 24% met somewhere in the middle by splitting the work between themselves and a contractor.
How much should you budget for home improvement?
One of the biggest challenges of home improvement is knowing how much money to set aside in advance. While there is no reliable way to predict whether your appliances will need replacing or your roof will need emergency repairs in the coming year, there are some general rules of thumb that homeowners can use to set savings benchmarks.
According to the University of Illinois Extension, homeowners should budget about 1% of the purchase price of their home per year for maintenance and repairs. For example, if your house cost $275,000, at the very least you would want to set aside $2,750 for home maintenance expenses.
That benchmark fits well with national spending averages. According to a Home Improvement Research Institute Report, in 2011 the median amount spent on home improvements was $3,000.
Which home improvement projects have a high return on investment?
As mentioned above, about a third of Americans take on home improvement projects in order to improve the resale price of their home. But given the current state of the housing market, the cost put into a project doesn’t always pay off when the home is sold. Before you invest in a home improvement project – whether you’re taking the do-it-yourself route or hiring a professional – consider whether that enhancement will pay off when it comes time to sell your home.
Remodeling Magazine ranked the following improvements according to cost recouped, which is calculated taking resale value divided by job cost. Surprisingly, replacing an entry door had the highest overall return on investment.
- Entry Door Replacement (steel)
- Deck Addition
- Garage Door Replacement
- Minor Kitchen Remodel
- Window Replacement (wood)
- Attic Bedroom
- Siding Replacement
- Window Replacement (vinyl)
- Basement Remodel
- Major Kitchen Remodel
For tips on maintaining your investment, check out our full Home Improvement Budgeting series.