Should I make home improvements on my town home?

Question

I have a town house in southern California. It is 1650 square feet, 3bd/2.5 ba, has a yard and 2 car garage.

I want to do some light remodeling: new kitchen cabinets, granite countertops in kitchen and bathrooms, update bathroom tubs, and other things. My whole project will cost about $27,000 for materials. No labor costs.

My wife and I plan to remain living in the town home for at least another 5 years because starting a family. We will have our place paid off (& will be debt free) in a few months and may possibly sell it one day if our neighborhood gets bad. But we may never move because real estate is SUPER expensive near the beach where we live.

Is $27,000 too much to invest in my town house? My reason for the updates is not for resell but to make our home more custom.
I want us to be happy with what we have so we don’t go house poor buying a fancier house.

Also, should we save our money for 18 months to pay for the project in full, or should we get a loan?

Answer 1

Depending on the value of your townhome, that kind of investment will usually pay a return in 5 years. It sounds like it would be a great investment to make your house a home.

Of course, if you can save the money first, that will save you money in interest (and you could spend more $$ on your house that way). You could also use that time to plan out your remodel strategy and find good deals on the materials you want.

Answer 2

As a Real Estate investor who is originally from the Los Angeles area, a piece of advice:
If you own any Real Estate free and clear of a mortgage in that area, KEEP IT.

To finance the project, you might want to consider a HELOC (Home Equity Line of Credit) which you can walk down the street to your local bank and get.
This is like having a credit card for what is probably at least $500,000.00 (the equity in your home), except that you only pay better than 1/3 of the interest you pay for normal, "unsecured" debt. Use the home as collateral.
The payments will be very low on a loan for $27k secured by a home worth over $500k (obviously, right?).

Since you are there to stay, you can and your family enjoy the upgrades in lifestyle, and your heirs will appreciate the upgrade in value.
Good Luck!

Answer 3

Home improvements are always a plus to the value of your home. It makes it different than everyone else. Paying for something in full is always better then paying installments unless you cant wait and there is no interest.

Answer 4

Depends on resale value in your area. If you can recoup the cost of renovations in two years upon resale then it might be worth the effort. Other wise forget it.