You might not spend a lot of time in your vacation home. However, like your regular home, your vacation home requires ongoing care to maintain its integrity. Whether you reserve your vacation home for family or decide to rent it out during the off-season, it’s important to think about required maintenance and upgrades that could increase home value, enhance comfort, boost curb appeal, and keep it running effectively.
Before upgrading your home, you’ll also want to weigh the cost versus the value of each project. Home improvement projects can quickly add up, which is why it’s essential that you establish a budget beforehand. That way, you can ensure you stay within your means and only put your money toward practical improvements. Building equity in your home can also help increase net worth and offer a source of funds to borrow from in times of need.
If you’re unsure of where to begin, here are four budgeting tips to consider:
1. Estimate Your Bottom Line
Decide which improvements are necessary, while also taking into account their impact on your quality of life and the value of your home. Keep in mind that while large-scale projects may cost more, they usually also offer a greater return, especially if you decide to rent out your property. Conversely, minor improvements are often cheaper, but don’t add as much value to your home.
Once you’ve settled on the upgrades you’d like to complete, calculate the associated costs for each project, factoring in any required materials and labor. While it’s likely that your estimate won’t be exact, having an idea of your intended expenses will help guide your decisions during the renovation process.
Keep in mind that home improvement projects rarely cost less than anticipated, so be sure to cushion your budget to account for minor projects and unanticipated expenses.
2. Figure Out How Much You’re Able to Spend
If you’ve been planning on renovating your vacation home for a while, you may have saved up enough cash to pay for the project outright or at least enough to front a sizeable down payment. However, these types of projects can come at a high cost, which is why you may want to think about other options, such as refinancing your mortgage or doing a cash out refinance.
Alternatively, many homeowners choose to take out a home equity loan to cover the cost of renovations. If you’ve built up enough equity in your regular home, you may qualify for a loan that you can use to pay for improvements on your vacation home. By choosing this route, you’d essentially take on a second mortgage that you would pay off with monthly payments, just as you do with your primary mortgage.
3. Factor In Minor Improvements
As a vacation home owner, it’s important to keep a close eye on small details, like cracked windows, chipped paint, baseboard scuffs, and worn carpeting. Addressing these easy-to-fix issues can help you increase resale value and please potential renters. They’re also more affordable than major renovations while still offering a return on investment.
While these repairs are usually cheaper, they should still be included in your budget for unexpected expenses. To account for these minor improvements, try following the 1 percent rule, which suggests that you reserve 1 percent of your home’s value each year for home maintenance and repairs. Using this rule, you can maintain a budget for ongoing upkeep and upgrades, regardless of their cost.
4. Focus on Projects with the Highest ROI
If you choose to rent out your property, potential renters may be turned off by a poorly maintained or outdated home, which is why it’s important to keep up on maintenance and important upgrades. And, even if you decide to keep your vacation home in the family, you’ll still want to take good care of the property.
When determining which rooms need the most attention, it’s important to think like a guest. Consider how you use your vacation home as well as how any renters would enjoy the property. That way, you’ll be able to focus on and budget for renovations that add the most resale value.
Focus on one renovation at a time, and make minor improvements where they make the most sense. If you’re unsure of which projects will yield the greatest ROI, consult a trusted contractor or realtor to help ensure you get the most out of your investment.