The Arizona housing market continues to show strength after several years of continuous growth. This has left many homeowners with strong home equity. According to a report by Black Knight, American homeowners possess three times more home equity than they did in 2012, when the housing market bottomed out. Arizona has seen similar trends, with Phoenix posting over twenty consecutive months of rising home prices.
If you have found yourself with a healthy increase in equity, it might be a perfect time to leverage a Home Equity Line of Credit, or HELOC. A HELOC allows you to tap your home’s equity in the form of a credit line. The increased purchasing power of a HELOC allows you to make needed home improvements that have the potential to raise the value of your home even further.
However, not all home improvement projects are created equally. There are a number of issues to consider before you start calling that contractor.
Go Big or Go Home?
You don’t need to design a replica of Versailles to increase your home’s value. In fact, sometimes large projects end up being more costly than they’re worth, especially if they involve knocking down walls, adding new plumbing, or making other major improvements that don’t typically recoup their financial investment.
For example, installing a patio is one of the lowest-yielding improvement projects, recouping just 43.2% of costs. Meanwhile, swimming pools aren’t even mentioned in the conversation since they typically incur maintenance costs and other inconveniences, in exchange for the benefits of the fun in the sun they provide.
The smartest investments tend to be modest in scale. Replacing bathroom fixtures might not whip you into a frenzy, but this small move can return huge value over fancier upgrades.
Home Renovations That Deliver the Highest Value
Between 1995 and 2005, the number of single-family homes doubled as a result of an unprecedented construction boom. With this frenetic pace came a rash of shoddily built homes full of structural deficiencies, like leaky windows or water damage, the most commonly reported problem among American homeowners. This is just one reason why you should prioritize any structural deficiencies that might exist before you move onto anything else. Tiling your kitchen doesn’t matter much if the floor is buckling.
Braving a southern Arizona summer without air conditioning is akin to climbing Mount Everest without a coat. You can have the loveliest home in Arizona, but without a functioning HVAC system, you’re going to have a tough time once you decide to sell. If your system is a bit old but works fine, then you won’t need to install a brand-new system, which can require ductwork and other added expenses. A new HVAC system doesn’t recoup as much money as some of the other items on the list, but neglecting to fix an old system will certainly detract buyers, especially in Arizona.
According to the US Department of Energy, Americans lose 25%-30% of residential heating and cooling energy use through inefficient windows. Replacing those windows is a simple way to save money on your energy bills and potentially add significant value to your home. Installing vinyl windows maximizes efficiency and recoups over 63% of the cost, making window replacement one of the easiest and most effective methods to boost your home’s value.
Front Door Replacement
Believe it or not, installing a new front door is the most valuable home upgrades, with a steel door replacement recouping 88.6% of costs. Steel doors retain so much value because they provide security and steel holds up better against the elements. Better yet is that installing a door is an easy DIY project that only takes a few hours, making it not only one of the best home investments, but also one of the easiest.
Garage Door Replacement
Here’s another example of a security measure gaining the best return. Members of the National Association of Realtors named garage door replacement as one of the top renovations when surveyed in the 2018 Cost vs. Value Report. A new garage door helps trap heat and cooling to make your home more efficient. It also adds curb appeal, especially if you match the door to the house’s architectural style.
Needs vs. Wants
As you can see, often the most exciting and ambitious projects aren’t always the ones that recoup the most value. For example, replacing a garage door will benefit you more than the walk-in closet of your dreams.
It’s ok to make improvements that will allow you enjoy your home more, but it is important to consider which ones will benefit you most financially in the long run. There are a number of decisions you’ll need to make before you consider using a HELOC to fund your home improvement projects. Since a HELOC is a form of debt, you’ll need to pay back the loan, so you’ll want to use the debt as effectively as possible by focusing on the projects that deliver you the best bang for your buck.
Best wishes on your quest for home improvement. May your costs stay low and your value grow high.
Loans subject to approval. Certain restrictions and fees may apply.