Tuesday, March 01, 2005

Remodeling Notes: Wise Spending

A reader commented on our house renovation budget. I’d like to address her questions. Yes, $1000 on a refrigerator is a lot of money, and $800 in other kitchen facelifts may be more than a lot of us can spend. I know—I’m staying at home by stretching my husband’s teacher salary! Let me tell you why I think my kitchen is a wise investment.

We bought our first fixer-upper five years ago with almost no money to renovate. We did everything ourselves and scrounged almost all our materials and appliances. I painted the entire exterior of the house for $9 using recycled paint mixed together in an empty garbage can. Our sweat equity and a smart choice of neighborhood paid off: two years later, we made substantial profit at the end of the sale. We bought a slightly bigger home in a slightly rougher neighborhood and set to work doing it all over again. Again, we netted a similar profit. In fact, the house sold so quickly that we lived in a hotel while finding another place!

What most people don’t know is that with the change in tax law, you no longer pay taxes on the sale of your home--if you have lived in it as a primary residence for 2 years or more. That’s right—all that profit was tax-free to us! Furthermore, we weren’t required to roll it into the purchase of another home. We could do whatever we wanted with it! This was the perfect way for us to build up our savings while living on my husband’s salary. It did not inflate our yearly income or push us into a higher tax bracket, as my salary would have done if I were working. It is a sideline we do together in the summers and on our own time. Many of the projects are things we would be doing anyway, for the comfort and enjoyment of our own home. So, as much as I like saving, careful spending to make a home sell better is good stewardship.

If you are a mom looking for a way to come home, renovation for a profit can be a valuable means of making money. Keys to making this strategy work for you:
*Do most of the work yourself, or find a very cheap source of labor.
*Make sure your husband is interested; if you can’t get him to complete the tasks on his current honey-do list, think twice about buying a fixer-upper.
*Spend your time researching neighborhoods and finding a home that needs mostly cosmetic repair. Then you can renovate quickly and enjoy living there for the next two years. No one wants to live in a construction zone, then move!
*Be flexible and recognize that you are making choices for this home, not your dream home. You can relax and be more creative when you don’t have the pressure of living with your decorating decisions for the rest of your life.
*Don’t be afraid to scavenge for goodies outside the big box home stores. You can’t buy everything new and stick to a small budget! Habitat for Humanity has set up several Homestores which sell recycled building materials. We found a 9 foot glass door unit with frame there for $150. A similar unit custom ordered from Home Depot runs over $1,000. Converting our garage just became $850 cheaper!
*If you run over budget, just stop. Don’t use credit. Wait and pray, pray, pray and God will open doors for you!

2 comments:

*Kristal* said...

I know this is an old post, but the Lord lead me to it on, of all days, the first of the new year! You don't know how much reading your words just now has given me inspiration! My DH and I have been talking about me quiting my job of 18 years and start working with real estate. We would like to start flipping houses but have never done so, and I'm terrified!! I want to stay home with the little one(2yo)but at the same time, contribute to the income. Your post has made me feel like "I CAN DO THIS"!! Thank you so much!!

Anonymous said...

I'm in a different position -- we will probably spend a bundle rennovating the kitchen, but we'll save money by doing a lot of our own labor. So, your ideas are valuable, even if I can't duplicate the bargains you've found!