When homeowners are considering a remodeling project, the question “What will it be worth?” is one of the foremost for many. The idea that the work is in many ways a real “investment” has served as great comfort to folks as they write the check for Draw#1. Things have changed though, at least for now.

While I know that the prevailing sentiment is that things have certainly changed for the worse in all things real estate related, I prefer to look at the bright side. I don’t say so easily either, I’m certainly among those who would be considered “severely” impacted by the market shift. But that’s another story.

Before getting into the bright side, let me explain a little bit about how people have gone about determining value in years past.

Cost vs. Value Report

Remodeling Magazine publishes an annual report called the “Cost Vs. Value Report“. The report goes to great lengths to help determine what the resale value of a project is in different markets nationwide.

They do this by providing specs for a typical project, such as a Bathroom Addition, to remodeling contractors in each featured market for the given year. The remodeling contractors provide cost estimates, based on the prescribed specifications.

The researchers also provide the same specs to a selection of local real estate professionals, including appraisers and real estate agents. It’s up to this group to review the project and give an estimate, based on their own experience, as to what the project will be worth.

A Great Sales Tool

This Cost vs. Value report is widely used as a sales tool, or at least it was when values were a little stronger. A home improvement seller such as a general contractor, a window replacement firm, or a siding company, would show the prospect in black and white what they could expect to get for the work if they sold the day it was finished.

Siding has always been strong for example. So the siding contractor shows you a report published by a national magazine, an apparent expert on the market, which clearly shows that you will recoup 90% of your investment. I know that any decent salesman would add the line “and that’s if you sell today! Clearly it will be higher in a year from now as the house overall appreciates.”

I know, because I’ve said those exact words, though I never used the report.

Average Cost Per Square Foot

This is the resale value method I always used when a client asked me “What will it be worth?” My answer was fairly boiler-plate and it went like this:

“Well, it seems that the houses in the area are all going for about the same price per square foot. I’m no expert on value, but It stands to reason that if we make your house 500sf larger, then you can just multiply out that number to get a decent estimate of the value.”

This worked fine for me because I was selling room additions for the most part, and reading it now, it makes perfect sense. In a predictable world that did what it was supposed to do, it would still make sense. But it doesn’t; not today. Not for now.

The Mental Cost Reduction

The purpose behind all of this is what I think needs to change. I think way too many people, on the professional side, and on the consumer side, were focusing much to strongly on the investment value of a home improvement project.

The homeowner sees an estimate, say it’s $100,000.00. That’s a whole lot of money! “Maybe I don’t want to spend $100,000.00″ they think. But they want that space, there must be a way to make that make sense. And this is where resale value of remodeling comes into play.

What if the client believes that they will have $100,000.00 in value from day one. Then how much are they spending? Zero, right? It’s no longer an expenditure, now it’s a transfer of funds from one place to another. Why not put it in the house where we can enjoy it?

The same would apply if the report shows them that the value will be $75,000.00. “Well, at least this is only costing me $25K, the rest is real value.” Makes perfect sense, right? Not today. Not for now.

Borrow, Borrow, Borrow

This actually could make some sense, even today, for those buyers paying cash. I’m among the majority who still hold out hope that real estate values will, eventually, bounce back and return to being an asset that appreciates, rather than one that drops in value, like a rock.

But the idea of borrowing based on these estimates of resale value seems very misguided to me at this time. Which brings me to the good news.

The Bright Side

Remember me saying that I wanted to look at the bright side? I bet you were starting to forget there was one! I know I was. My own writing was depressing me! I wonder if that means I should do some editing?

But the good news is really good news.

If we all wake up from this hypnotic trance where our homes are our “biggest single investment” and consider them as HOMES, not investments, I think we’ll start making much better choices. Much better!

I received the following question in an email and I thought the answer might be useful to others, so rather than just respond in email, I’ve posted it here .

I’ve spoken to many hundreds of excited owners over the years who want to add a second floor on the house and Natalie asked the typical questions.

Question:

We need to add on to our house at least one bedroom, and a guest room would be nice as well. The way our house is situated, the most aesthetically pleasing way to do it would be to add a couple of rooms on a second floor.

My question to you is, what are the limitations with adding on a second story to a house that is currently only a single story? Can it be done, or will it be prohibitively expensive. Any experience you have to share would be appreciated! – Natalie

Answer:

Hi Natalie,

I appreciate your question and I do have some experience I can share. My company has designed and built a few dozen second floor additions over the years.

Let me break down your question into segments.

Can it be done?

Yes. There is no such thing as a house that cannot receive a second floor addition one way or another; or at least not one I’ve seen yet…somebody will probably send me a picture of a house under a concrete overpass or something.

Years ago, after struggling with engineer after engineer on job after job trying to determine if the existing first floor foundation would hold up a second floor, I decided to skip the first floor footings altogether.

The truth is that most newer one story homes have almost zero “extra” strength built into them. As such, most one-story homes have insufficient foundations for the added loads of a two-story. Each state has it’s own set of building codes and Florida is among the most stringent, so a local professional will be able to help you better in that particular area. The lengths I’m accustomed to going to might not be required everywhere.

In the event that the existing foundation is insufficient, there are two options. First, you can augment the existing foundation with additional concrete and steel. The other option, the one I went to on all second story additions, is to build new footings for the second floor itself.

We did this by essentially building a “stilt house” within the existing home. Structurally speaking, these were like two independent structures. You could remove the first floor from under the addition, and it would remain intact.

This is done by placing adequate foundations directly under posts (we often used 6×6 posts) which supported the framing for the second floor. I would design the additions so that these posts can be placed inside existing or new first floor walls, or otherwise integrated into the first floor design with new features. The point being that these posts are “invisible” after the work is done.

So, this is a very long way of explaining that yes, it can be done in almost any house.

Is it prohibitively expensive?

Second floor additions are more costly than first floor additions, but I wouldn’t say prohibitively so. In my experience, the cost for a second floor job is about 20%-30% more than the same square footage built on the ground level. The majority of this extra cost has to do with the requisite remodel of the area under the addition and the cost of the stairs and stairwell.

The cost of an addition can be quite a bargain in times like this when the money you might effectively “lose” by selling in a depressed market is substantial. If you feel an addition of any type would be a good investment, I wouldn’t let the cost of a second floor addition scare you off.

Other Considerations:

Design

A good design is always an absolute imperative on a room addition. I would advise you to not compromise on this. Work until you have a design that meets your needs and you feel will be aesthetically pleasing.

Second floor design work is much more challenging, so you want to be certain that you’re working with someone who has experience in second story additions. If someone says “I haven’t really done many, but it’s no big deal.”, don’t believe them. It is a big deal and the design is the key.

Living During Construction

First floor additions have the great advantage of being able to be completed to a 95% level before breaking into your living space. Even if you’re remodeling adjacent space, the construction area can be effectively sealed off from your home.

Not so with a second floor addition. If the area where you plan to add-on is over an important living area, it could present a real problem. You really need to be able to move-out of the area directly under the addition for the duration of the project.

I’ve had a few clients move to a rental during construction and for a major project that can be a good idea. For most folks, it’s not an option. So plan on “camping-out” in your own home for awhile and be ready for some major inconvenience.

Over the Garage

For a number of reasons, building a second floor over the garage is a great move. The garage has a pretty impressive list of advantages:

• The cost to fix-it after construction is much lower since there is no floor covering, basic walls, little trim if any, etc.
• The ability of most families to live without the garage for a couple of months is much greater, as compared to the kitchen for example.
• The garage floor is often lower than the adjacent house. This is a huge advantage if the skies open and the rain pours down right after they tear the roof trusses off your house. The water will run out of the garage and down the driveway, instead of into your living room.

So, if it works in your plan, consider building over the garage.

I think that covers the basics…I hope it is helpful.

We all know that I love remodeling. My best-selling free eBook is entitled The Power of Remodeling — How Remodeling Your Home Can Change Your Life. That’s right, change your life!

But what about your marriage? Changing your life is one thing… anybody can do that, right? They got The Secret, Tony Robbins, and old copies of Dale Carnegie to do that. But your marriage!? That’s serious business we’re talkin’ now.

And isn’t home remodeling supposed to be like the dedicated arch-enemy of marriage? Isn’t it a fact that something like 2/3 of all couples who start remodeling never get past the demolition? Yet, now I’m saying it’s good counseling?

Anybody who pastes his head on butterflies and cartoon cowboys must be crazy anyway, right?

Wrong! Only 1/3 of marriages fail before the end of demolition!

Okay… all joking aside. This is serious business.

Remodeling Is Marriage Counseling

I read a post today about how really building a relationship was about getting to the core… well, here is a quote:

“Instead of living by others’ expectations, discover and live from your core.”

Got that? Your CORE! Okay, I don’t really know exactly what that means, but I do know this: It made me think about remodeling. In fact, I thought that’s where she was headed… but no.

Here’s what I think:

Save Your Marriage By Remodeling

• Remember that this home is for both of you! It shouldn’t reflect her style or his style. It should reflect YOUR style together. As a couple. A little work is all it takes to figure this out.
• Husbands – Realize just how important the house is to your wife! Don’t take it from me, take a look at what she likes to read online… check out her Google Reader…( I’m not a certified counselor)
• Wives – Remember that his lack of style is actually a style. It may seem like it’s not to you, but it is to him. There is no doubt that a set of surroundings exists that he would consider “perfect” and, all things being equal, he’s probably up-for the idea of making it happen.
• Research together – the best thing you can do is go out to places that you think might give you some clues. Model homes, hotels, restraunts, pool halls, Lowe’s Motor Speedway (not the parking lot at your local Lowe’s), whatever… lots of places. Spend some time paying attention to what physical surroundings actually instigate a good feeling in each of you. Take a picture, write it down.
• Designate Areas – What was that movie where they split the house down the middle? War of the Roses? Like that, but in a less dramatic way. For some reason, I don’t like the term “man cave” but there is some sense to the idea. If your design styles aren’t totally complementary, try to have some section that you agree belongs to your spouse to design however he/she wants.   (most often, he gets the garage, and that’s not fair! At least give him a porch too.)
• Agree on a budget! This one is the main culprit. Money fights! I can tell you from experience how to avoid this, but it might mean you start your work later. Have an agreed “splurge fund”. The problem is when the time comes for a toilet purchase… you want the nice one with all the bells and whistles (pottys have bells and some sport whistles too). He doesn’t see the value…it has a very simple purpose, he says.  This is where the splurge fund comes in. If you say, “Jim, this John is important to me! I’m willing to splurge on it!” (again, I’m not certified in this…so…)
• Decide on a work schedule! It can be very challenging for both of you to have work going on six or seven days a week twelve hour days. (that’s your contractor’s hours, right?) Decide before you start what the hours will be, tell your contractor, or hold yourself to it. This is especially true if you have strangers around. It gets old. Fast. It might mean to do the work in stages. That’s not so bad anyway.
• Just work together… from your core!

The overall point is that your house is the largest outward expression of you as a couple and if you both get involved in the remodeling process you’ll both get a sense of ownership of the project. You’ll both be excited, if not about every aspect of the work, at least about something! When one person isn’t really excited at all, it can be bad news!

Did I say I wasn’t certified?

By the way… if you’re wondering how I ended up reading this post on marriage, I’ll show you. I saw this link on Facebook:

Build a Better Marriage By Getting Buck Naked … so I clicked on it!

Now, I know that you have some thoughts on relationships and remodeling! Let’s hear ‘em!

Raise your hand if you’re confused.You’re not a loone, er, I mean, alone. I think most people who are ready or are planning to remodel are asking themselves the same question… how much should we spend?

And since I’m immensely intelligent, I have the answer. No, not really. But I do have some thoughts on the subject. Lets start at the beginning…

Manufacturers Offer Consumer Rebates

I got an email last week from the folks at Danze. If you’ve not heard of them, Danze is an Illinois company that “manufactures and distributes fine furnishings for the kitchen and bath”, and they’re having a sale… sort of. Along with the email, I received a photo…

Nice…

Two things caught my eye more than anything else. First, it was the light fixtures which I think are purrdy sharp. Then it was the vanity, which I thought was unique and nice looking. The press release said that they were offering a rebate of up to $125 on vanities. I wonder how much that vanity is… I started thinking.  Ready?… about $1,000.00, give or take.

That’s how I got to thinking about the question “How does one determine a budget in tough times?”

What Kind of Investment Are We Talking?

I’ve seen some husbands choke over the years. (it’s funny and sad at the same time)  A $1,000 little vanity would usually do it. But I’ve also seen $40,000 worth of Onyx in one master bathroom. That makes this vanity look very affordable. It all depends on perspective.

But the times changed dramatically with regard to investment. The days when you could quantifiably say…”we ought to get most of this back in resale value.” or better yet…”we’ll profit from this choice.” … well, let’s just say that option is “temporarily unavailable.”

But there is another entire side of the budget decision. There is an investment in “lifestyle”. There is a heartfelt pursuit of a great environment that changes the way we feel, which of course changes everything. It’s these parameters that drive the high-end market in a tough economy. It’s an investment in emotion, not an IRA.

Permanent Shifts In Thinking

Green. Small. Do more with less. Footprint. Impact.

All of these words are in people’s mind when it comes to the homes they want to create.  These factors can play heavily on the budget for an item… such as a cool light fixture.

You might be willing to spend a little more on the perfect light if you only need one or two special fixtures than if you need a dozen.

Scale can increase item-by-item budget.

Authenticity and Individuality

I’ve been reading a ton about the new wave of design consciousness. People are less apt to accept the same as the neighbors. They want unique and they want it to be uniquely them. Two different things. Both can impact budget.

The Bottom Line

I’m trying to say that while I think overall budgets may go down as people build smaller homes and banks change lending practices, I think there will be more instances of “truly special” items in peoples homes.

So, let me ask you a question… when your overall budget goes down, do you feel like you want at least one splurge item? Like one special part? Or no? I’d love to hear your answer in the comments!

Today, we have a great guest post!  I’m honored to welcome Melissa Michaels from The Inspired Room , enjoy!

Top Ten Things I Learned about Remodeling a Kitchen On A Budget

Several years ago, we took on our biggest home improvement project to date — and lived to tell about it.

Sometimes Paint Isn’t Enough

Remodeling a hideously ugly, smelly, rat-infested sorry excuse for a kitchen was not for the faint of heart. We bought the house knowing how bad the kitchen was, but I thought I was just going to break out the bleach to scrub it down, slap on some paint to freshen it up and buy new appliances that actually worked and call it good. I was prepared for everyone to step back and be amazed that something so ugly could be pretty again with a new coat of paint.

But, sadly, sometimes a little paint isn’t enough. Once I really assessed the situation, it became obvious that I had to do MORE! The kitchen is an important room in the house, so it pays to do it right if you can. I am so glad I did, because my kitchen is what probably sold my house this spring.

Let me clarify here: doing it “right” doesn’t mean spending $100,000. It just means doing your homework.

I thought long and hard about what we could do ourselves and what was best left to the professionals. And I also came up with a number of creative ideas that gave me a lot of bang for my buck.

It took a lot of thought but it was worth it. Two years after buying our house, we finally had a lovely kitchen!

Before

So, what are the top 10 things I learned about remodeling a kitchen on a budget?

1. Assess the situation ahead of time and get a lot of opinions.

Let professionals come over and give their opinions. Get bids on doing individual projects like new counters as well as bids on the entire kitchen. Eventually you’ll start to get a feel for what is necessary, what you could do without and who you want to work with.

2. Find a creative contractor.

We interviewed at least five contractors before we decided on one. While the estimate was important in our decision, finding someone who had creative solutions was by far the most important thing to us in the long run. Our contractor would suggest things that made our kitchen look more custom and high end but didn’t cost an arm and a leg. I am not a contractor so I don’t always know what can be done, so having his opinion was invaluable.

3. Take your time in the planning stage.

I was super anxious to have a working kitchen, but my husband and I spent many many hours looking at magazine photos for inspiration, thinking creatively and drawing up sketches to show our contractor.

I estimate we saved about $30,000 by doing a lot of the thinking and creative planning ahead of time. We found solutions to what could have been very expensive fixes simply by taking the time to solve them creatively.

4. Do at least some of the prep work yourselves.

Neither my husband or I are particularly handy with tools or building things. But, we do know how to use a sander and a paint brush. So, we (OK, I really mean my husband) spent countless hours sanding rough dark beams, priming them and painting them.

I cannot even imagine how expensive it would have been to replace the beams, let alone have someone else do all the prep and painting.

5. Details, details, details.

The key to a custom looking kitchen is in the details. I don’t mean fancy pants hand carved marble corbels either. You can choose things that look unique and special, or you can chose something that is plain and non-descript.

It is the little details that will give your room the “ooh and ahh” factor so be unique and add some special features. Here is a post where I shared specific ideas from my kitchen, if you want to see more.

6. Don’t be afraid to speak up.

I think we drove our contractor crazy sometimes because we wanted everything to be just right. Sometimes would get out our level and let him know if things weren’t quite level. We actually overheard one of the subs tell his boss that we were using a “piece of crap level” (can I say that here?) because to his eye, it looked fine. But, we were paying a professional and we deserved to have things look right to OUR eye.

7. Mix things up.

Don’t be boring when you can be special! Mix things up! Yes, you can use more than one style of hardware and more than one cabinet finish.

We had five kinds of cabinet pulls in our kitchen. We chose four types that were hammered black iron, but various shapes and styles. And then for our glass cabinets we chose glass knobs with an iron base. They all tied together but gave more interest because of the various shapes. We had two different cabinet finishes and a couple of variations on our basic cabinetry detail to bring in more personality.

8. Drawers are better than cupboards, IMHO.

If you are putting in any new cabinetry or retro-fitting an old cabinet, I must tell you that I love drawers more than cupboards. I find cabinet doors clumsy. And I especially do not like the cabinet doors that you open and then have to pull out a drawer. Too many steps for me!

I like to pull out a drawer and see what is in it right away. No standing on my head to see in a deep dark cupboard and no fancy maneuvers to pull out a drawer within a cupboard. Just a simple drawer works for me! I had lots of them with HEAVY DUTY HARDWARE in my kitchen and I LOVED them!

9. Creative concealment: my money saving weapon.

I do not like to spend big money to rip things out if I don’t have to. I had the craziest window EVAH in my kitchen. Several contractors told me to rip it out. It was ugly. Yes it was ugly. The cost to replace that beauty? $20,000 because it would involve remodeling the whole corner of my house. Yeah. NOT!

A good coat of primer and paint, a little trim work from my contractor, a curtain rod and strategically placed panels disguised this hideous feature for teeny bits of money.

10. Work with what you have.

We kept the basic footprint of our kitchen intact. We were able to keep plumbing and electrical costs to a minimum, as well as avoided replacing a tile floor by simply leaving our floorplan the same.

Furthermore, we reused all of our existing perimeter cabinet bases and freshened them up with new doors and paint. It all looked brand new! LOTSA money saved. Using what you have whenever possible makes the job much more affordable.

*********************

RG – That’s some great advice…especially the part about hiring a creative contractor!

I’m sure you all know Melissa! She’s the smart and creative soul behind The Inspired Room which is just chock full of, well, inspiration. And humor. And insight.  (and don’t miss that link up in #5 – great pictures of the whole kitchen there!) Thank you Melissa for your post here today!

Melissa was one of the first to RSVP for the Remodeling Guy Round-Up (even though no reservations are required!) and I’ll be back tomorrow to show you some super quick and easy ideas you can get done before Friday!