Personal Finance Hour: Episode 15 – Home Improvement and Doing it Yourself
Recap by: Brian of Building Wealth Together
This week’s episode of the Personal Finance Hour featured Jim and JD discussing all things involving home improvement. Each has had projects they have worked on over the years in their respective homes. They jumped right into discussing their experiences.
JD’s Experiences
JD stated that he and his wife Kris purchased a 100 year old home about four years ago. In fact, knowing that that house needed a lot of work was part of the reason that he felt the need to start paying off his debt.
Apparently, the previous owner of JD’s home was a “do-it-yourselfer”. Unfortunately, it didn’t sound like he was successful in his attempts to do things himself, leaving JD with several projects and improvements to be made to his home. One example he gave were some of the windows that the prior homeowner installed. These windows looked beautiful; however they weren’t very energy efficient. JD and Kris take a very methodical approach to deciding if they should undertake a home improvement project. Specifically they do a cost/benefit analysis and depending on the outcome, they move forward accordingly. JD has had a home improvement project almost every summer since he and Kris purchased their home.
Jim’s Experiences
Jim and his wife live in a townhouse that was built in the early 80’s. Because it’s a newer home, he won’t have to undertake some of the same types of improvements that JD has or will have to. However, he did replace all eleven of his windows since he moved in three years ago. The window replacements were done specifically for the energy efficiency purposes as an inefficient window can really impact the cost of heating or cooling your home.
When Jim undertook this project, he made sure he was taking advantage of the tax breaks that are made available for home improvement projects. In this instance he received a $500 tax credit by installing approved energystar windows. Using tax breaks like these is a great way at mitigating the cost of home improvement projects. Similarly, JD replaced his water heater and received a tax credit for almost the same amount he bought it for.
Picking a Contractor
Price is always a factor when picking a contractor, but both Jim and JD agree that you shouldn’t always look at price. You need to do your homework and take into consideration referrals and your gut feeling. The two hosts discussed checking with your local Better Business Bureau to make sure the contractor you are looking to hire is in good standing. Also, there are websites like Angie’s List that help you look into a contractor’s history.
Sometimes trusting the recommendations of friends can be very beneficial. However, if your friend goes through a larger company and recommends the company based on a great experience, there is no guarantee you will get the same specific contractors to come out to your home. Jim specifically said he listens to his neighbors whenever he has a similar problem that they have experienced. This is one of the benefits Jim has by living in a townhome. If a contractor is repairing a neighbors roof, it is likely his may need some work too. If that contractor does a good job for his neighbor, it only makes sense to bring them back out to his house because of their familiarity with the project.
JD did stress that he and Kris select a contractor based on their gut feeling more than the price offered. When hiring someone, you are essentially giving them access to your home. You should want it to be someone you feel comfortable with.
MLR from MyLifeROI called into the show in the waning moments to share more details about how his parents saved over $10,000 by discussing the estimates they received from contractors with a very handy neighbor. He provided Get Rich Slowly with a guest post on the topic and you can read it here.
Tips For Working With Contractors
When working with contractors, both JD and Jim strongly encouraged having clear communication before work begins. Having a clear and accurate account (preferably written down) of what the contractor will be doing and what is expected of them can save tons of headaches for both sides. If you are unclear with contractors, that is when mistakes can be made and costs can increase.
It is very hard to think of every tiny detail of the work that a contractor is about to undertake. However, write down the expectations and the plan for the project and review it with the contractor. If you do this you are likely going to minimize the likelihood of a contractor misinterpreting your directions and doing something that is not to your liking.
Best Way to Become a Do-it-Yourselfer
When deciding to do something yourself, Jim stated that it should come down to how comfortable you are with performing the tasks that the project requires. If you know a project is likely easy for you to do it yourself, but have never actually done it before, it may be best to ask a friend or neighbor with experience to help. Watching something being done right, especially a simple procedure can be a great learning opportunity for the next time you have a similar situation. Jim emphasized that do-it-yourself work is not the time to learn on the fly. He joked that house work is not like basketball; you won’t get better with just repetition. Often times you need someone to show you how the first time, and then you will be comfortable the next time you face the same problem to do it yourself.
Both JD and Jim strongly encouraged the listeners that are just becoming do-it yourselfers to not cut corners on a project. If home improvement isn’t your thing, you are probably unqualified to make the decision if its acceptable to cut corners or to improvise.
NCN from No Credit Needed offered up a fantastic idea in the chat room. If you desire to become a do-it-yourselfer, or are looking to meet people that are home improvement savvy, you can volunteer for Habitat for Humanity. By working on a home, you will receive some training that can help with future projects and you also can make connections with others that can be helpful when you decide to undertake a large home project.
Return on Home Improvement Investments
Some people perform home improvement projects to increase the value of their homes as well as for their own enjoyment. Jim and MLR posted a couple of links in the chat room that can show you how much you can expect to recoup if you make the investment to improve your home (Remodeling Magazine, SixWise,This Old House). 80% is really the max of what you can expect to recoup with a project. Remodeling or improving your home is more than dollars and cents however these sites can be a useful tool.
Lastly, if you are looking at selling your house doing home improvements may not be appropriate and may not give the house any extra value. JD gave an example of the people he purchased his home from. Prior to selling their home, they put down new carpet to make the home look more attractive. However, JD and Kris weren’t interested in the carpet, and they ripped it up so they could have hardwood floors. The people wasted thousands of dollars to re-carpet for no reason.
Interesting Sites Discussed During Show
EnergyStar is a government-backed program helping businesses and individuals protect the environment through superior energy efficiency.
Angie’s List is a quality source for local home improvement contractors and doctors.
Energy Trust of Oregon has a mission to change how Oregonians produce and use energy by investing in efficient technologies and renewable resources that save dollars and protect the environment. JD used one of their services that had people come out and inspect his home and tell him where improvements could be made that would be better for the environment and his wallet.
One Project Closer is a website that is devoted to home improvement by one of Jim’s friends. The name comes from the idea that each project moves you one project closer to creating the perfect home or perfect community.
Next Week’s Episode: JD and Jim will have a surprise topic for us next Monday.
