My Story: Home Renovation for Profit
contributed by Meredith Pelham
Recipe for a Successful Remodeling Project
Do It Yourself?
Workshop Money Savers
We bought our first fixer-upper five years ago with almost no money to renovate. We did everything ourselves and scrounged almost all our materials and appliances. I painted the entire exterior of the house for $9 using recycled paint mixed together in an empty garbage can. Our sweat equity and a smart choice of neighborhood paid off. Two years later, we made $45,000 profit at the end of the sale. We bought a slightly bigger home in a slightly rougher neighborhood and set to work doing it all over again. Again, we netted a similar sum. In fact, the house sold so quickly that we lived in a hotel while finding another place to buy!
Most people don't know that with the change in tax law, you no longer pay taxes on the sale of your home if you have lived in it as a primary residence for two years or more. That's right, all that profit was tax-free to us! Furthermore, we weren't required to roll it into the purchase of another home. We could do whatever we wanted with it! This was the perfect way for us to build up our savings while living on my husband's salary. It did not inflate our yearly income or push us into a higher tax bracket, as my salary would have done if I were working. It is a sideline we do together in the summers and on our own time. Many of the projects are things we would be doing anyway, for the comfort and enjoyment of our own home. Our current house is a 60s ranch in a quiet suburban neighborhood. It's definitely the nicest we've had yet. We got a good price when we bought it, and we anticipate selling it at another $40,000 profit. So, as much as I like saving, careful spending to make a home sell better can be good stewardship.
If you are a mom looking for a way to come home, renovation for a profit can be a valuable means of making money. Keys to making this strategy work for you:
- Do most of the work yourself, or find a very cheap source of labor.
- Make sure your husband is interested. If you can't get him to complete the tasks on his current honey-do list, think twice about buying a fixer-upper.
- Spend your time researching neighborhoods and finding a home that needs mostly cosmetic repair. Then you can renovate quickly and enjoy living there for the next two years. No one wants to live in a construction zone, then move!
- Be flexible and recognize that you are making choices for this home, not your dream home. You can relax and be more creative when you don't have the pressure of living with your decorating decisions for the rest of your life.
- Don't be afraid to scavenge for goodies outside the big box home stores. You can't buy everything new and stick to a small budget! Habitat for Humanity has set up several stores that sell recycled building materials. We found a nine-foot glass door unit with frame there for $150. A similar unit custom ordered from Home Depot runs over $1,000. Converting our garage just became $850 cheaper!
- If you run over budget, just stop. Don't use credit. Wait and pray.
Meredith Pelham is a wife and mom who would shop the ends of the earth to find bargains for her family. Read more about her family's adventures at http://likemerchantships.blogspot.com/.
"My Story" is a regular feature of The Dollar Stretcher. If you have a story that could help save time or money, please send it by email to MyStory @stretcher.com.
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