• Do I purchase a much larger home than I need because I realize square footage is equity in the bank?
• Do I purchase a more modest home and invest in a major remodel?
• Do I purchase a comfortable, well-kept home and simply maintain it?
The larger home puts you into that “if you don’t use it, you lose it” category. The primary issue with unused space in a home is that the space becomes neglected, i.e., excessive moisture content, excessive cold, etc.
Additionally, total square footage is a major consideration with town tax assessors. Finally, you run the risk of a national trend toward the downsizing of homes, especially when being influenced by economic pressures. Buying a much larger home than one needs has some merit, but it can also create neutral to negative cash-flow implications.
The fixer-upper presents real equity (perhaps even sweat equity) opportunities. However, if you are planning on owning it more than 7-10 years, you could easily fall prey to outdated trends.
Example of a remodel being outdated: enclosed breezeways. Once a primary spot to spend home improvement dollars, today it has been replaced by the four-season room. The breezeway has essentially become a musty smelling shoe-storage bin.
As for the future, I believe crown molding (which has been around for more than 1,000 years), even with its recent (last 10 years) popularity, will soon become an outdated enhancement. The reason being, as we age as a society (by 2020, 60 percent of Americans will be 60 or older) lighting will become more of an issue. Look for 12- to 14-inch soffits around the perimeter of rooms with built-in recessed lighting (with adjustable eyelids) to replace crown molding.
The comfortable well-kept home allows you to gain the highest return on your home-improvement dollars. The fact is, you can gain within 1% to 2% of annual home appreciation value by simply maintaining your home to a higher standard. (Additionally, of all the options, home maintenance is more do-it-yourself friendly).
How much money should I budget for home maintenance?
Answer: Because of the fragmentation of home maintenance industry, and the varying age and conditions of homes, there is no real standard. However, I believe in a very good rule of thumb for determining a monthly home maintenance budget. A homeowner should take the total square footage of the home and multiply it by $1, then divide by 12. Adjust accordingly.
Example: For a 1,600-square-foot home, $1,600 divided by 12 equals $… per month.